AAC Holdings has been one of America’s hottest stocks since listing on the New York Stock Exchange back in October 2014, showing rises of 150%. However, its story is becoming more of a cautionary tale than one of pure success, as attention falls on A Better Tomorrow rehab clinic – one of seven facilities for drug and alcohol addiction run by AAC Holdings’ main operating unit: American Addiction Centers.
The current scandal around A Better Tomorrow treatment center in Murrieta actually relates to an incident that occurred in 2010, when AAC was operating under its original name of Forterus Inc. It involves the death of a patient who had traveled to Los Angeles from his home in Springerville, Arizona, to receive treatment at A Better Tomorrow. Sadly, ‘a better tomorrow’ was not the outcome in this case, for the patient, or ultimately for AAC and its senior executives.
The Death of Patient Gary Benefield
Gary Benefield was 52 years old, and had recently been hospitalized due to pneumonia. He also suffered from emphysema and chronic obstructive pulmonary disease. Prior to boarding his flight to LA, he had been using an oxygen tank, however this had been emptied at the airport.
On arrival, Benefield was not given the further oxygen that would generally have been administered to someone in his condition, and was instead given anti-depressant and anti-anxiety medication. It is then recorded in a report into the case by the California Senate Office of Oversight and Outcomes from 2012 that staff at the A Better Tomorrow rehab center failed to check on him from midnight until the following morning. Tragically, by this time he was dead, something made all the more sad by the fact it would have been his 53rd birthday. He left behind a wife and stepchildren.
The Murder Indictment
In July, an indictment charging Forterus Inc. (now AAC), A Better Tomorrow, and four individuals with the murder of Gary Benefield was unsealed by California Attorney General Kamala Harris. Included among those indicted was the president of AAC Jerrod Nathan Menz, who resigned from his position the following day. He was one of the co-founders of AAC and holds shares worth $200 million. Two other former employees were indicted, along with one other named Mignon Dean who still holds office with AAC. A fifth person involved in the case was indicted for abuse of a dependent adult, but not murder.
The Impact on AAC’s Stock
While the death of Gary Benefield took place five years ago, the indictment issued in late July has seen the previously very healthy stock prices of AAC drop dramatically in recent days. Trading on AAC stock was even halted briefly for volatility on August 4th, a day which saw shares in the troubled company fall by up to 53%.
AAC’s Position on the Charges
AAC Holdings remain insistent that there is no founding for the murder indictment, and that Gary Benefield died of natural causes for which they hold no liability. A filing claimed that AAC intend to ‘vigorously defend the company and each individual in court’. Nonetheless, their filing also admitted that defending themselves could incur ‘costs that are material’, which is certain to be a large factor in the uncertainty causing the drop in share prices.
While the Gary Benefield case has certainly been the most harmful to confidence in A Better Tomorrow and its parent company American Addiction Centers, it is not the first time the rehab center in Murrieta has been scrutinized. The 2012 report by the California Senate Office of Oversight and Outcomes also looked at three other deaths at the facility during the same 2.5 year period as Benefield’s.
Wrongful death lawsuits have also been raised against A Better Tomorrow as the result of two further deaths relating to patients of the center, these being suicides the complainants believe should have been prevented by staff overseeing the people in question.
While the murder indictment is not expected to be resolved for some time, it is hard to see how AAC Holdings can recover from the impact these accusations have had on shareholder confidence.