Armor Health Management, one of the nation’s largest jail medical providers, can’t pay its debts and has turned its assets over for liquidation, allowing another company to potentially take over its lucrative contract in a Texas jail and manage several of its other entities.

The company has $153 million in unsecured debt, including its payments due to employees, consultants, lawyers and victims of its poor medical care who have won or settled lawsuits.

The Florida-based Armor filed an emergency motion this month that asks a Miami judge to allow Enhanced Management Services to take over its jail contract in Nueces County, Texas. This company would also be responsible for managing some of Armor’s other entities, including the ones providing care in St. Johns, Baker and Lee counties, along with counties in other states.

A court filing shows that Armor Health Management has has $153 million in unsecured debt, including its payments due to employees, consultants, lawyers and victims of its poor medical care who have won or settled lawsuits.

An Armor representative said in an email that “Armor made an assignment for the benefit of creditors in accordance with Florida law. That entity is subject to litigation claims as far back as 2009 all of which includes events that involved Armor’s former management. Over 90 percent of all litigation materialized under former management which separated from the company in late 2018.”

Armor warned jail officials in at least one Florida county about the filing and assured them the pending sale would not affect its operations, but leaders in Nueces County didn’t know about the filing until The Tributary called to ask questions. Sheriff J. C. Hooper said when he learned about it, he called Armor and was told care at his jail wouldn’t change. 

“My only concern is the inmates,” Hooper told The Tributary on Thursday. “My only concern is that they are properly cared for both with medical and mental care. I have not noticed any changes to the services for the inmates and, believe me, I stay on top of it. That’s what matters to me.”

But University of Florida bankruptcy law professor Christopher Hampson said the process could lead to confusion for local governments and for those suing Armor.

Hooper said the county has not filed any lawsuits against Armor, and he’s not sure why their contract is the one mentioned in the court filing.

In Jacksonville, The Tributary found jail deaths tripled after Armor took over medical care in the Sheriff’s Office’s facilities. The Jacksonville Sheriff’s Office canceled its $98 million contract with Armor following The Tributary’s reporting, and two state lawmakers have called on the U.S. Justice Department to investigate the local jail’s conditions under Armor’s care.

A footnote in Armor’s emergency filing says that Enhanced Management Services is owned in part and controlled by the principal owner of Armor, which Hampson said could raise concerns, even though the practice is not unusual.

A court filing shows that Enhanced Management Services is owned in part and controlled by the principal owner of Armor.

“When the buyer is controlled by the entity that controlled the company before, it’s even more important to make sure that there is a full and fair auction for the assets,” Hampson said. 

The person assigned to liquidate Armor’s assets was appointed by the court and will be monitored.

“It’s not uncommon for the only buyer at a distressed sale to be the entity that ran the business beforehand, because they may be best positioned to continue the business in the future,” Hampson said.

The legal filing also sheds light on much of Armor’s business practices, including details about its debts to a network of consultants, lawyers and local governments, in addition to the victims of its poor health care practices who have successfully won lawsuits but failed to get Armor to pay.

It’s unclear if any of the people or companies to whom Armor owes money will object to the proposed sale. And it’s unclear what will happen to the lawsuits where Armor still owes money, or lawsuits that are still ongoing, which largely involve medical malpractice and wrongful death cases.

And with Armor still involved in dozens of ongoing lawsuits as of the filing, it could make it a confusing time for attorneys and families seeking relief. 

“All of a sudden, the defendant files for bankruptcy, and it feels like the rug is being pulled out from under your feet. Even if you win, how are you going to get paid? Where’s the money going to come from?” Hampson said, adding that the premise of this business move is to shed any debt arising from the litigations.

Armor can’t pay lawsuit settlements 

Armor has repeatedly lost or settled lawsuits alleging it provided substandard care in jails. In Milwaukee, it was found criminally liable after one man died in the jail.

When the motion was filed this month, Armor was involved in excess of 80 lawsuits and the company said that paying for the fees or settlements potentially involved in those cases would have a “detrimental and adverse impact on the ability” for Armor to remain in business.

The emergency motion specifically mentions a recent settlement of $6 million, which Armor is unable to pay. Not mentioned is a recent jury verdict of a $16 million medical malpractice case in Florida or a $1.05 million settlement in Milwaukee. The Milwaukee Journal Sentinel reported that despite Armor’s contractual agreement to defend and indemnify the county, Armor told county leaders that it did not have the “financial ability to fund a settlement to resolve this case or pay for any eventual judgment,” leaving Milwaukee County and its insurance provider to pay.

Now, Armor says it is “unable to pay its debts as they become due.”

The bidding agreement defines the liabilities the purchaser will assume and does not include the debts owed to plaintiffs in ongoing litigation, Hampson said.

The legal filing shows it also still owes former Jaguars Hall of Famer Tony Boselli $28,000. Armor hired Boselli to act as its lobbyist in Jacksonville, where it had secured the $98-million contract.

Boselli did not return a request for comment.

It’s likely Armor created separate entities for each jail contract to separate any liability, Hampson said. The State of Florida lists at least three dozen LLCs that are connected to the Armor corporation, mostly formed between 2021 and 2023, but they are not part of the filing.

Enhanced Management Services has offered $500,000 to buy the company as a whole if no one else does. Bids on the company are open until Dec. 1. 

Hampson said the fact that Nueces County didn’t know about the filing is concerning. He also added that all of the creditors should have also been notified. 

“If their proposal is to shed the liability from these plaintiffs, then I really want to know that this deadline of Dec. 1 is a good deadline, that the dollar amounts in the auction are reasonable, and that the auction is above board and full and free and fair,” he said. “So the auction procedures become even more important when the buyer is controlled by the same entity as the entity that sold.”

Armor isn’t the first

In February, Corizon, another for-profit company that provided medical care in prisons and jails filed its own bankruptcy in Texas and moved most of its debts to a new company called Tehum Care Services, which then also declared bankruptcy.

Then, according to USA Today, Corizon executives created another company to handle medical services in jails and take over all of Corizon’s contracts – YesCare.

Corizon, like Armor, has been sued hundreds of times for bad medical care against inmates and has lost or settled millions of dollars worth of those lawsuits.

On Wednesday, nine senators, including Elizabeth Warren, Bernie Sanders, Cory Booker, Judiciary Committee chair Dick Durbin, and Finance Committee chair Ron Wyden, questioned Corizon’s bankruptcy claim in a letter to YesCare and Tehum leaders.

“We are writing to strongly object to the attempt by Corizon Health, Inc. — and related companies, Tehum Care Services, Inc. and YesCare Corporation (together, “Corizon”) — to manipulate bankruptcy law with the aim of skirting accountability for the harms that incarcerated individuals have endured under Corizon’s care,” the 7-page letter begins.

The senators wrote that Corizon used a maneuver nicknamed the Texas Two-Step to evade mass tort liability. 

“Your company has taken this abusive strategy a step farther,” they wrote, asking the owners to “provide full relief for meritorious claims against Corizon by all incarcerated people, their families, former employees, and third-party medical providers.”

Those claims total more than $1.2 billion, and Tehum is seeking to settle them for $37 million, according to reporting by Insider.

Nichole Manna reports on the criminal justice system in Jacksonville. She has previously covered criminal justice at newspapers in Texas, Kansas, Nebraska, North Carolina and Tennessee, but is originally...