Sunday, November 30, 2003

Magistrate threatens jail
MIAMI, Fla. - Two principals of Vital Care Group, a distributor of catheters and lancets to 300 medical supply customers, are struggling to keep their $7 million business afloat after a federal magistrate nearly threw them in jail for contempt of court in September.

The magistrate took exception to an alleged breach of a patent settlement agreement between Vital Care and Palco, a Santa Cruz, Calif.-based vendor of lancets. In June 2002, Vital Care agreed to pay Palco $100,000 and to limit sales of two lancets that infringed on Palco’s patents.

Six months later, Vital Care balked at the agreement and prepared to fight the settlement terms. That action precipitated the magistrate’s recommendation that the company’s principals, Ramzi Abulhaj and Rick Admani, be incarcerated until Vital Care complied with the agreement.

To complicate matters, Home Diagnostics won a $694,000 settlement against Vital Care for non-payment of diabetes test strips and breach of a non-diversion provision.

After the magistrate recommended jail time, Admani paid off Palco and took steps to clear itself of any contempt. Vital Care filed for voluntary Chapter 11 bankruptcy on Oct. 6.

Now, in the wake of Vital Care’s Palco and HDI problems, its principal lender, BankAtlantic, has shut down Vital Care’s $3 million line of credit. The bank also has asked all of the troubled distributor’s customers to make payments directly to BankAtlantic.