Steward Health Care spent millions on surveillance of its critics — even amid financial crisis

On another occasion, an intelligence firm targeted a top Maltese politician and circulated an allegedly fraudulent bank wire transfer that suggested he had illegally granted a passport in exchange for a multimillion-dollar bribe.

The lone link among these targets? They dared to criticize or question the business practices of Steward Health Care, drawing the attention of executives at one of the largest for-profit health care systems in the United States.

As Steward struggled to provide services and pay vendors in many of its three dozen or so hospitals in Massachusetts and across the country, its executives spent millions on intelligence firms, according to corporate records, videos, and other files obtained by the global journalism outlet the Organized Crime and Corruption Reporting Project and shared with the Boston Globe Spotlight Team.

In all, senior Steward executives authorized and spent over $7 million from 2018 to 2023 on firms that provide research, intelligence-gathering, and surveillance services, according to emails, encrypted messages, and financial records reviewed by the Spotlight Team.

The surveillance was part of what Steward’s general counsel called a “spare no expenses mission” to gather dirt on people who were viewed as problematic by the hospital chain’s executives. And files show that the private intelligence firms discussed ways to potentially weaponize the compromising material, if necessary.

These surveillance operations coincided with Steward’s ignominious downfall. The Boston-born company careened from a hospital chain with a visionary model and a commitment to the underserved to a flailing venture in which executives reeled in hefty bonuses while services suffered.

Business intelligence and research work are commonplace in the high-stakes corporate world, but such behavior is atypical of health care providers, experts say, and the operations carried out here go far beyond the norm.

It is unclear if the actions violated the law, given the multinational jurisdictions where the operations took place. Nonetheless, the tactics raise questions about an organization that lists among its core values “accountability” and “accepting responsibility for continuous performance & improvement.”

Founded in 2010, the for-profit health care chain has become one of the largest, most powerful US health care companies of its kind. It’s also become one of the most troubled.

The company first enlisted the help of intelligence firms in Malta, where a controversial hospital deal with the nation’s government erupted in flames, with officials saying Steward failed to deliver on its promises. Two top Steward executives are ensnared there in a criminal conspiracy case related to the deal, with authorities recommending they face charges for corrupting Maltese public officials.

In the United States, Steward is mired in bankruptcy, the fate of its network hazy, while its Massachusetts properties head for the auction block. In recent years, crippling staff shortages at Steward hospitals have put patients at risk, records show. Dozens of lawsuits from unpaid vendors — from elevator companies to orthopedic suppliers — have piled up in court.

Records show that Steward executives prioritized intelligence-gathering over most everything else. Monthly bills ran as high as $440,000. They were to be paid on time and in full.

“We are relying on [them] for truly existential work,” Herbert Holtz, counsel for Steward, said in a January 2022 voicemail to the company’s chief financial officer. “We really do need to keep them high on our list of must pays.”

It was Holtz who called the work of one firm part of “a spare no expenses mission,” the recording shows. And he said in the voicemail that a newly extended contract with one firm came at the direction of Steward Health Care CEO Ralph de la Torre.

“While general counsel and as a private lawyer since then, Holtz has neither recommended nor sanctioned any illegal or unethical activity,” said a Steward spokesperson in a statement to the Globe. The spokesperson did not respond to questions directly about the intelligence work.

In a statement, Holtz said that he “acted appropriately and ethically” at all times and that he was “bound by attorney client privilege from responding” to questions about these matters.

Experts told the Globe that large companies often hire firms to compile corporate intelligence on competitors.

“In these cases, you have a lot of people who say, ‘I want to hire somebody who is going to get [the critic] and make their life miserable,’ ” said security expert Ira Winkler, the chief information security officer for CYE Security and author of several books on corporate espionage.

What’s irregular is that Steward — a health care system with a focus on community hospitals that serve low-income patients — would put so much of its focus and resources on these activities.

“Following people, surveilling someone, that’s beyond the lines,” Winkler said. “It could be considered harassment. But even if legal, it’s weird for a hospital system to be spending resources on this.”

The intelligence missions and research work were assigned code names, nods to predators of the animal kingdom. Kestrel, like the small, fierce falcon, and Albacore and Bluefin, like the tuna species. Former combat veterans and seasoned crisis communicators were tapped to handle difficult “opponents.” The most sensitive details of their communications took place in encrypted chats, but snippets of the missions are detailed in various email correspondence, documents, and audio recordings.

The recurring bills from the firms were sometimes so large that they surprised corporate finance managers who had to approve the costs.

The Steward executives linked to or referenced in the correspondence include de la Torre; Armin Ernst, the CEO of Steward International; Mark Rich, president of Steward; and Holtz.

Holtz’s digital fingerprints are evident in nearly all of the surveillance missions. One of Boston’s most renowned litigators, Holtz left his seven-attorney firm in 2018 to join Steward as general counsel in Dallas, where the company relocated from Boston.

At the time, Holtz told Massachusetts Lawyers Weekly that he had “no regrets” about the decision to join Steward. The hospital system was ballooning in size as it sought to expand its unique model of community-based care through nationwide acquisitions and a bid overseas in Malta.

But within a few years, the shine had worn off. Top executives were suspicious of just about everyone, even their Steward co-workers.

A surveillance operation in 2023 took aim at a former Steward executive who other executives feared might spill company secrets to an independent auditor. The man had been a thorn in the side of executives, with a habit of asking questions about expenses, according to one internal email.

A search of the man’s company-issued phone revealed two juicy bits of information. One, the man had seemingly solicited the services of a sex worker. And two, he’d discussed cosmetic surgery with a physician.

“Efforts to recover and analyze additional information from the extracted device image are ongoing and further results will be briefed separately as soon as they come in,” wrote a director with the British firm Audere International in a subsequent report.

Audere, founded by a former British Army officer named Charles Blackmore, had been working for Steward since 2018 on assignments connected to the company’s partnership with the Maltese government.

“To know is to empower” is the motto of the UK firm. “It’s what you don’t know that affects the outcome. Our timely intelligence fills the gap.”

In the Audere report, the Steward executive under scrutiny was identified only by his first name and otherwise assigned an alias.

Blackmore received a compromising photo of this same executive — whom the Globe has chosen not to name due to the personal nature of the material.

Blackmore, correspondence shows, considered using the supposed sex worker to gather more information. He also mulled arranging for a female agent to get close to the former executive by expressing an interest in receiving leadership coaching from him.

The correspondence shows that each of these plans, according to Blackmore, was to be run by “Herb” for approval — an apparent reference to Holtz. The records do not make it clear whether the tactics were approved or deployed.

When contacted by the Globe, the former executive had a representative issue a statement on his behalf, saying he was “unaware that he was the subject of any surveillance until contacted by a reporter.”

A spokesperson for Steward said: “The portrayal of the experience with a former Steward employee is inaccurate. A mutual non disparagement clause between the employee and the company prevent specific comment.”

That same spring, Steward deployed Audere on yet another mission. This time, Audere gathered intelligence that could be used to potentially smear one of Steward’s most outspoken critics: British financial analyst Fraser Perring.

Perring founded the financial research group Viceroy Research LLC. There, he investigates publicly traded companies and then speculates — and bets — on the decline of their stock. These types of short sellers typically focus on firms with opaque disclosure and complex ownership structures. Both apply to Steward, which stopped filing its mandated complete financial statements in Massachusetts nearly a decade ago, as well as its landlord, the publicly traded Medical Properties Trust.

In February 2023, Perring authored a report that touched a nerve at Steward, calling into question Steward’s latest international foray in Colombia and the involvement of Steward stakeholder Medical Properties Trust.

A month later, an intelligence team from the security firm Greyprism, which had been contracted by Audere, pulled up outside Perring’s home in northeast England, according to a report prepared for Audere and reviewed by the Globe. For six days, the team followed Perring’s movements. From the living room to the bedroom. On a trip to a steel fabricator and the local pub. For the dropoff and pickup of his 11-year-old daughter from school. And on a bike ride with his family.

In one video reviewed by the Globe, Perring sits on his couch next to his partner, watching a television program. It’s dark outside and the camera shakily peers through a glass door.

The surveillance report does not identify Perring by name, but includes a satellite image of his home and the name of his daughter’s school. In an interview with the Globe, Perring confirmed that he and his partner were the people in the video. He said he first learned of the surveillance after his daughter “became terrified by seeing the same people follow us.” He said he filed a police report shortly thereafter.

Perring said he was appalled and outraged by the invasion of privacy. “And what is particularly shocking is that they did this while Steward was insolvent and unable to meet its basic obligations to its patients, employees, and vendors.”

In a released statement, an attorney for Greyprism said the company was “unable to discuss its work on any specific cases due to client confidentiality and data protection reasons.

“Its work also often involves matters giving rise to legal professional privilege and/or high-risk security issues. GP would not, and has not, acted in the manner alleged and in breach of its legal obligations.”

Audere International was tasked with launching a campaign that would, in Blackmore’s words, “put pressure” on Perring, according to correspondence from an Audere corporate meeting reviewed by the Globe.

Around the same time, an account called viceroyleaks cropped up on the social media platform X.

“This account’s sole purpose is to expose #fraud, #scam and #insidertrading of Fraser Perring and Viceroy,” reads the user’s first post, dated March 8. “We do not forgive. We do not forget.”

Correspondence shows Blackmore reviewed posts to the account before they were published. Again, Blackmore noted he would send posts to “HH” for approval.

That same week, Audere came at Perring from yet another angle. The firm shared a dossier with Perring’s name in the title and included his bank account number and balance as of March 2023, as well as transactions going back over the previous five years. Another report includes records of the numbers, times, lengths, and costs of his recent phone calls. It’s unclear how Perring’s confidential information was procured and if — or how — it was used.

Internal emails show that Ernst, Holtz, and de la Torre were scheduled to meet with Blackmore and other business intelligence contractors in London the same week the Perring operation took place.

It is not clear how much Steward spent in 2023, but the company paid $778,913 to Audere in the first three months of 2022, according to a quarterly report presented in Dallas.

“Our client’s work is confidential and as such they are unable to respond to enquiries about such matters including speculation as to the identity of clients,” a law firm representing Audere said in a statement to the Globe. “Our client takes its legal and regulatory compliance obligations seriously and acts in accordance with the same. Any suggestion to the contrary would be defamatory of our client.”

Just after Steward moved its headquarters from Boston to Dallas, company leaders looked to expand the health care empire overseas. Malta seemed like an easy pick. Ernst, who had spent years working with de la Torre, orchestrated Steward’s takeover of a flailing $4.23 billion hospital deal with the Maltese government.

But almost immediately the deal turned sour and Steward leaders were displeased. The money from the Maltese government was not being transferred quickly enough. And executives directed their ire at the island nation’s health minister, Chris Fearne.

Steward blamed Fearne when payments were held up by disputes over whether Steward was providing all the medical services it had been contracted to deliver under the government contract.

“I’m truly getting exasperated,” Ernst wrote to Fearne in an October 2018 email.

By 2021, Steward was contemplating legal action and “prepared to drop a case in US Federal Court naming Fearne and others as bad players,” according to an email written by Steward executive Mark Rich.

But no court case ever materialized. That December, Steward executives hired a consulting firm called the CT Group. The London-based company was founded by one of the most influential lobbyists in Australia; the firm, self-admittedly, was “long known for its political dark arts.”

Fearne, who had repeatedly and publicly demanded that Steward make good on its contract, soon became the focus of an intensive intelligence campaign. In a proposal for “Project Bluefin,” the CT Group laid out its game plan. They would “identify instances or areas in which the opponent has behaved improperly” and then “deploy the information to secure coverage of the issue in the Maltese media.” The latter step was to be done discreetly and “anonymously.”

Fearne is not explicitly named in this proposal, which quoted the project cost at more than $300,000.

Soon thereafter, the private intelligence agency shared a highly confidential bank wire transfer record purportedly showing 3.2 million euros, about $3.5 million, moving to an account held by the daughter of Fearne’s former chief of staff. The payment, dated November 2019, was sent by a business partner of Igor Levitin, a Russian government official with ties to President Vladimir Putin. Levitin’s brother, the oligarch Leonid Levitin, had just obtained a Maltese passport, despite sanctions that should have prohibited him from obtaining one.

In a document titled “Malta: Abuse of Passport Scheme,” Fearne is described as using his ministerial position to lobby for the issuance of Leonid Levitin’s passport as part of a quid pro quo for payment. Metadata from the document shows that a CT Group director authored the report.

The CT Group shared this information with Steward, emails show.

And in October 2022, Ernst, who runs Steward International, forwarded the wire transfer and the report on the purported Maltese passport scheme to a partner at a British law firm.

But the veracity of the bank wire transfer has been disputed. The Austrian bank allegedly involved in the transfer described the record as “forgery” to the Maltese investigative journalist Matthew Caruana Galizia. The Maltese police also investigated the allegations of bribery by Fearne but “no evidence was found . . . that could lead to a criminal prosecution,” according to a statement police provided to the Times of Malta.

It is unclear whether Ernst questioned the document’s legitimacy. But by the following summer, the wire transfer document and the allegations that Fearne accepted a bribe ricocheted through Ukrainian and Maltese press.

“CT has provided corporate intelligence services to the highest standards for over a decade,” the firm said in a statement to the Globe. “CT is committed to and complies with all laws and regulations in all jurisdictions in which it works and is confident the intelligence sourced in this project is genuine and accurate.”

The CT Group is currently involved in two unrelated defamation lawsuits in British court. The claimants, former clients of CT Group, allege that the firm engaged in “industrial-scale forgery,” as well as “apparent criminality” in relation to genuine documents. In the first case, the High Court said the evidence that the banking records were forged was “very strong” but that did not demonstrate “wrongdoing or improper behaviour by CT Group.”

The CT Group denied any wrongdoing in either case, calling the allegations “an ambush and abuse of the UK courts system.”

While much of this investigative intelligence work was taking place across the globe, Steward’s hospitals in the United States were struggling under the weight of the coronavirus. From 2020 to 2021, Steward hired hundreds of temporary staff to meet the need. But by March 2021, Steward was disputing 3,400 invoices and withholding over $42 million from one staffing agency, which eventually pulled its staff from Steward hospitals, court documents show.

Meanwhile, nearly every Audere invoice that flowed into Steward’s inbox was considered a top priority for payment. In 2020, Audere billed Steward more than $950,000, correspondence shows. Members of Holtz’s staff hounded the company’s finance department to pay the bills in full and on time — sometimes before their due dates — and quickly dismissed any concerns employees raised about their nature.

“Herb is asking to initiate payment immediately — is there something you need from me in order to expedite?” wrote one of Holtz’s executive assistants in a September email.

A set of bills from the fall of 2021 appeared to have surprised two Steward finance employees. Holtz’s executive assistant sent them the Audere invoice with the instructions to pay the sum “ASAP,” noting that the amounts were in British pounds, as opposed to dollars.

“500k???” wrote one accountant in a private thread to his colleague, who responded, “That’s like $700k usd . . .”

That set of bills was paid directly by Steward Health Care System LLC in Dallas.

Holtz, through a company spokesperson, said he “advocated for prompt payment to consultants to the legal department” and “did not opine on prioritizing those over other hospital or medical vendors.”

Holtz also oversaw the dispute with the unpaid staffing agency, which he accused of “pandemic profiteering” in an internal memo.

As the invoices continued to pile up, Steward and the staffing agency battled in a Massachusetts court, a case that remains ongoing.

Conditions at the time grew grim in Steward’s Massachusetts hospitals. At Good Samaritan in Brockton, a union representative with the Massachusetts Nurses Association spelled out her concerns in a memo that was also sent to the federal government.

“For the past eighteen months deteriorating conditions in the Good Samaritan ED resulting from extremely poor RN and tech staffing . . . has continued to worsen to beyond crisis conditions,” the representative wrote. “More often than not, the ED is understaffed in the realm of 50% of required RNs.”

On one night in the fall of 2021, there were 101 patients in the emergency department with only six nurses to care for them, creating a 14-hour wait for some patients in the waiting room, the memo noted. On another, seven full ambulances idled outside the hospital as 11 nurses juggled 71 patients in the emergency room.

A day after Thanksgiving, 11 nurses were assigned to 95 patients and a patient with acute renal failure was left unattended.

That patient was later found dead in the hallway.

This story has been updated to reflect that Igor’s Levitin’s brother, Russian oligarch Leonid Levitin, was the beneficiary of an alleged Maltese passport bribery scheme.

Khadija Sharife (OCCRP), Tom Stocks (OCCRP), and Jacob Borg (Times of Malta) contributed to this report.

Hanna Krueger can be reached at hanna.krueger@globe.com or on Signal at +1 (339) 242-0289. Feedback and tips can also be sent to the Boston Globe Spotlight Team at spotlight@globe.com, or by calling (617) 929-7483. Mail can be sent to Spotlight Team, the Boston Globe, 1 Exchange Place, Suite 201, Boston, MA. 02109-2132, or share your tip here.