Stanford fraud charges eyed in Emageon-HSS merger collapse

By Eric Wicklund
11:35 AM
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The mystery behind last week's collapse of the Emageon-HSS merger appears to be tied to Tuesday's bombshell announcement of $8 billion fraud charges against a Texas-based international financing company.

The federal government announced Tuesday that Texas billionaire R. Allen Stanford's three businesses have been shut down over charges of investment fraud. Stanford and associates are accused in civil charges of lying about the safety of investments sold as "certificates of deposit," which promised unrealistically high rates of return. Investigators also said Stanford faked historical data about other investments, which he used to lure new investors in a $1.2 billion mutual fund scheme, and that he shielded 90 percent of the company from independent review.

Stanford, 58, is described by Reuters as one of the most prominent businessmen in the Caribbean, with investment advisers around the world helping him grow a personal fortune estimated at $2.2 billion by Forbes magazine.

The charges relate to the Stanford Group and Stanford Capital Management, two Houston-based financial advisory firms as well as Stanford International Bank, an Antigua-based company. Stanford International is the financing firm of Health Systems Solutions, the New York healthcare IT firm that had announced plans last year to merge with Emageon.

HSS had pledged to pay $62 million, or $2.85 a share, for Birmingham, Ala.-based Emageon in a deal announced Oct. 14, but forced a delay in the process when officials apparently couldn't get the financing from Stanford International in time for a Dec. 18 closing date. HSS and Emageon then agreed to a Feb. 11 closing date, and HSS added $4 million to a $5 million escrow account that would be delivered to Emageon if the deal fell through.

On Feb. 11, HSS officials announced they wouldn't have the money from Stanford International to close the merger. The next day, Emageon called off the deal and took control of the escrow account.
The collapse of the Stanford empire could affect the profitable HSS down the line, particularly in light of the bad economy.

HSS closed the third quarter of 2008 with $3.02 million in revenues, a 106 percent increase over the third quarter of 2007, and gross profit of $1.33 million, a threefold increase over the same quarter of the year before. At that time, Stanford International Bank had agreed to provide an additional $5 million in equity and $85 million in convertible securities to the company for acquisitions and working capital.

"Stanford's funding of HSS during the current global capital markets crisis demonstrates their continued
confidence in our strategic plan and our management team.  This availability of financing allowed us to
negotiate the acquisition of Emageon Inc., a leading provider of radiology and cardiology imaging and
technology," said Stan Vashovsky, HSS' chairman and CEO, in a press release at that time.  "We appreciate Stanford's support and will keep working diligently to execute our growth strategy and to enhance our capital markets presence with the goal of listing on a larger stock exchange and increasing shareholder liquidity."