Last year’s sale of a well-known medical practice in Sierra Vista has triggered a lawsuit after the buyer reportedly stopped making payments after just three months and then left the seller in the dark about what was happening with patient and employee records.
Dr. John Herrod owned and operated Lenzner Medical Services LLC, a multi-physician internal medicine clinic since 2008. Last month an attorney for Herrod’s company filed a breach of contract complaint against Old Pueblo Healthcare LLC, alleging Old Pueblo entered into a $400,000 purchase agreement “but never intended to fulfill its payment obligations under the Contract.”
According to the lawsuit, Herrod agreed in July 2019 to sell his medical practice to Old Pueblo for a $150,000 down payment, 12 monthly payments of $7,600 to start in September 2019, and then a final payment of the balance due. But after escrow closed in August, Old Pueblo reportedly only made three payments, and two of those payments were late, Lenzner Medical claims.
As of March 19, no further monthly payments had been received, the lawsuit states. Old Pueblo must file an formal answer to the lawsuit with the Cochise County Superior Court by the end of April.
Records at the Arizona Corporation Commission (ACC) show Old Pueblo is owned by Tucson Healthcare Group, which is owned by Michael O’Neil of Northport, New York. Messages left by Arizona Daily Independent with the business office of the Sierra Vista clinic were not returned.
The lawsuit also accuses Old Pueblo of removing funds from the Lenzner Medical bank account without Herrod’s permission, improperly processing employee payroll, and failing to let Herrod know about the hiring of new physicians. The latter caused problems for Herrod in trying to inform his patients of what was happening, the lawsuit states.
In addition to the sale of the medical practice, in August a company owned by Herrod and his wife sold the building which houses Lenzner Medical at the southwest corner of Lenzner and Wilcox Drive. Cochise County property records show the building was sold to Southern Arizona Realty Holdings, which in turn is owned by O’Neil.
The real estate transaction is not part of the breach of contract lawsuit.
ACC records show O’Neil also owns Desert Medical Offices, Yavapai Labs, and Prescott Realty Holdings, as well as Source Ventures LLC which owns Yavapai Healthcare Group in Prescott. He is also listed as co-owner of Maricopa Healthcare Group, Prescott Valley Healthcare, and Tri-City Healthcare Solutions.
The address listed on ACC records for O’Neil appears to be a 6,200 square-foot home on Long Island valued at more than $1.1 million.
Herrod continues to be licensed by the Arizona Medical Board, and in fact he saw patients on behalf of Old Pueblo for several weeks after the sale, according to the lawsuit.
In December 2019, Arizona Daily Independent reported that a Sierra Vista doctor was under investigation in Cochise County for not reporting the sexual abuse of a child. That doctor was Herrod.
Court records show Herrod served as a bishop for the Church of Jesus Christ of Latter-day Saints in Bisbee for several years, ending around 2012. He admitted to a federal agent in 2018 that Paul Douglas Adams, a church member and U.S. Border Patrol agent, had confessed to engaged in ongoing child molestation while Herrod was bishop.
Adams was arrested in February 2017 on numerous state and federal charges related to sexual abuse and sexual exploitation of children. He killed himself in a detention facility that December while awaiting trial. If convicted, Adams had faced life in prison.
Although Herrod and his successor bishop knew of the ongoing abuse, neither notified law enforcement nor child welfare authorities. One of the victims Adams admitted abusing after Herrod stepped down as bishop was an infant.
Federal and county officials have declined to comment on the bishop matter since confirming the investigation in December.