NEON health clinics face foreclosure amid $11 million debt crisis, lawsuits say

CLEVELAND, Ohio — Northeast Ohio Neighborhood Health Services owes $11 million to several businesses, including one that seeks to foreclose on the nonprofit’s headquarters and eight health clinics.

All Pro Capital Funding said in its lawsuit that NEON owes it $8.8 million on a loan that was initially intended for repairs for a 2021 fire that devastated its health clinic in the city’s Hough neighborhood.

The lawsuits could jeopardize the nonprofit, which was founded in 1967. NEON is one of the oldest Federally Qualified Health Center networks in the country and provides healthcare for those who can’t afford it or are underinsured.

Attorneys for All Pro Capital Funding, a private equity real-estate investment company, called into question the actions of NEON’s executives, including longtime CEO Willie Austin, saying a recent history of issues at the nonprofit has “further eroded All Pro Capital’s confidence in [NEON’s] management.”

Cleveland.com and The Plain Dealer reached out to Austin for comment.

Two other companies sued NEON in March in Cuyahoga County Common Pleas Court.

Jani-King of Cleveland, a cleaning service company, said in its lawsuit NEON stopped paying its bills and owes the company $486,000. Cedar Advance LLC, a cash advance company, said in its suit that NEON owes it $1.8 million for cash advances it stopped paying back.

All Pro Capital filed its lawsuit last week in federal court in Cleveland.

The lawsuit said NEON in May 2022 took out an $11 million loan, but stopped making monthly payments in September. All Pro Capital then took back $4.1 million that NEON had placed in a lockbox account, according to the lawsuit.

All Pro Capital reached out to NEON officials, including Austin, several times, including attempts to settle out of court. NEON never responded, the lawsuit said.

All Pro Capital is asking for an order of foreclosure on NEON’s nine properties that it used as collateral for the loan. The properties include its headquarters and all eight other clinics in Cleveland and East Cleveland.

Attorneys have also asked for a judge to appoint a receiver to take control of the property during the foreclosure proceeding.

The recent lawsuits compound legal entanglements for NEON dating back to 2016 and were referenced in All Pro Capital’s lawsuit.

The first happened between 2016 and 2018, when a developer hired by NEON to renovate the New East Side Market, Arthur Fayne, embezzled $900,000 from the project. Fayne was sentenced to 18 months in federal prison. Austin, who was technically the victim in the case, wrote a letter on Fayne’s behalf, prior to Fayne’s sentencing hearing.

NEON also paid a $1.3 million judgment to its chief financial officer at the time, James O’Donnell, after O’Donnell reported Fayne’s misconduct to Austin, who fired O’Donnell in 2017.

NEON also fell victim to corrupt former Cleveland City Councilman Basheer Jones, who used his influence in 2018 to get his romantic partner hired as a consultant. NEON paid Sinera Jones $40,500 for work she never performed.

The councilman later took $50,000 from NEON under the guise of using it for an event where Basheer Jones said he’d give away gift cards and backpacks. He pocketed the money instead.

Basheer Jones was later sentenced to two years and four months in prison on corruption charges. Sinera Jones pleaded guilty to her role in the crime, but has not yet been sentenced.

In his final months on council, Basheer Jones also pushed to allocate $2 million of the city’s American Rescue Plan funds to go to NEON, in part to help it rebuild NEON’s Hough Health Center that was gutted by the May 2021 electrical fire. City Council passed the legislation, but the city never paid out the money.

All Pro Capital Funding attorney Peter Morrison wrote in the lawsuit that the issues with NEON “as a victim in the criminal actions noted above suggests that it is not able to protect its financial interests, its assets, and the interests of its creditors,” the lawsuit said.