Bain-Backed Company Faces Charges Of Abuse

Dozens of young adults allege they were abused at Mount Bachelor Academy, a so-called “tough love” boarding school for troubled youths in Oregon that was run by Aspen Education Group, a company owned by CRC Health Corp., a large national health care company bought by Bain Capital in 2005 for $720 million, sister publication Buyouts reported.

The allegations are spread across two recent lawsuits and come two years after state agencies suspended Mount Bachelor’s license because of allegations of abuse. In July, nine former students filed a lawsuit seeking nearly $14.3 million from Aspen and CRC Health, according to press reports. On Nov. 9, 14 more students filed a lawsuit, seeking $23 million, according to reports.

Bain Capital, which manages $66 billion in assets, has not been named as a defendant in either of the lawsuits, and the alleged incidents took place before Bain bought the company. It should be noted also that health care in general tends to be a highly litigious industry and that CRC Health and many of its subsidiaries treat people with very serious conditions.

But the lawsuits could prove to be a public relations headache for a firm like Bain, founded by Republican Presidential candidate Mitt Romney, which touts itself as “one of the world’s leading private investment firms.” The suits also come at a time when the private equity firms are doggedly trying to advance themselves as job creators and responsible stewards of capital for the likes of police officers, firefighters and teachers.

Based in Cerritos, Calif., Aspen Education offers boarding schools, wilderness therapy, residential treatment, special needs summer camps and weight loss programs, according to its Web site. CRC Health bought it in 2006 for $291 million, according to Capital IQ.

“We have been extremely pleased with the performance of CRC, and believe the marriage of these highly complementary organizations creates a powerful presence in behavioral health with strong continued growth prospects,” John Connaughton, a managing director at Bain Capital, said in a press release announcing CRC Health’s acquisition of Aspen Education. “We also see significant potential to leverage customer bases, business development activities, clinical operations, and support functions to provide a broader range of services while enhancing the effectiveness of care delivery and customer service.”

Altogether, 31 young adults have alleged they were abused at Mount Bachelor, according to KTVZ.com, a news hub in central Oregon. The allegations are all the more troubling considering many of the plaintiffs had already suffered abuse in childhood.

One allegation says that girls who had been sexually abused earlier in their lives were forced to perform “lap dances” for male peers and staff. A female student also says she was forced by staff to clean up the remnants of her roommate’s miscarriage. The allegations across the two lawsuits also include being deprived of food, water and shelter for prolonged periods of time; denial of medical care; and incessant hard labor, including moving boulders from one place to another in the middle of the night.

The two lawsuits aren’t the first time Aspen Education and CRC Health have run into trouble. In November 2009, Oregon’s Department of Human Services suspended Mount Bachelor’s licence after a seven-month investigation found nine claims of abuse worth investigating, including sexualized role play and reenactment of traumatic events, according to KTVZ.com. In 2010, Mount Bachelor settled legal actions it had taken against the state of Oregon contesting the allegations; as part of the settlement, Aspen Education and CRC Health agreed that Oregon’s DHS had reasonable cause to investigate abuse at Mount Bachelor and seek corrective action, according to KTVZ.com. Aspen Education decided to leave Mount Bachelor closed.

In Tennessee, meanwhile, the Department of Children’s Services and the Department of Mental Health are investigating the death of a diabetic 18-year man nine days after he checked out of New Life Lodge, a drug rehabilitation center owned by CRC Health, according to The Tennessean, a Nashville newspaper. CRC Health is also facing two lawsuits over two New Life patients who died in 2010, according to the newspaper.

Aspen Education is one of at least six acquisitions CRC Health has made under Bain’s ownership, according to Capital IQ.

CRC Health has made several changes at the executive level, though it’s not clear if they were made in response to its various legal concerns. In January, it appointed a new CEO. And in August, in unveiled a new 10-member “clinical advisory board,” led by a chief clinical officer, “responsible for providing expert guidance as the company develops a cutting-edge treatment delivery system that encompasses the latest innovations and research,” according to a company press release.

In August, Aspen Education and all of its facilities achieved full accreditation by the Joint Commission, a health care accrediting body founded in 1951, and the Commission on Accreditation of Rehabilitation Facilities, a non-profit accrediting body founded in 1966, according to an Aspen Education press release. The company is “the only organization of its kind to achieve such a feat,” according to the press release.

Bain Capital declined to comment, instead referring Buyouts to a lengthy statement from Aspen Education regarding the most recent lawsuit, which was also provided to KTVZ.com.

“We are confident there is abundant evidence showing no substance to any allegations of abuse made against Mount Bachelor Academy, as was clear in the resolution with the Oregon Department of Human Services agreed to in September of 2010. DHS initially took action based on students’ allegations, but withdrew its orders, including the suspension of Mount Bachelor Academy’s license, after further information became available. Given the favorable terms of the settlement agreement, we agreed to dismiss our various legal proceedings against the state. We also independently decided to leave Mount Bachelor Academy closed due to the fact that the state’s sudden, although erroneous, closure of the campus had effectively shut the program down.

“This does not change the record that for more than two decades, Mount Bachelor changed the lives of over 1,000 troubled young people for the better. It was a program specifically designed for troubled students who had failed to progress in other settings. It was designed to help kids confront the worst of their behaviors and take ownership of them, whether that be substance abuse, sexual acting out or other issues.

“This approach proved successful at producing positive, life-changing results, and was attested to in the resounding evidence we submitted to the state. While we cannot comment on specific allegations due to HIPAA privacy regulations, we vigorously deny any and all charges of mistreatment.”