In latest troubles, top UM athletics booster John Ruiz faces $67 million lawsuit

The health-insurance claims company founded by lawyer John H. Ruiz, a top financial booster of University of Miami athletics, faces another legal challenge after a Miami healthcare provider filed a lawsuit last week saying that Ruiz’s company, LifeWallet, owes it nearly $67 million.

The civil action comes after LifeWallet acknowledged earlier this month that the publicly traded company is under investigation by the U.S. Securities and Exchange Commission and has been subpoenaed by a grand jury convened in the Southern District of Florida. A Miami Herald investigation last month first reported the parallel probes and issues with the company’s financial filings with the SEC.

Cano Health is simultaneously being sued by LifeWallet.

Cano is itself struggling. The primary healthcare provider, which caters to seniors covered by Medicare and private insurers, said in its quarterly filing with the SEC that it might not be able to continue operating and that it would be firing nearly 700 employees to cut costs.

In its suit filed last Thursday, Cano alleges LifeWallet “is a sham and effectively a Ponzi scheme” that has made “misrepresentations” in contract agreements between the two companies. Cano argues that the company, which was founded under the name MSP Recovery, has used the value of health insurance claims it obtained from Cano and other companies to “prop up an absurdly over-inflated valuation.”

READ MORE: ‘Red flags on top of red flags’: Problems mount for UM athletics booster John Ruiz

Cano claims in its suit that LifeWallet used that valuation to convince other companies to offer assets in exchange for shares and to “support windfall salaries and perks for its executive officers, including many self-interested transactions with its own founder and CEO, Defendant John Ruiz.”

In its lawsuit against Cano, LifeWallet argued that the dispute should be handled through mediation or arbitration, as it said the companies had earlier agreed. On Sunday, it filed a motion in response to Cano’s suit, arguing that the healthcare provider’s complaint should be struck as a “sham pleading.” Cano filed a response on Tuesday to LifeWallet’s motion to strike the complaint, alleging that the motion was “legally unsupported” and accusing LifeWallet of using it as a “flimsy pretext to submit more than two dozen pages of scurrilous, irrelevant attacks on Cano Health.”

Cano Health’s lawyers did not immediately respond to a request for comment. A spokesperson for LifeWallet said Cano “has embarked on a public smear campaign” and called the lawsuit filed by Cano “baseless.”

Common criticism

While their stocks traded for 45 cents and 12 cents per share, respectively, at market close on Tuesday, Cano and LifeWallet were among the highest-profile Florida companies in recent years to go public through mergers with special purpose acquisition companies, or SPACs, which are companies created exclusively for the purpose of merging with an existing company to take it public. When Cano went public in 2020, it was valued at $4.4 billion, while LifeWallet went public in 2022 at a valuation of more than $32 billion.

SPAC deals exploded in popularity in 2020, offering companies an alternative to the traditional route of an initial public offering, or IPO, with far less regulatory scrutiny. While some companies that went public through this method have found success, most notably the sports betting company DraftKings, the results have largely been disappointing.

“On average companies that have merged with SPACs have not done well for public-market investors,” said Jay Ritter, a business professor at the University of Florida who has extensively researched IPOs.

The common criticism of many SPAC deals, Ritter says, is that “too many of the companies that have merged with SPACs are low-quality companies.”

In February, Bloomberg reported that at least eight companies that had gone public through a SPAC merger had already filed for bankruptcy and that dozens more didn’t have enough money to keep funding their operations for the following year.

Competing claims

When LifeWallet went public in 2022, it projected that it would earn billions by recouping healthcare insurance payments for health claims that should have been paid by another party. For example, if a car crash resulted in a hospital bill paid by a health insurer such as the federal Medicare program, LifeWallet would seek to get the car insurance company to reimburse the health insurer, as it should have paid the tab.

In 2021 and 2022, LifeWallet and an affiliated company struck deals with Cano to purchase the right to pursue insurance claims on behalf of the healthcare provider for a combined total of nearly $67 million that would be paid in stock, according to the suit filed by Cano in Miami-Dade Circuit Court.

READ MORE: Top UM booster John Ruiz’s company LifeWallet confirms SEC probe, grand jury subpoena

But Cano alleges that LifeWallet breached that agreement by missing initial deadlines to issue stock to fulfill the agreement and then failing to register the stock with the SEC, rendering it impossible for it to be traded.

LifeWallet’s suit against Cano doesn’t address the claims that it failed to properly register the shares, but points out that the company issued stock worth $10 million to Cano soon after LifeWallet went public last year and then issued additional stock to pay the balance to Cano last month. LifeWallet disclosed both of these transactions to the SEC.

In the dispute, LifeWallet alleges that it is owed $5 million by Cano under a service agreement between the companies.

LifeWallet also said in its complaint that Cano hasn’t cooperated in a case the company is pursuing based on Cano’s claims that it said could net as much as $30 million from prescription-drug rebates that LifeWallet said were wrongfully withheld from Cano.

Even if Cano obtains the money it says it is owed by LifeWallet it might not be enough to right the ship for the company, which said last week in its quarterly SEC filing that it operated at a net-loss of more than $331 million in the first six months of the year. Cano, which runs health clinics and pharmacies, has primarily operated in Florida, Texas, Nevada and Puerto Rico, though it said last week that it plans to end operations in Puerto Rico by the beginning of next year.

Cano’s co-founder and CEO, Marlow Hernandez, stepped down from his position in June after facing pressure from a group of major investors and former board members, including Miami real estate investor Barry Sternlicht, anesthesiologist and addiction care executive Lewis Gold and private equity manager Elliot Cooperstone. The group publicly criticized Hernandez’s leadership and cited the deal with LifeWallet among what they saw as the company’s bad decisions.

LifeWallet filed a separate suit against the three investors last week, alleging breach of confidentiality and defamation. A spokesman for the three investors declined to comment.

Ruiz’s company has become a prominent financial sponsor of top players in the UM athletics program through newly legal name, image and likeness, or NIL, deals, and Ruiz has also proposed building a stadium for the Hurricanes, which would be known as LifeWallet Stadium.

The University of Miami has not responded to requests for comment about ts relationship with Ruiz or LifeWallet.