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MedQuist Clams Up 
Company fails to Respond to Questions; New SEC filings Indicate Stock Listing in Jeopardy
 
The Asheville Tribune and I apparently have been put on a "do not contact" list following last week’s disclosures regarding possible
outsourcing of Veterans Administration medical transcriptions to a company in India.
 
MedQuist, a NASDAQ listed company in New Jersey that is 71 percent owned by the Dutch company Royal Phillips, closed its Asheville office last week and laid off the system administrator who had accused them of outsourcing Veteran’s Administration medical records overseas.
 
On March 24 the company announced it would fail to meet the Security and Exchange Commission’s extended deadline of March 30 for filing its Annual Report on the required 10K form. On March 31 the NASDAQ responded with notification to MedQuist that they would be de-listed from the exchange on April 8 unless they filed an appeal. Also, MedQuist’s trading symbol was changed from MEDQ to MEDQE to indicate their out-of-compliance status.
 
MedQuist promptly filed the appeal and issued proper notification with an SEC 8K report. The appeal provides MedQuist up to six weeks of additional time to prepare the 10K or to explain why they cannot provide financial statements. If they are de-listed due to a lack of financial information they would also be excluded from trading in the Over The Counter (OTC) market.
 
None of this has been picked up in the mainstream media. But many other worms in the medical transcription can have come to light.
 
David Lazarus, columnist for the San Francisco Chronicle, independently came up with other examples of questionable outsourcing of medical transcriptions to companies in Pakistan and the Philippines. A Website http://www.privacyforvets.com/ had 30,000 hits after The Asheville Tribune posted the story on its Website, http://www.ashevilletribune.com/; and I had whistle blower Susan Purdue on my Sunday afternoon talk show on WWNC-AM 570. She also appeared on the Web-based morning radio program, http://www.thepowerhour.com/ hosted by Joyce Riley.
 
While working on that story we spoke with a public relations representative at Ruder Finn, Inc., the agency representing MedQuist. The young lady obtained two denials from the firm in short order and we included them in the story. 

But when we got back to her with follow-up questions we received no reply.
 
The nature of our questions may be considered provocative but the company’s denials were issued in the present tense. There was no statement denying that what Purdue alleged happened was untrue. For the record, here are some of the questions MedQuist won’t answer:

Are you aware of the allegations (Susan Purdue) has made regarding outsourcing medical transcription overseas?
 
MedQuist’s Web site says there are 10,000 US/based MedQuist transcriptionists.
 
Are there any who do MedQuist work overseas?

If so, did any work for MedQuist on VA medical records? If so, how do you guarantee confidentiality of the data? If so, How do you comply with HIPPA regulations?
 
Does MedQuist have transcribers in India? Pakistan?
 
Have you ever? When? If in the past but not now, when were they discontinued? Have military transcriptions been outsourced overseas? Do you think it is a security risk to outsource to transcribers in those countries?

What impact could overseas outsourcing of military records have on your relationship to government agencies such as the Veterans Administration or other medical organizations?
 
What specific allegations of improper billing have been brought to the board’s attention? Would this include the possibility of federal charges of "procurement fraud" due to excessive profit margins due to overseas transcriptions under federal contracts?
 
Has MedQuist been investigated by the FBI or any other regulatory or criminal agency regarding these allegations?
 
Was the company’s decision to delay release of the 10-K annual report prompted by concerns over possible criminal liability under the
Sarbanes-Oxley Act of 2002?
 
Finally, it is our understanding that Susan Purdue has invested her life savings in defending herself during her testimony on legal fees. If the company’s Board of Directors internal audit substantiates Susan Purdue’s charges, will she be compensated for bringing the problems to management’s attention?
 
But those weren’t the best questions. I saved them for last: 

Questions for Gregory M. Sebasky, new MedQuist President and CEO: Are any MedQuist loans, notes or other financial instruments dependant upon maintaining listing on the NASDAQ, or being able to be traded in the OTC market? Please provide a list of insider trading since the date of Susan Purdue's e-mail notifying management she had contacted the FBI, on Sept. 16, 2002. This list should cover all current and former corporate executives and  those considered by the SEC to qualify as "insiders."
 
A company’s refusal to answer questions doesn’t necessarily imply guilt. But the normal reaction would be to simply call back, or e-mail, to politely refuse further comment. Writers and talk show hosts can live with that. But MedQuist’s abrupt termination of communications is unprofessional and reflects poorly on their management.
 
By the way, I stated "new CEO." MedQuist has had four of them in the past 18 months, roughly since Purdue went to the FBI with her story. 

We’ll keep an eye on the situation. 

This story filed for the Tribune by Bill Fishburn.

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