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management contract.14 The actual management contract is between
SCA Management and the Operating Partnership, and contains much
more extensive and detailed provisions than are stipulated in the
General Partnership agreement. Notably, the term of the
management agreement is at variance with the term stipulated in
the General Partnership agreement.15
The administrative record does not reveal that petitioner or
RHS had any role in negotiating the actual management contract.
It is executed for both the Operating Partnership and SCA
Management by the same individual--David E. Crockett--in his dual
capacities as secretary of SCA Centers and vice president of SCA
Management, raising the suggestion, if not the likelihood, of
self-dealing between these two SCA affiliates.
Respondent asserts, and we agree, that this long-term
management contract with an affiliate of SCA Centers is a salient
indicator of petitioner's surrender of effective control over the
14 The General Partnership agreement merely provides that
SCA Management will assume “full responsibility for administering
the day-to-day operation of the ambulatory center in accordance
with the goals, policies and objectives” of the Operating
Partnership, and stipulates an initial 15-year term, renewable
for two 5-year terms, and a fee equal to 6 percent of the
Operating Partnership’s gross revenues.
15 Whereas the General Partnership agreement stipulates a
15-year initial term for the management contract, the actual
management contract modifies this provision to the advantage of
SCA and its affiliates by providing that the initial term is
equal to the term of any indebtedness, lease, or other obligation
of the Operating Partnership guaranteed by SCA or SCA’s
affiliate, but not less than 15 years.
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