2015a-ems-0190-dhs volume 5 10/09/2015 1 before the … · 2010. 9. 15. · 2015a-ems-0190-dhs...

2015A-EMS-0190-DHS VOLUME 5 10/09/2015 996

1 BEFORE THE OFFICE OF ADMINISTRATIVE HEARINGS

2 IN THE MATTER OF: )

3 ) MARICOPA AMBULANCE, LLC, ) No. 2015A-EMS-0190-DHS

4 ) Applicant. )

5 ____________________________)

6

7 At: Phoenix, Arizona

8 Date: October 9, 2015

9

10

11

12 REPORTER'S TRANSCRIPT OF PROCEEDINGS

13

14 VOLUME 5 (Pages 996 through 1118)

15

16

17

18

19

20 COASH & COASH, INC. Court Reporting, Video & Videoconferencing

21 1802 N. 7th Street, Phoenix, AZ 85006 602-258-1440 [email protected]

22 Prepared By:

23 JODY L. LENSCHOW, RMR, CRR Certified Reporter

24 Certificate No. 50192

25

COASH & COASH, INC. 602-258-1440 www.coashandcoash.com Phoenix, AZ

2015A-EMS-0190-DHS VOLUME 5 10/09/2015 997

1 INDEX TO EXAMINATIONS

2 WITNESS PAGE

3 KRISTI BEIAN-PONCZAK

4 DIRECT EXAMINATION BY MR. BELANGER 1002

5 CROSS-EXAMINATION BY MS. FICKBOHM 1048

6

7

8

9 INDEX TO EXHIBITS

10 NO. DESCRIPTION OFFERED ADMITTED

11 Exhibit MA-29E CV of Kristi Ponczak 1049 1049

12 Exhibit MA-40E 2013 ARCR for PMT 1044 1044

13 Exhibit MA-42E 2013 ARCR for 1041 1041

14 Southwest Ambulance

15 Exhibit AMR-88 Declaration of 1107 1107 Stephen Farber in

16 Support of Rural/Metro

17 Corporation's Chapter 11 Petition

18

19

20

21

22

23

24

25


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 998

1 BE IT REMEMBERED that the above-entitled

2 and numbered matter came on regularly to be heard

3 before the Office of Administrative Hearings, 1400 West

4 Washington Street, Suite 101, Phoenix, Arizona,

5 commencing at 9:01 a.m. a.m. on the 9th day of October,

6 2015.

7

8 BEFORE: Administrative Law Judge Diane Mihalsky

9

10 For the Applicant:

11 COPPERSMITH BROCKELMAN, P.L.C.

12 Mr. James J. Belanger Mr. Scott M. Bennett

13 2800 N. Central Avenue Suite 1200

14 Phoenix, Arizona 85004 602-224-0999

15 [email protected] [email protected]

16

17 For Intervenor ABC:

18 MUNGER CHADWICK, P.L.C.

19 Ms. Adriane J. Hofmeyr 333 N. Wilmot

20 Suite 300 Tucson, Arizona 85711

21 520-721-1900 [email protected]

22

23

24

25


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 999

1 APPEARANCES CONTINUED:

2 For Intervenor AMR Maricopa:

3 FLETCHER, STRUSE, FICKBOHM & MARVEL, PLC

4 Ms. Ronna L. Fickbohm 6750 N. Oracle Road

5 Tucson, Arizona 85704 520-575-5555

6 [email protected]

7 SHORALL McGOLDRICK BRINKMANN Mr. Paul J. McGoldrick

8 1232 E. Missouri Avenue Phoenix, Arizona 85014


10

11 For Intervenor Rural/Metro:

12 SQUIRE PATTON BOGGS (US) LLP Mr. Lawrence J. Rosenfeld

13 One East Washington Street Suite 2700

14 Phoenix, Arizona 85004-2556 602-528-4000

15 [email protected]

16 For Arizona Department of Health Services, Bureau of

17 Emergency Medical Services and Trauma System:

18 OFFICE OF THE ATTORNEY GENERAL Education and Health Section

19 Ms. Laura T. Flores Ms. Patricia LaMagna

20 Mr. Kevin D. Ray Assistant Attorneys General

21 1275 W. Washington Street Phoenix, Arizona 85007-2926


23

24

25


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1000

1 ALJ MIHALSKY: We're on the record. It

2 is 9:01 a.m. on October 9th, 2015. This is the hearing

3 in Case No. 2015A-EMS-0190-DHS that is in the matter of

4 Maricopa Ambulance, LLC. My name is Diane Mihalsky. I

5 am the Administrative Law Judge who has been conducting

6 the hearing in this matter.

7 I'll ask the parties and attorneys to

8 make their appearances for the record, beginning on my

9 left.

10 MR. BENNETT: Good morning, Judge.

11 Scott Bennett and Jim Belanger on behalf of Maricopa

12 Ambulance.

13 MR. RAY: Good morning, Judge. Kevin

14 Ray, and with me today, Laura Flores and Patricia

15 LaMagna, and to my right is Ithan Yanofsky.

16 ALJ MIHALSKY: New faces.

17 MS. FICKBOHM: Good morning, Your Honor.

18 Ronna Fickbohm and Paul McGoldrick on behalf of AMR of

19 Maricopa, and with me today is AMR, Inc.'s regional

20 finance and operations officer for the Southeast

21 region, Rich Bartus.

22 MR. ROSENFELD: Good morning, Your

23 Honor. Lawrence Rosenfeld representing the Rural/Metro

24 intervenors, and to my left is corporate representative

25 Marco Rivera.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1001

1 MS. HOFMEYR: Good morning, Judge.

2 Adriane Hofmeyr for ABC Ambulance, and I have ABC's

3 principal, Neal Thomas, with me.

4 ALJ MIHALSKY: Very good.

5 Are we ready to begin with the

6 presentation of evidence, or do we have preliminary

7 matters this morning?

8 MR. BELANGER: I think evidence,

9 Judge.


11 Then Maricopa Ambulance can call its

12 next witness.

13 MR. BELANGER: Kristi Ponczak, please,

14 Judge.

15 ALJ MIHALSKY: Ms. Ponczak, if you would

16 raise your right hand.

17 (Ms. Kristi Beian-Ponczak was duly sworn

18 by the Administrative Law Judge.)

19 ALJ MIHALSKY: Thank you.

20 Could you state your name for the record

21 and spell your last name for the court reporter.

22 THE WITNESS: Kristi Beian-Ponczak. The

23 last name is B, as in boy, E-I-A-N-P-O-N-C-Z-A-K.


25 Go ahead.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1002

1 KRISTI BEIAN-PONCZAK

2 called as a witness on behalf of the Applicant herein,

3 having been previously duly sworn by the Administrative

4 Law Judge to speak the truth and nothing but the truth,

5 was examined and testified as follows:

6

7 DIRECT EXAMINATION

8 BY MR. BELANGER:

9 Q. Kristi, please give us a little bit about

10 your education and professional background.

11 A. Yes. I graduated from Arizona State

12 University with a Bachelor of Science degree in

13 accounting, and followed that up with obtaining my

14 certified public accounting certification.

15 Q. Okay. Can you elaborate on that a little

16 bit? When did you get your CPA?

17 A. I got my CPA about a year and a half after

18 graduating from ASU, while I was working at Coopers &

19 Lybrand.

20 Q. When did you graduate from ASU?

21 A. May of 1989.

22 Q. And what was your first job after graduating

23 from ASU?

24 A. I was recruited by Coopers & Lybrand, which

25 at that time was either a Big 6 or a Big 8. I can't


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1003

1 recall. And I was recruited into their valuation

2 litigation support services group to be an entry-level

3 associate, assisting with litigation work.

4 Q. Was your undergraduate degree in accountancy,

5 finance or management?

6 A. It was a Bachelor of Science, and they call

7 it accountancy.

8 Q. When did you obtain your CPA?

9 A. I believe it was a year and a half later.

10 Q. Do you still hold a CPA?

11 A. Yes, I do.

12 Q. Is that a license through the State of

13 Arizona?

14 A. That's correct.

15 Q. Okay. Give us a little bit of detail about

16 your work at Coopers & Lybrand.

17 A. So at Coopers & Lybrand I worked directly for

18 the manager of litigation support, and I assisted -- as

19 an entry level, I assisted, at the direction of the

20 manager, to provide services related to various

21 litigations, whether in the valley or outside the

22 valley. Often they were related to valuation work

23 around earnings and profits of bankrupt or insolvent

24 entities and working through that analysis.

25 Q. What about after Coopers & Lybrand?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1004

1 A. After Coopers, I was recruited from Coopers

2 to Main Street & Main, which is a publicly traded

3 entity here in Arizona. They're the largest franchisee

4 holder for the TGI Friday's restaurants. At the time

5 that I was recruited, they were expanding into new

6 lines of business and sought me out to assist with the

7 integration of those acquisitions into their larger

8 public company.

9 Q. And how long did you do that for?

10 A. I was there for three years.

11 Q. And then after that?

12 A. From there I -- Main Street made the

13 determination to spin off some of their entities that

14 were non-restaurant-related. I was asked by the senior

15 management team to be part of that management buyout

16 and spin-off. So we spun off that part of the

17 organization and created Sun Street Foods, and I moved

18 over there as the controller of Sun Street, which was a

19 privately held enterprise.

20 Q. Okay. What about after that?

21 A. I worked with the management team there for a

22 couple of years. We were effective in building that

23 business and selling it to Shamrock Foods, as they were

24 expanding in the frozen food distribution business,

25 which was primarily what our operation was.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1005

1 So we sold to Shamrock Foods, and then at

2 that time I ventured out with the CFO of Sun Street at

3 the time and we had our own consulting group

4 independently, and we were providing financial

5 services, sort of co-sourcing financial services for

6 small to mid-size companies, helping them establish

7 their accounting departments, their IT infrastructure,

8 their back-of-the-house ERP reporting and that sort of

9 thing.

10 Q. Where do you live?

11 A. Scottsdale, Arizona.

12 Q. How long have you lived in Arizona?

13 A. Born and raised here.

14 Q. Have you ever lived anywhere else?

15 A. When I was three to six years old, I lived in

16 St. Louis.

17 Q. Was that your decision to move to St. Louis?

18 A. No, but it was fun because there was snow.

19 Q. I'm only kidding.

20 Okay, and after that, after that last, when

21 you sold I think to Shamrock, what was your experience

22 after that?

23 A. So with the CFO at that time, he and I

24 created our own financial consulting practice, and we

25 assisted, as I stated, with providing services,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1006

1 financial services, to small and medium-size companies,

2 helping them establish their ERP system, their IT

3 systems, sometimes their POS systems, helping them

4 create their financial reporting. So I did that for a

5 couple of years.

6 Q. Let me stop you for just one second. What is

7 an ERP system?

8 A. An ERP system is a reporting system,

9 enterprise reporting system, package.

10 Q. Okay. What is a POS system? I'm not asking

11 because I know the answer and I'm expecting you to say.

12 I have no idea.

13 A. POS stands for point of sale, and that's very

14 often the front-of-the-house system in a restaurant or

15 commercial retail where you're entering the register.

16 Q. About what time are you doing this?

17 A. This was between 1995 -- 1996 and 1998.

18 Q. Okay. After that?

19 A. So while I was on my own in that business, I

20 was being contacted by Rural/Metro on multiple

21 occasions, Rural/Metro Corporation, which was at the

22 time a locally publicly traded enterprise. And I was

23 being sought out by their director of finance, trying

24 to recruit me into Rural/Metro. So that went on for a

25 couple of years, and I was routinely saying, "No. I'm


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1007

1 doing my financial practice and enjoying it, so not at

2 this time."

3 In February of 1998, the last time they

4 reached out to me, at that point I made the decision

5 that it looked like an interesting opportunity and I

6 was ready to move back into the public environment, a

7 publicly traded company. So I accepted the position at

8 Rural/Metro starting April of 1998 as the director of

9 budgeting and planning.

10 Q. Okay. How long were you with Rural/Metro?

11 A. For just over 13 years.

12 Q. Give us a little bit about your history with

13 Rural/Metro.

14 A. So Rural/Metro Corporation, as a publicly

15 traded company, was an amazing organization. We had a

16 phenomenal management team in place there at the time.

17 When I entered the company in 1998, I was asked to be

18 the director of budgeting and planning. Within four

19 months I was asked to move into the treasury position

20 and cash management, and I did that.

21 Unfortunately, at that time the company had

22 just come out of the 1990s, which was a very aggressive

23 time in the ambulance industry, where the two largest

24 players, AMR and Rural/Metro, were acquiring a lot of

25 entities and, frankly, in retrospect, overpaying for


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1008

1 them.

2 Q. Might those be the two same intervenors, in

3 addition to ABC, that are in this room with us today?

4 MS. FICKBOHM: I'm going to object,

5 because she's referring to the national organization

6 AMR, and AMR of Maricopa wasn't even in existence then.

7 BY MR. BELANGER:

8 Q. Okay. Might that be the parent entity of AMR

9 Maricopa, which was not in existence back then, and

10 Rural/Metro; are those the same intervenors that are in

11 the room today?

12 A. Yes, as I understand it.

13 Q. And then there's also ABC, which is, as you

14 know, over in the corner with Ms. Hofmeyr and

15 Mr. Thomas?

16 A. Yes.

17 Q. You understand that they're intervenors in

18 this process?

19 A. Yes, I do.

20 Q. Okay.

21 A. So within eight months of me joining the

22 firm, I was sitting in the office with the CFO and the

23 CEO and telling them that they were a couple months

24 away from being in technical default on all of their

25 lender agreements.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1009

1 So at that time there was a change in the CEO

2 and CFO, and I was asked to move in, take over more of

3 the finance division. A new CEO was brought in and a

4 new CFO were brought in. And we spent the next four

5 years, I would characterize really from early 1999

6 through mid to late 2003, as Rural/Metro Corporation's

7 restructuring period, where we were evaluating every

8 operation for profitability and performance in the

9 market and making a determination if we were going to

10 keep operations open or if we were going to have to

11 strategically close down operations.

12 And the objective was to ensure that our

13 investors and our lenders, as well as our customers

14 from a local perspective, were all treated fairly, and

15 made sure that we were performing on all of those

16 measures.

17 So by the end of that time period in early

18 2004, we were out of what we, as management, called

19 restructuring, our restructuring period. We were

20 operating and focused on organic same service area

21 growth and new contract growth.

22 Q. Okay. As you continued on with Rural/Metro,

23 give us a little bit more history. You eventually

24 became the CFO; is that correct?

25 A. Yes, in October of -- so during this time


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1010

1 period, the same CEO was there. I was promoted into

2 the vice president and treasurer of the organization,

3 and then in October of 2006 was asked to step in as the

4 chief financial officer, and held that position until

5 the early fall of 2011.

6 Q. Okay.

7 A. And that was -- if I could add?

8 Q. Sure.

9 A. During that time, that was a very critical

10 time for the company. Our objective was certainly to

11 focus on making sure that we took care of the

12 communities we were in and monitoring that very closely

13 at all levels within the organization, both from a

14 contract compliance perspective, as well as from a

15 profitability perspective; but during that time period

16 we were able to bring the company from 18 million in

17 EBITDA up to 75 million of EBITDA by the time I

18 departed the company.

19 Q. And we've heard a lot about EBITDA. Is that

20 a concept that you use in your analysis of businesses

21 that you've been affiliated with as CFO?

22 A. Absolutely. Operationally, when you're in a

23 company and you're operating a company on a daily

24 basis, to us, earnings before interest, taxes,

25 depreciation and amortization is critical, because that


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1011

1 is the number that directly is a result of operational

2 decisions being made at the market level.

3 It's not complicated or confused by what I

4 would call corporate decisions. And by "corporate

5 decisions" I mean capital structure decisions that may

6 drive interest expense, taxing regulatory decisions

7 that may be as the result of corporation formation

8 decisions, accounting decisions that are driven by

9 GAAP, those sorts of, particularly around the

10 acquisition of fixed assets.

11 So as a CFO that's an operational CFO, my

12 focus is to monitor my operations on their EBITDA

13 performance, which is based on their decisions at the

14 local level.

15 Q. So you left Rural/Metro early in the fall of

16 2011; is that the right time frame?

17 A. I gave my notice to the CEO and the board in

18 early August of 2011 and was asked at that time if I

19 would agree to stay on and complete the June 30th, 2011

20 fiscal year end audit, which was due by September 30th;

21 and I agreed to do so.

22 Q. Who was the auditor?

23 A. PricewaterhouseCoopers.

24 Q. Okay. After you left Rural/Metro, what did

25 you do?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1012

1 A. Took a couple years off.

2 Q. And why did you do that?

3 A. I have one son, and he was 11 years old, and

4 I wanted to spend a little bit of time with him. So I

5 took a couple years off and spent time with him.

6 Q. What is it that you do now?

7 A. I'm now the chief financial officer of

8 Priority Ambulance Holdings and all of its

9 subsidiaries.

10 Q. When did you take that position?

11 A. I started that position January 1st of 2014.

12 Q. Tell us what it is you do with Priority

13 Ambulance.

14 A. So as the chief financial officer, I have

15 responsibility to report on the financials and the

16 performance of the company, both internally to our

17 board and externally to lenders, and I have -- which

18 encompasses many aspects. It encompasses all of

19 treasury management, cash management, financial

20 performance, financial reporting, insurance

21 negotiation, the evaluation of leasing or purchasing,

22 you know, financing type coordinations, et cetera.

23 Q. As part of what you do with Priority, do you

24 assess new acquisitions or potential acquisitions?

25 A. Absolutely, yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1013

1 Q. Explain that a little bit.

2 A. So we have -- part of our strategy is to grow

3 both organically through start-ups and through

4 start-up, as we've done in Tennessee and Alabama, but

5 also to expand through acquisitions.

6 And in order to do that, we've got to first

7 seek out potential targets. And when we see targets

8 that we find could be attractive, which means they

9 might be in an existing service area we're in, they

10 might be in a service area close to an existing service

11 area, they might be -- because of the experience of our

12 management team, they might be in a location that we

13 have extensive knowledge of the reimbursement in that

14 market and the customers in that market, so that might

15 also be an area we expand.

16 So we look at opportunities, and as we look

17 at those, we meet with the potential targets, have

18 preliminary conversations with them, and then we go

19 through an extensive due diligence process to prove out

20 what we call their quality of earnings, and that means

21 their EBITDA to us.

22 Q. As part of that process, do you do anything

23 related to revenue recognition or determinations of

24 what their revenue streams are?

25 A. Absolutely. You know, in our industry,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1014

1 health care industry, but I speak to ambulance

2 industry, revenue recognition is the most important

3 thing from a P & L or EBITDA perspective, because

4 revenue in our industry is an estimate.

5 The month we transport patients we don't know

6 who the payor is, in many instances. In some

7 instances, when we take a transport, we may not even

8 know the patient's name until a couple of days later,

9 when we can seek that information from our partners in

10 the hospital or things.

11 So we have to estimate revenue while we

12 obtain this sort of information, and that's very

13 typical in the health care industry.

14 Q. Do you have a revenue analysis team at

15 Priority?

16 A. Absolutely. Absolutely, which to me is just

17 critical. And so we have a very robust revenue

18 recognition process at Priority Ambulance and all of

19 our -- which is done -- you know, so our structure is

20 we've got Priority Ambulance, and then below it we've

21 got what we call cost centers, which are even below the

22 market level.

23 So, for instance, in Tennessee we've got

24 Tennessee as a location, but below it we may have five

25 or six cost centers, and that we manage EBITDA down at


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1015

1 that level. So we have a revenue recognition program

2 and committee that reviews revenue down at that level.

3 Our revenue recognition program is very

4 robust. So I have a team of five people that on a

5 monthly basis we get together and review and perform a

6 lot of analytics around all of the collections, the

7 payors, the service level, historical collections by

8 cost center, to assess what we should be booking this

9 month's revenue on.

10 So if I could explain --

11 Q. Sure.

12 A. -- revenue for just a moment.

13 So our industry is not rocket science. It's

14 actually very simple from an accounting perspective.

15 Revenue is transports times an estimated average

16 patient charge. We call that APC. And that's what

17 revenue is.

18 Transports we know, because it's coming

19 directly out of our CAD systems, our computer-aided

20 dispatch systems. So we know our transports. What we

21 have to estimate is our APC, which is the rate we are

22 ultimately going to collect on each transport.

23 So what my committee is doing is -- if I may,

24 my committee consists of myself, the controller, the

25 vice-president of revenue cycle management, and my


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1016

1 manager of financial planning analysis. The committee

2 every month looks at analytics at the cost center level

3 that says, okay, over the last, in our case, 19 months,

4 by cost center, this is what we billed at gross

5 revenue; these are the settlements, which we would

6 refer to internally as Medicare or Medicaid or AHCCCS

7 discounts; and then bad debt.

8 So gross revenue, less these settlements,

9 less bad debt, is what we call revenue. And that is

10 what I expect to collect in cash over the next

11 12 months, which is my collection cycle.

12 Q. Did you have -- I'm sorry, did I --

13 A. No.

14 Q. Did you have a similarly -- prior to leaving

15 Rural/Metro, did you have a similar, what you would

16 characterize as robust, revenue analysis team at

17 Rural/Metro when you were --

18 A. Prior to leaving?

19 Q. Yeah, prior to leaving.

20 A. When I was at Rural/Metro, we created this --

21 the same revenue recognition model that I utilize at

22 Priority Ambulance is the same model that I created

23 with my team at Rural/Metro in 2002, 2003, when we were

24 in the middle of restructuring, and that's -- we used

25 that model until the day I left Rural/Metro.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1017

1 Q. Are you aware whether or not, after you left

2 Rural/Metro, they continued to use the same revenue

3 analysis model that you had put in place?

4 A. Directly, I have no knowledge. I hear,

5 because my staff were still there for a period of time

6 after, and so I heard that there were significant

7 changes made in that; but I don't know directly.

8 Q. In terms of when you do -- and I'm not going

9 to spend a whole heck of a lot of time on this. When

10 you do some of your acquisition analysis, do you also

11 use third parties?

12 A. We do. We sort of evaluate the size of the

13 acquisition based on an expected purchase price, and we

14 evaluate that as we think about capital structure and

15 how we're going to finance that transaction. And if

16 we're going to need to utilize a combination of debt

17 and equity, we will often go out to a third party to

18 have a third-party independent review to prove out the

19 acquisition target's quality of earnings or EBITDA.

20 That's what they're proving out.

21 Q. You understand that we're here for an

22 application for a certificate of necessity for Maricopa

23 Ambulance?

24 A. Yes, I do.

25 Q. Have you ever been convicted of a felony?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1018

1 A. No.

2 Q. How about a misdemeanor involving moral

3 turpitude?

4 A. No.

5 Q. Do you know what moral turpitude is?

6 A. I believe I do.

7 Q. Okay. Have you ever been disbarred from any

8 federal or state program --

9 A. No.

10 Q. -- involving the administration of government

11 funds?

12 A. No.

13 MR. BELANGER: Judge, I've got the

14 rainbow on my screen, and I don't know, if I just

15 click, will it go away?

16 ALJ MIHALSKY: Oh, no, I need to let you

17 in. I keep forgetting. I'm sorry about that.

18 MR. BELANGER: That might be a ring of

19 Saturn, actually. I don't know if that's a rainbow.

20 ALJ MIHALSKY: I'm not sure what it is.

21 MR. BELANGER: There we go.

22 ALJ MIHALSKY: There you go.

23 BY MR. BELANGER:

24 Q. These are all up from yesterday? I'm just

25 going to close out of them and start all over again.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1019

1 Sorry, Judge. I probably just clicked out of

2 a document that I'm going to call right back up.

3 Ms. Ponczak, I'm showing you what's been

4 admitted as Maricopa Ambulance 24H. What are we

5 looking at?

6 A. This is a subset document out of -- as one of

7 the documents that I provide to the management team and

8 to the board on a monthly basis that --

9 Q. Let me just stop you for a second. You were

10 here when Mr. Chandra testified for the last couple of

11 days; is that correct?

12 A. Yes.

13 Q. He's on the board, isn't he?

14 A. Absolutely.

15 Q. Is he familiar with all of the process

16 regarding the certificate of necessity, the application

17 for the certificate of necessity for Maricopa

18 Ambulance?

19 MS. FICKBOHM: Objection, foundation.

20 MR. ROSENFELD: I join in that

21 objection.

22 BY MR. BELANGER:

23 Q. Well, do you communicate --

24 ALJ MIHALSKY: It's overruled. The

25 witness may answer, if she can.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1020

1 THE WITNESS: Yes. We keep him very

2 updated in our process and have been speaking to him

3 about the Arizona market and the CON process since

4 inception of the company.

5 BY MR. BELANGER:

6 Q. And this information, I mean I think he

7 testified to it; this information -- well, I won't even

8 ask that.

9 Let's go into it. Let's actually look at

10 this, and I want to look at revenue. Do you see

11 there's a graph on the top, the top left, right above

12 the -- it says Historical Operations EBITDA Trend?

13 A. Yes.

14 Q. What does that graph represent?

15 A. That is a monthly representation since

16 inception of the company of the earnings before

17 interest, taxes, depreciation and amortization that the

18 company has achieved on a monthly basis.

19 Q. Okay. And in the first box, top left-hand --

20 and this document is actually -- oh, my. I don't want

21 to copy anything. There we go. You see that I've

22 enlarged this so it's actually a -- I don't know what I

23 just did there.

24 Okay, back up.

25 The box indicated that's Revenue, you see in


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1021

1 the top left-hand corner of 24H, Maricopa Ambulance

2 24H?

3 A. Yes, I do.

4 Q. And there's --

5 For example, let's look at Location No. 1 in

6 2014. Where is Location No. 1?

7 A. That is East Tennessee.

8 Q. It says -- it's got actual revenue for the

9 year of 2014. What is actual revenue? We had a lot of

10 discussion of that yesterday. What is -- for example,

11 if we look at June, actual June, it's $221,437.

12 A. Yes.

13 Q. What does that mean?

14 A. So actual just means that we have closed that

15 month from a financial reporting perspective. So that

16 is the actual revenue that we have booked in our

17 accounting system for that month.

18 Q. And you were here yesterday when, I think it

19 was, Ms. Fickbohm was asking questions of one of the

20 witnesses regarding cash flow or revenue, and there was

21 a discussion regarding revenue being booked?

22 A. Yes.

23 Q. Do you remember that?

24 A. Yeah.

25 Q. Okay. So if we're looking at the actual June


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1022

1 number of $221,437, are those dollars in the door?

2 A. No, no, no. No.

3 Q. Okay. Explain that.

4 A. So revenue, as I stated earlier, is an

5 estimate in the health care industry. The

6 responsibility that I have is to ensure that that

7 number is the best estimate I have at the point in time

8 that I close that month of what that -- what I expect

9 to collect in cash ultimately on that month.

10 So for June, the 221,000 for East Tennessee,

11 I expect that once I complete my full collection cycle,

12 which is approximately 12 months, that I will collect

13 in the door 221,000.

14 Q. Now, when you were talking about your revenue

15 analysis team or revenue recognition, do you actually

16 go back and do an assessment of that number? And I'm

17 looking at the $221,437 number. What kind of

18 assessment do you do so that, for example, your board

19 of directors can rely on that number?

20 A. Yeah, absolutely. That's part of our monthly

21 process. Every single month we do what's called a cash

22 proof. And a cash proof is where we go back and we --

23 the cash that comes in the door this month, we apply it

24 back to the actual date of transport. So in this month

25 I might collect dollars on a transport that occurred


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1023

1 five, six, seven months ago.

2 We do an analytic where we take the money

3 that came in this month and we apply it back to the

4 month that that transport originally occurred, and I

5 look at that to see if I'm proving out my revenue, and

6 we call that a cash proof. And that's a -- so every

7 month we perform that as part of our capital committee

8 review process at the cost center level, so that we can

9 get comfortable that that revenue we booked in January,

10 that we're going to hit that number.

11 So every month I look to say -- we look back

12 at January, based on new money we've collected this

13 month that got applied back to January, and we say,

14 okay, do we still believe that number we booked. And

15 if we didn't, we would make an adjustment.

16 Q. The next box down -- and I assume that would

17 be the same if I picked any actual month? For example,

18 December of 2014 for Location No. 2, you do the same

19 kind of analysis to substantiate whether or not the

20 figure that's on this exhibit is reliable and accurate?

21 A. Absolutely. If I may give an example?

22 Q. Sure.

23 A. So here we just closed August mid September,

24 and during that review committee we looked back. In

25 January, of that 260 -- oh, I'm talking '15. I


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1024

1 apologize.

2 But if you look at January '15 --

3 Q. Hold on a second. I have that capability.

4 A. It's right here, yeah, on this.

5 Q. I think I do. Where is it?

6 MS. FICKBOHM: Slide over to the right.

7 BY MR. BELANGER:

8 Q. I got it. I was just on the wrong bar.

9 A. So I apologize.

10 So in January, of that 2,835,022 of revenue

11 that we recorded, as of right now, we have 46,000 left

12 to collect to achieve that revenue number. So to me,

13 that's good, because to me, I'm eight months into that

14 collection cycle. I've got four more months, based on

15 my historical collection cycle. I'm going to hit that

16 number. So I have no concerns. And that's what makes

17 me sleep at night, is that I'm constantly affirming

18 that number.

19 Q. Okay. We've heard a term, or it's actually

20 an acronym, I think it's DSO?

21 A. Yeah.

22 Q. What is DSO?

23 A. DSO stands for days sales outstanding and is

24 a measure of how quickly we collect on our sales.

25 Q. Does that impact -- for example, if we're


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1025

1 looking at Exhibit 24H, actual January, that

2 $2,835,022, does your DSO, does that impact that

3 number?

4 A. Well, I would say DSO is a result of the

5 number. DSO is a mathematical calculation that

6 determines how quickly I'm collecting on my revenue.

7 So the revenue I've booked here compared to the

8 accounts receivable I have is what calculates out DSO.

9 Q. Okay. And this Exhibit 24H, it also has a

10 box for transports; do you see that? It's the third

11 box down on the left.

12 A. Correct.

13 Q. Is that an estimated number, or are those

14 actuals?

15 A. No, those are actuals. So to me, that's one

16 of our key metrics that -- so we do a reconciliation

17 every month between our dispatch centers and our

18 billing to reconcile, to make sure, number one, most

19 critically, that we have received all the paper

20 documentation so that we can bill properly or

21 completely. So, no, those are actual numbers.

22 Q. And then if we go down to Page 2 of 24H, what

23 are we looking at here?

24 A. This is simply --

25 Q. Feel free to take control of the mouse and --


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1026

1 MS. FICKBOHM: Help Jim out.

2 BY MR. BELANGER:

3 Q. Yeah, help me out, exactly.

4 A. Okay.

5 Q. Thanks, Ronna.

6 A. This is simply starting to break down and

7 provide location-by-location visibility. So this

8 particular graph is looking at only our start-up

9 markets and trying to provide visibility to my audience

10 internally, which is my management team, as well as my

11 board, visibility to how our start-up markets are

12 performing.

13 So this, again, provides the same

14 information. The Location 1 is East Tennessee. This

15 is our revenue by month, our EBITDA by month, the

16 margin, transport volumes, both ambulance and

17 wheelchair. We look at those very separately.

18 Q. Okay.

19 A. So this is our 19-month actual financial

20 results and then the projections that I expect to

21 achieve through the year.

22 Q. And when you do projections, and obviously

23 this chart contains projections, I assume -- what kind

24 of analysis goes in before you're comfortable putting a

25 projection, for example, on this exhibit?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1027

1 A. So we have a daily projection that internally

2 we call a flash that goes out to the management team

3 every morning, and that's based on actual transports

4 from the night before and from the beginning of the

5 month.

6 I have a manager of financial planning and

7 analysis who issues the flash on a daily basis, and

8 that flash is a consolidated effort with the operations

9 team, with myself, with my manager of financial

10 planning and based on historical performance of actuals

11 and expenses incurred and, also, actual transports for

12 this month.

13 Q. I don't want to spend a lot more time on this

14 exhibit, but as we scroll through it, and feel free,

15 this is, I believe, Page 3 of exhibit -- hopefully it's

16 Page 3. What are we looking at here, just briefly?

17 A. So this is looking at one acquisition that we

18 did and the performance of that acquisition and our

19 projection through the end of the year.

20 Q. And is this the kind of information that is

21 provided to your board?

22 A. Absolutely. On a monthly basis we provide to

23 them a 36-page management report that is full of

24 information at the cost center, at the market level

25 end.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1028

1 Q. Do you know what an ARCR is?

2 A. Yes.

3 Q. I always get this wrong. The ambulance

4 revenue and cost report?

5 A. Yes.

6 Q. And were you involved in assisting to prepare

7 the ARCR that was part of the application for this

8 hearing for Maricopa Ambulance?

9 A. What I would say is, consistent with the way

10 we manage our company, the ARCR was reported -- was

11 created at the operation level; and then I oversaw --

12 reviewed it overall from a reasonableness perspective,

13 looking at my historical knowledge of the market from

14 when I was the CFO of Rural/Metro, and provided

15 commentary to the operations on the report. But I did

16 a -- and I would consider, you know, my review to be

17 reasonably thorough in terms of --

18 Q. Okay. Do you under -- is it your

19 understanding that the ARCR, in the process of an

20 application, is a back and forth between the applicant,

21 which is Maricopa Ambulance, and personnel from the

22 Department, the Bureau?

23 A. Yeah. Uh-huh. Yes.

24 Q. And that -- were you aware that any of the

25 information that was requested by the Bureau or its


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1029

1 employees was not provided to them?

2 A. Not that I'm aware of, no.

3 Q. I want to show you the ADHS -- DHS-18-0001.

4 A. Yes.

5 Q. This has been admitted. This is an exhibit

6 that has already been admitted.

7 Are you familiar with this document?

8 A. Yes, I reviewed this document.

9 Q. I want to go to Page 5.

10 And if you have a headache, this will

11 exacerbate it.

12 ALJ MIHALSKY: I have a question for the

13 record. On my list ADHS-1 is not in, but I think it's

14 the same thing as MA-1.

15 MR. BELANGER: MA-1 is our application,

16 Your Honor, so --

17 ALJ MIHALSKY: But, yeah, if --

18 MR. RAY: It's 18, Judge, DHS-18.

19 MR. BELANGER: Oh, what did I say?

20 ALJ MIHALSKY: Oh, okay. Very good.

21 Yes, ADHS-18. I misheard.

22 MR. BELANGER: Okay. Yeah, it's DHS-18,

23 and I believe that is in.

24 ALJ MIHALSKY: Yes, it is.

25 MR. BELANGER: Okay great.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1030

1 BY MR. BELANGER:

2 Q. So I'm looking at Page 5 of DHS-18, and

3 there's the applicant's proposal and BEMSTS analysis.

4 And do you understand that's a back and forth between

5 the Bureau and the applicant in the process?

6 A. Yes, as I understand.

7 Q. I think, in fact, AMR's counsel, in their

8 prehearing memorandum, described it as an organic

9 process. It may not have been in this one, but in the

10 AMR Maricopa; an organic process back and forth between

11 the Bureau, the application.

12 A. That's right.

13 Q. I may be incorrect about that. I actually

14 thought that was a good description.

15 Is that --

16 A. That's my understanding, yes.

17 Q. Your understanding of it, okay.

18 Oh, there's a couple things in here I want to

19 look at, and I just want to do this more so that the

20 ALJ kind of understands what's going on regarding some

21 percentages and the like.

22 Do you see the top where it says Revenue?

23 What is your understanding of the line of this, what

24 would be gross revenue? And I may not be saying that

25 correctly, but --


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1031

1 A. Yeah, sure.

2 Q. Okay.

3 A. The line on here that is identified as

4 Routine Operating Revenue, the 24.6 million, is what we

5 would call gross revenue. And I would define gross

6 revenue as before any contractual discounts, i.e.,

7 related to Medicaid or AHCCCS or any Medicaid or

8 Medicare programs.

9 Q. Okay. Is that gross revenue number, it says

10 Routine Operating Revenue there, is that the usual and

11 customary charges times the number of transports?

12 A. Correct. That's how we characterize it, yes.

13 Q. Is that the same thing as APC, or is that a

14 different concept?

15 A. No, no, no, that is not. That would be --

16 APC is several layers down.

17 Q. Okay. And then you see that there's

18 various -- for example, the applicant's proposal had

19 settlements, and BEMS had a modified number for

20 settlements; do you see that?

21 A. I do.

22 Q. And then there's a total op -- well, and then

23 there's some other adjustments, but then there's a

24 Total Operating Revenue number --

25 A. Yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1032

1 Q. -- do you see that?

2 And there's two columns. There's one that's

3 applicant's total operating revenue of $14,366,000 and

4 change and then the Bureau's $16,680,000 and change; do

5 you see that?

6 A. Yes.

7 Q. Under Expenses, many of these are identical.

8 There's a difference in the bad debt number; do you see

9 that?

10 A. Yes.

11 Q. Generally, across operations for Priority

12 right now, what is your bad debt percentage in terms

13 of -- that's not a good question; but what is the

14 percentage of -- what am I looking to say? -- write-off

15 as bad debt?

16 A. Yeah. So for the Priority Ambulance

17 entities, our seven locations, on average our bad debt

18 as a percentage of routine operating revenue is

19 17 percent.

20 Q. Okay. You understand -- and I don't know if

21 you do or not. Do you understand that this proposal

22 was accepted by Priority Ambulance; in other words,

23 when B --

24 A. Oh, yeah.

25 Q. Okay.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1033

1 A. Yes. When we reviewed this, we understood

2 and appreciate the comments by the Bureau and recognize

3 that they -- that's their view, as we understand it,

4 looking at comparable ambulance companies; that they

5 would have increased our bad debt and reduced our

6 EBITDA and also net income.

7 Q. The number right here, the $541,378, my

8 cursor is circling around it --

9 A. Yes.

10 Q. -- that's right above this column right

11 here --

12 A. Yes.

13 Q. -- what is that?

14 A. That is corporate overhead allocation. And

15 if I may explain that a little bit?

16 Q. Please do.

17 A. So when we look at any of our locations and

18 we're looking at EBITDA, those are what I would call

19 loaded. In other words, they are absorbing the full

20 expense that it takes to run that operation locally,

21 even some things that are at corporate.

22 So, for instance, our building is a national

23 billing office, but we charge the operations, each

24 location, a fee per transport for that billing. So

25 that expense is there, not at corporate.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1034

1 Q. Okay.

2 A. Same with insurance costs, auto liability,

3 general liability, professional liability, workers'

4 compensation; that is all negotiated at corporate, but

5 expensed through allocation to the operations, the

6 locations.

7 Then after all of that allocation of those

8 expenses, there's an amount remaining at corporate that

9 really is primarily wages for the CEO, the CFO, the

10 COO, our CIO. That fee then is what -- we have

11 allocated a portion of that in the ARCR to our Maricopa

12 Ambulance, LLC business.

13 Q. And do you understand that to be a

14 requirement of the ARCR, that allocation?

15 A. Yes. Yes, absolutely.

16 Q. You know there's the net income (loss) and

17 then there's a -- the Bureau, and there's the

18 applicant's proposal. The applicant's number was

19 $986,362, and the Bureau was 1,542?

20 A. Yes, I understand.

21 Q. Was that information made available to the

22 board of directors?

23 A. Absolutely. We discussed that with Samarth

24 as -- in reviewing with him this market.

25 Q. Are the numbers on the ARCR actual numbers,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1035

1 or are they projections?

2 A. They're projections.

3 Q. For example, the bad debt number, $4,792,694?

4 A. Yes.

5 Q. Understanding that that's the Bureau's number

6 and that was accepted, is it possible that Priority

7 Ambulance could have a lower bad debt number?

8 A. Absolutely. There are many factors that

9 drive bad debt. The number one factor of driving bad

10 debt is the payor mix. I would define payor mix as

11 Medicare payors, Medicaid, AHCCCS payors, commercial

12 payors, and self-pay patients, which are patients

13 without coverage, insurance. So depending on payor mix

14 in a market, that can dramatically impact bad debt.

15 And the service level, type of service being

16 performed, also can significantly drive bad debt. So

17 if you're managing a high 911 emergency market, you are

18 likely going to have higher bad debt expense than if

19 you're managing a nonemergency market.

20 Q. I'm assuming that in this industry,

21 regardless of your best efforts, there's going to be

22 some amount of bad debt?

23 A. Absolutely.

24 Q. But that it's probably in every -- that it's

25 in -- every ground ambulance service provider, I


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1036

1 imagine, and correct me if I'm wrong, that their goal

2 is to reduce the amount of bad debt as part of their

3 process and their operations; is that a fair statement?

4 A. Absolutely, and I think what drives lower bad

5 debt -- as you stated, there's an inherent bad debt in

6 every market; but to me, the biggest defense against a

7 higher bad debt is your billing, your ability to bill

8 correctly and accurately and to obtain as much

9 insurance information as you can in a market.

10 Q. I'm going to move down a couple of pages on

11 this exhibit, DHS. I believe the page I want is --

12 here we go.

13 You mentioned that bad debt can be higher in

14 911 operations or emergency transport operations. Why

15 is that, if you have a higher mix of 911 transports?

16 A. Yeah, I think having a higher mix of 911

17 means that you are -- it's a different population. So

18 when a call comes into 911 dispatch, you're rolling on

19 that call. In other words, you are going to assist

20 that patient irrespective of their ability to pay, and

21 you don't even know what their ability to pay is when

22 that call comes into dispatch. So you're inherently

23 going to have a higher mix of self-pay payors in a 911

24 business than in a nonemergency, prescheduled business.

25 Q. Okay. Let me -- I want to illustrate this a


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1037

1 little bit, because you indicated that currently

2 Priority Ambulance has about approximately a 17 percent

3 bad debt number?

4 A. Correct, as a percentage of gross revenue.

5 Q. And does that include 911 transports?

6 A. Oh, absolutely, yes. Some of our markets

7 have -- are 911.

8 Q. Are you aware of whether or not, if Maricopa

9 Ambulance were granted a CON, whether in its first year

10 of operations it would have a high percentage of 911

11 transports?

12 A. No, in our expectation and what we've built

13 into our application and our first year of projections,

14 is that the 911 business would be minimal.

15 Q. Do you see in Footnote No. 1 on this page

16 where it indicates that in calculating deductions from

17 revenue -- it's Bates DHS-18-0011, and it's Footnote

18 No. 1. Do you see?

19 A. Yes.

20 Q. It indicates "In calculating deductions from

21 revenue, the Bureau implemented a ratio of AHCCCS

22 Settlement at...and Bad Debt amount to Total Operating

23 Revenue at 19.46 percent," okay.

24 Given the amount of -- so make note of that

25 number. I'll write it down for you.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1038

1 19.46 percent doesn't sound like that big of

2 a difference from 17 percent?

3 A. It can be, though. It can be, because it's

4 calculated off of the gross revenue or what's defined

5 as the routine operating revenue.

6 Q. Okay.

7 A. Which in our case is almost 25 million.

8 Q. So let's go back to Page 5, just by way of

9 illustration.

10 If Maricopa Ambulance improved its ability to

11 collect debt such that the number went from

12 19.46 percent to 19 percent, what impact would that

13 have on net income in real dollars?

14 A. If you think about it, it's just a percentage

15 of the gross, right. So every 1 percent is going to be

16 approximately $250,000. So even if we took it from

17 19 and a half percent down to our companywide average

18 of 17, that would be $600,000 of additional revenue

19 that we would expect to get that would fall down to the

20 EBITDA line.

21 Q. Additional income? Additional income?

22 A. Income, EBITDA.

23 Q. And it's possible that your bad debt ratio

24 could be higher than the 19.46 percent?

25 A. Absolutely.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1039

1 Q. And do you have any reason to believe that if

2 the -- the bad debt ratio in year one of operation if

3 Maricopa Ambulance received a CON, that the board of

4 directors would not continue to support operations in

5 Maricopa County?

6 A. Absolutely not. The extensive conversations

7 we have had with our board, we are in this market --

8 hope to be in this market, if we are awarded a CON, for

9 10, 20, 30 years. You know, we want to be in this

10 market. They are committed to this market.

11 And it would not be prudent to look at a

12 one-year model. You know, we are looking at this in

13 the long run, and our first year is going to be our

14 most expensive year, you know, because we're getting

15 started. We've got training wages coming in. So this

16 is -- we're in this for the long haul, so we're

17 prepared to move forward.

18 Q. Showing you what has been marked as Maricopa

19 Ambulance Exhibit 42E, and that is a -- well, do you

20 know what this is?

21 A. I do.

22 Q. What is it?

23 A. These are -- this is the ARCR application,

24 right? And financials supporting it.

25 Q. It's for Southwest. Do you see that it's for


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1040

1 Southwest General?

2 A. Southwest General, Inc., yeah.

3 Q. And it's signed by --

4 A. John Karolzak.

5 Q. Do you know Mr. Karolzak?

6 A. I do. I worked with him for many years.

7 Q. Let's go to Page -- is it this page here,

8 Scott? Yeah. It's Maricopa 42E-0003.

9 What is the bad debt percentage? And I'm

10 just doing this by way of illustration. This is no

11 qualitative assessment on Southwest Ambulance at all.

12 But by way of illustration, what is the percentage --

13 how would you calculate the percentage of bad debt

14 based on this ARCR?

15 A. Comparable to the 17 percent I just

16 illustrated, you would just -- you would take Line 11,

17 Bad Debt, of 20.7 million --

18 Q. Okay.

19 A. -- and divide it by Line 1, Ambulance

20 Services Routine Operating Revenue of 119.2 million.

21 Q. Why don't -- can you do that?

22 A. 17.4 percent.

23 Q. Okay. To your understanding, does Southwest

24 Ambulance do interfacility transports? I mean if you

25 don't understand, that's -- only if you know.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1041

1 A. When I was at the company, we did.

2 Q. Okay. So 17.4 percent?

3 A. Uh-huh.

4 Q. Okay. That's under the 19.46 percent number

5 that the Bureau estimated?

6 A. Correct.

7 Q. Do they do 911 transports as well? Did I

8 just ask you that?

9 A. My recollection is that they do, when I was

10 there.

11 Q. Do you know which comparable ground ambulance

12 providers the Bureau looked to to determine the bad

13 debt ratio?

14 A. No, I don't.

15 Q. Let's look at --

16 MR. BELANGER: Move Maricopa Ambulance

17 42E, Your Honor, into evidence.

18 ALJ MIHALSKY: Exhibit MA-42E --

19 MS. FICKBOHM: Is that the calendar year

20 2013; is that what that is?

21 MR. BELANGER: Yeah, I believe it is.

22 It was signed in 2014.

23 MS. FICKBOHM: Oh, okay. I was just

24 curious.

25 MR. BELANGER: Yeah.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1042

1 ALJ MIHALSKY: -- is admitted.

2 BY MR. BELANGER:

3 Q. Okay. And I want to show you Maricopa

4 Ambulance -- this is Maricopa Ambulance Exhibit 40E.

5 Do you see that?

6 A. I do.

7 Q. And it says it's for Professional Medical

8 Transport, Inc.?

9 A. Yes.

10 Q. Well, that's a different company name, but

11 it's signed by the same gentleman; do you see that?

12 A. John Karolzak, yes. This is another

13 subsidiary of Rural/Metro Corporation, as I understand.

14 Q. If we did the same calculation for PMT, and I

15 may be -- am I on the right page?

16 A. You are, yeah.

17 Q. Which is 42E-0003.

18 A. So that if I take Bad Debt, Line 11, of

19 19.3 million, divide by Line 1 of 80.2 million, I get

20 24 percent.

21 Q. And there may be other examples. We've

22 looked at ARCRs for other of Rural/Metro's companies'

23 exhibits, right?


25 Q. And some of them are as low as 7 percent or


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1043

1 8 percent bad debt; isn't that correct?

2 A. I saw one at 9 percent.

3 Q. And do you know what kind of transports they

4 were doing?

5 Is it ComTrans? Yeah.

6 A. My memory serves me that the one I saw that

7 was 8 to 9 percent was nonemergency transports.

8 Q. That bad debt number can fluctuate; is that

9 fair to say?

10 A. Correct.

11 Q. But it's the goal to try and reduce that bad

12 debt number as much as possible?

13 A. That's right, because that -- the bad debt

14 number is the only reduction to gross revenue that you

15 can have some control over, you know, because Medicare

16 and Medicaid have built in discounts. The commercial

17 discounts that are also considered part of settlements,

18 that's a negotiated number, so you do have control over

19 that. But then bad debt you have some control over,

20 and the biggest element of control you have to manage

21 your bad debt is through best billing practices.

22 Q. And going back to Maricopa Ambulance, if it

23 was able to improve or better its bad debt number by

24 one half of 1 percent, that represents how much in net

25 income?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1044

1 A. Well, each 1 percent is approximately

2 $250,000.

3 ALJ MIHALSKY: Do you want to offer

4 Exhibit MA-40E?

5 MR. BELANGER: Yes, Your Honor.

6 Exhibit MA-40E is admitted.

7 BY MR. BELANGER:

8 Q. I think you testified that you left

9 Rural/Metro in the fall of 2011, is that --

10 A. Correct. I gave notice to the board and the

11 CEO in early August of 2011 and was asked to stay to

12 complete the fiscal June 30th year-end audit. So

13 actually ended up my final day was the end of October.

14 Q. Was it what is know as a clean audit when you

15 left in 2011?

16 A. Yeah, absolutely. We finished our June 30th

17 audit and PricewaterhouseCoopers issued a clean opinion

18 on that audit, and in addition to that, we had -- as

19 part of just being taken private, we had, in the spring

20 and late spring of 2011, had gone through extensive due

21 diligence by various lender groups in terms of that,

22 the process of being taken private. PWC issued a

23 comfort letter on our financials and our financial

24 performance, and we had extensive teams of finance

25 professionals in our audit looking at all of our


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1045

1 numbers and analyzing our numbers.

2 Q. You understand that Rural/Metro filed a

3 bankruptcy in 2013?

4 A. I am aware, uh-huh.

5 Q. Have you ever been -- have you been sued as a

6 result of that bankruptcy by anybody?

7 A. No.

8 Q. When you were at Rural/Metro, was

9 Rural/Metro, in the course of operating its business,

10 ever a defendant in civil litigation? Do you know what

11 that is, a defendant in civil litigation?

12 A. Yes, I do.

13 Q. Probably understood that from your work at

14 Coopers when you were doing litigation support.

15 A. Yes.

16 Q. When Rural/Metro was sued while you were

17 there, up to and including in your capacity as a CFO,

18 when they were sued, did they defend those lawsuits

19 when they were filed against them? And that's a

20 general statement, but --

21 A. Yeah, yeah. You know, what I would say, as a

22 $750 million company, transporting 1.2 million patients

23 a year, we had suits coming in that we were managing

24 and dealing with, both from -- some from payors, some

25 from patients. You know, and we managed through all of


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1046

1 those and, you know, worked with defense attorneys to

2 work through that.

3 Q. Do you understand that a lawsuit, a

4 complaint, is a series of allegations that needs to be

5 proven? Do you understand that?

6 A. Absolutely, yes.

7 Q. While you were there, did Rural/Metro ever

8 enter into any corporate integrity agreements?

9 A. We did. We did. We had two corporate

10 integrity agreements that I can recall.

11 Q. And I'm not concerned necessarily about the

12 substance of those or the subject matter or anything

13 else; but are you aware that when there's -- were the

14 corporate integrity agreements, were they with the

15 Department of Justice?

16 A. Yes.

17 Q. Were they resolved pursuant to settlements;

18 do you know?

19 A. They were. We did settle on those, yes.

20 Q. Are you familiar with language in settlement

21 agreements, even if they lead to a corporate integrity

22 agreement, that basically says the subject of the

23 investigation is resolving -- and this is not an exact

24 quote, but it's a general concept. -- resolving the

25 claims that are being brought by the government not


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1047

1 because it agrees to the validity of the claims, but in

2 an exercise of its business judgment? Are you familiar

3 with that concept?

4 A. Absolutely, because that's something that --

5 decisions we made routinely, that the economic decision

6 of when it -- there are times it's better just to

7 settle and move forward.

8 Q. And even if you settle and move forward, it

9 may be that you don't believe the basis of the claims.

10 Nonetheless, it's a business decision to resolve it and

11 go forward?

12 A. Absolutely. That's correct.

13 MS. FICKBOHM: Your Honor, I haven't

14 said anything so far, but there's been a lot of leading

15 going on here. So I'm going to object to the form and

16 ask counsel to not lead her quite so much.

17 ALJ MIHALSKY: Fair enough. This is

18 your witness.

19 MR. BELANGER: Thanks, Judge.

20 BY MR. BELANGER:

21 Q. You mentioned that you left Rural/Metro in

22 the fall of 2011 and spent some time at home. Why did

23 you take some time off and spend some time at home?

24 A. Oh, well, I -- at the time, my husband and

25 I -- our son was 11, and he was having some challenges


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1048

1 in school, and ultimately during that two years we were

2 able to get him diagnosed with Asperger's. So it was

3 just a good time for me to be at home and focus on the

4 family, and he needed me there, so...

5 MR. BELANGER: Judge, could we take a

6 break for just a couple of minutes? It's not the

7 ordinary breaking time, but I think I might be

8 finished.

9 ALJ MIHALSKY: Close enough. We'll be

10 back on the record at 10:30.

11 (A recess was taken from 10:13 a.m. to

12 10:32 a.m.)

13 ALJ MIHALSKY: We're back on the record.

14 Go ahead, Mr. Belanger.

15 MR. BELANGER: No further questions at

16 the moment, Judge.


18 Ms. Fickbohm.

19 MS. FICKBOHM: Thank you, Your Honor.

20

21 CROSS-EXAMINATION

22 BY MS. FICKBOHM:

23 Q. So let's get the name thing straight first.

24 You said Beian-Ponczak, right?

25 A. Yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1049

1 Q. Okay. So is that what you prefer to be

2 called?

3 A. No, you can call me Kristi.

4 Q. Okay.

5 A. Or Ponczak.

6 Q. Okay. So I heard you say that, and then I

7 heard Mr. Belanger say Ponczak, and I thought is he --

8 so you simplify it?

9 A. Yes, I do.

10 Q. Okay. Thank you.

11 I'm going to jump around a little bit,

12 because I have my notes, some of which were covered by

13 Mr. Belanger, so I'm going to apologize on that.

14 Let's go to your CV here.

15 ALJ MIHALSKY: That is MA-29E, which has

16 not been submitted. Do you want to offer that in?

17 MR. BELANGER: I would like to, Your

18 Honor. I'm checking my list, and that was something I

19 was supposed to have done.

20 ALJ MIHALSKY: Okay.

21 MR. BELANGER: I still have a box with

22 no check.

23 ALJ MIHALSKY: Well, we're going to talk

24 about it, so Exhibit MA-29E is admitted.

25 MR. BELANGER: Thanks, Judge.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1050

1 BY MS. FICKBOHM:

2 Q. You talked about how when you -- at Priority

3 Holdings you're responsible to report on the financials

4 internally and externally and working with management,

5 cash management reporting, insurance reporting,

6 evaluating of leasing, purchasing, financing, assessing

7 new operations, organic growth and acquisitions. Do

8 you recall that?

9 A. Yes.

10 Q. Is that the same sort of things that you did

11 when you were the CFO for Rural/Metro?

12 A. Yes.

13 Q. And you talked about working with the CEO

14 from early 2004 on at Rural/Metro. Who was the CEO

15 from early 2004 forward until you left at Rural/Metro?

16 A. From two thousand -- actually, from 1999

17 through early 2010, the CEO was Jack Brucker. Then the

18 seat was filled by the chairman of the board for six

19 months while they sought another CEO, and then in June

20 of 2010 Michael DiMino joined the firm, and I worked

21 with him until my departure.

22 Q. And what was Bryan Gibson's role at

23 Rural/Metro when you were there?

24 A. The company had acquired one of his

25 enterprises in the 1990s, so in the early years he was


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1051

1 a local manager in the Southern region. Then he left

2 the firm for a while and then came back to the firm;

3 but at the time in 2010, in that time period he was the

4 COO.

5 Q. The COO. So did you work closely with him

6 also?

7 A. I did work closely with him, but I was

8 primarily working with the CEO.

9 Q. And did Mr. Blackburn work with Rural/Metro

10 when you were there?

11 A. He did.

12 Q. And what was his role?

13 A. He was a regional manager.

14 Q. And did you ever work with him?

15 A. On budgeting, yes.

16 Q. Just a couple of things to clear up. When

17 you were testifying, you mentioned P & L. So can you

18 tell the judge what you meant when you referred to

19 P & L?

20 A. Profit and loss statement.

21 Q. You talked about your collections on January

22 of 2015 at Priority and how you only have $46,000 left

23 to collect. Do you recall that?

24 A. Yes.

25 Q. Would you agree that the further away one


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1052

1 gets from the actual date of billing, the more

2 difficult money usually becomes to collect?

3 A. Yes, I would.

4 Q. And it's that stuff that's trailing that ends

5 up being the copays, the self-insured, that maybe you

6 might eventually have to write off?

7 A. That is absolutely the case. In our

8 collection cycle, we collect about 85 percent of the

9 money within the first eight months or so, and then

10 that last 15 percent takes a while to get.

11 Q. If ever?

12 A. If ever, correct.

13 Q. When you talked about the bad debt number

14 that was used in the ARCR collections, you referenced

15 looking at Priority's seven locations, at the average

16 of those seven locations, correct?

17 A. Yes.

18 Q. You would agree with me that none of those

19 locations are in Arizona?

20 A. Correct.

21 Q. And you would also agree with me that another

22 difference between the Priority operations in Arizona

23 is your proposed Arizona operation doesn't involve any

24 wheelchair transports, correct?

25 A. Correct.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1053

1 Q. There's a different regulatory scheme in

2 Arizona than there is in any of the states Priority is

3 already in on the East Coast, correct?

4 A. Can you define regulatory?

5 Q. Regulated by the State of Arizona; different

6 regulatory scheme in Arizona than on the East Coast?

7 A. Yes.

8 Q. And you would agree with me that you're

9 probably going to encounter a different payor mix in

10 Maricopa County than you have in some of the Priority

11 operations on the East Coast?

12 A. I would acknowledge that each market can have

13 a different payor mix.

14 Q. And do you think any of the markets that

15 Priority has on the East Coast will mirror Maricopa

16 County?

17 A. I could not comment on that off the top of my

18 head.

19 Q. Would you agree with me that as we sit here

20 today, the entity that probably has the best view into

21 the existing payor mix in Maricopa County and what

22 reimbursement rates that involves is the Bureau of

23 Emergency Medical Services and Trauma Systems, also

24 known as the Bureau?

25 A. Yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1054

1 I would certainly defer to the Bureau's

2 expertise in the knowledge of the market, yes.

3 My caveat to that would be that they may not

4 be as familiar with our billing practices.

5 Q. You talked about the bad debt figure and said

6 it could end up being lower, correct, than predicted?

7 A. Which figure?

8 Q. The bad debt percentages on the ARCR as

9 calculated by either you or the Bureau. You said, you

10 know, it could possibly end up being lower. Do you

11 remember that testimony?

12 A. Both my proposed, as well as the Bureau's

13 number, could be lower?

14 Q. Yes.

15 A. Yes.

16 Q. Do you remember saying that?

17 A. Uh-huh. Correct.

18 Q. Would you agree with me that it could also

19 end up being higher?

20 A. Yes.

21 Q. And, again, would you agree with me that with

22 regard to the parties sitting in this room today,

23 including Priority through you, the party that probably

24 has the best perspective into that figure is the

25 Bureau?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1055

1 A. I don't know that I could comment on that. I

2 have tremendous respect for the Bureau, so I recognize

3 their knowledge in the market. But I don't know the

4 expertise of everyone else.

5 Q. You know that they're seeing the financial

6 reportings by every existing ambulance transport

7 provider in the state on an annual basis, which

8 includes information about bad debt in all of those

9 reportings, correct?

10 A. That's as I understand, yes.

11 Q. So they've got a pretty good database, right?

12 A. Yes, I would say they do.

13 Q. Okay.

14 You talked about the difference between 911

15 and IFT and how if you get called for 911, you've got

16 to go whether or not they can pay. Do you recall that?

17 A. Yes.

18 Q. You would agree with me that if an ambulance

19 gets called to do an IFT transport, say, from an Urgent

20 Care Center where somebody walked in, but really

21 belongs in a Trauma Center emergency room, that person

22 has to be transported also regardless of whether they

23 can pay?

24 A. Yes.

25 Q. So there certainly is a body of IFT


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1056

1 transports that you're not going to know, when you go

2 to get them, whether or not the person even has

3 insurance or can pay, correct?

4 A. Yes.

5 Q. You talked about the expectation that in

6 Maricopa Ambulance's first year they're going to have a

7 pretty high percentage of IFT and really minimal 911,

8 and I agree with you 100 percent on that. It's just

9 the nature of the Maricopa County market, right?

10 A. Yes.

11 Q. And your application was open about that,

12 correct?

13 A. Yes.

14 Q. So when the Bureau did its calculations on

15 your finances, that's something that they would have

16 been aware of from your application, correct?

17 A. Yes.

18 Q. I think I understand, though, that you say

19 you think the Bureau didn't really calculate the bad

20 debt figure correctly?

21 MR. BELANGER: Objection --

22 THE WITNESS: No.

23 MR. BELANGER: -- Your Honor.

24 BY MS. FICKBOHM:

25 Q. Okay.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1057

1 ALJ MIHALSKY: Sustained.

2 MS. FICKBOHM: Oh, objection.

3 ALJ MIHALSKY: I don't think she said

4 that.

5 MS. FICKBOHM: Okay. I was --

6 ALJ MIHALSKY: Ask your question, ask

7 your next question.

8 BY MS. FICKBOHM:

9 Q. Okay. So you're not disagreeing with the

10 Bureau's calculation of what they expect Maricopa

11 Ambulance's bad debt percentage figure will be; you're

12 not disagreeing with that?

13 A. I think we accepted the Bureau's number.

14 Q. Okay.

15 Let me ask you, are you aware of the AHCCCS

16 cut in reimbursement rates that just happened

17 October 1st of this year?

18 A. Peripherally.

19 Q. So would you agree with me that,

20 unfortunately for all medical providers in Arizona,

21 AHCCCS has just cut its reimbursement rates by

22 3 percent of gross effective October 1st, 2015?

23 A. I would defer to my billing on that. I am

24 peripherally aware of the change.

25 Q. And you would agree with me that that's


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1058

1 something that's been out there that people have been

2 talking about for months, because it was coming down

3 the pike and we were aware of it, correct?

4 A. Yes, uh-huh.

5 Q. And assume with me for a moment that the

6 precise figure is 3 percent of gross. That's going to

7 impact your bad debt line item, correct?

8 A. No, I don't agree that that would impact bad

9 debt.

10 Q. It will impact settlements. Sorry.

11 A. Oh. That's correct.

12 Q. Okay. And based on whether you use your

13 figures or the Bureau's, we're probably talking

14 somewhere between a 250,000 to $450,000 hit, correct,

15 at 3 percent of gross?

16 A. I would have to calculate that. If that's

17 mathematically the calculation, then that could be,

18 yes.

19 Q. When you were the CFO at Rural/Metro, you

20 basically had top-line responsibility for the company's

21 accounting standards, correct?

22 A. Correct.

23 Q. And that includes the tools that were used

24 for revenue estimates, correct?

25 A. Correct.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1059

1 Q. And also the tools used for revenue

2 recognition?

3 A. Correct.

4 Q. And when I say revenue recognition -- I love

5 these terms -- that's basically money in the door,

6 right?

7 A. Yes.

8 Q. Okay. So you're obviously experienced with

9 how the money runs. That also requires some experience

10 and knowledge of the operational end, correct?

11 A. Can you define operational end?

12 Q. Well, you have to have a bridge between you

13 and operations, because to know what the financial

14 needs of a company is, you need to know what the

15 operational needs are, right?

16 A. Yes.

17 Q. Okay. So how critical would you say it is to

18 an ambulance operation to keep up-to-date on ambulance

19 repairs and maintenance?

20 A. Very important.

21 Q. And what about keeping medical supplies

22 stocked and up-to-date?

23 A. Very important.

24 Q. Would you call these second tier priorities?

25 A. Can you explain that?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1060

1 Q. Well, it --

2 A. In relationship to what?

3 Q. In relationship to if you look at all of the

4 expenses of an ambulance transport business and you

5 were arranging them by importance, would you call those

6 expenses second tier, you know, secondary to -- a

7 secondary expense?

8 A. So from -- if I understand the question, I

9 would say certainly the cost of payroll is the number

10 one largest expense in an organization.

11 Q. Uh-huh. I agree with you on that.

12 A. So if we're comparing it to that, I would say

13 medical inventory expense is less critical than the

14 payroll expense.

15 Q. I'm talking about not from a which is the

16 bigger number, but which -- you know, expenses that are

17 important to keep an appropriate ambulance service

18 running and doing what it needs to do. And I would

19 agree with you, payroll is right up there. But

20 wouldn't you put ambulance repairs and maintenance and

21 medical supplies on an equal level with payroll?

22 A. I would say vehicle maintenance in totality

23 is very critical; fuel cost I think being number one

24 within the composite of vehicle-related costs. And,

25 yes, that's very critical. We have to be able to have


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1061

1 vehicles on the road.

2 Q. So when Mr. Samarth -- I probably have that

3 wrong.

4 A. Mr. Chandra.

5 Q. Mr. Chandra. Thank you. Mr. Chandra.

6 When Mr. Chandra shared with us his lender

7 presentation, where he had put ambulance repairs and

8 maintenance and medical supplies as a second tier

9 expense, would you agree that's an investor perspective

10 versus an operational perspective?

11 MR. BELANGER: Your Honor, could I have

12 that question read back? I didn't get it.

13 ALJ MIHALSKY: Could you read the

14 question back?

15 (The record was read by the court

16 reporter as follows:

17 QUESTION: When Mr. Chandra shared with

18 us his lender presentation, where he had put

19 ambulance repairs and maintenance and medical

20 supplies as a second tier expense, would you

21 agree that's an investor perspective versus

22 an operational perspective?)

23 MR. BELANGER: Object to the form, to

24 speculate what he meant by that or what was explained

25 in that meeting.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1062

1 MS. FICKBOHM: I'm just asking her for

2 her perspective, Your Honor.

3 MR. BELANGER: I'm still going to

4 object.

5 ALJ MIHALSKY: I'll overrule it. The

6 witness may answer, if she can.

7 THE WITNESS: Could I see the

8 presentation?

9 BY MS. FICKBOHM:

10 Q. Sure.

11 ALJ MIHALSKY: And we're looking at

12 Exhibit MA-98.

13 MS. FICKBOHM: Indeed.

14 BY MS. FICKBOHM:

15 Q. Okay. So here we have what he called

16 critical versus what you called critical and then we

17 have second tier. Do you see that?

18 ALJ MIHALSKY: That appears to be

19 Page 24.

20 MS. FICKBOHM: Yes, I'm sorry, Page 24,

21 Your Honor.

22 THE WITNESS: Yes, I do.

23 BY MS. FICKBOHM:

24 Q. Okay. So you would classify ambulance

25 repairs and maintenance and medical supplies as a


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1063

1 critical expense, correct, as you already testified?

2 MR. BELANGER: Objection. I don't know

3 that that's what she testified to.


5 MS. FICKBOHM: I asked her how critical

6 they were, and she said very. I mean we can read the

7 record back, but how critical --

8 ALJ MIHALSKY: She said what she said.

9 MS. FICKBOHM: Right. So I was just

10 circling back, as counsel on the other side of the room

11 does again and again.

12 ALJ MIHALSKY: I understand. I

13 understand. And we have two different perspectives

14 here, and I'm not sure she knew what Mr. Chandra meant,

15 and you can ask her what she meant in light of

16 Mr. Chandra's presentation; but we're trying to decide

17 whether these two remarks are comparable.

18 MS. FICKBOHM: I'm just trying to draw a

19 distinction between an analysis of criticality done

20 from an investor perspective versus an on-the-ground

21 running an ambulance transport company perspective.

22 ALJ MIHALSKY: I understand, and this

23 witness may agree with you or not. That's where we're

24 going.

25 MS. FICKBOHM: Right. Exactly.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1064

1 BY MS. FICKBOHM:

2 Q. So my question is, do you agree with me that

3 when it comes to running an ambulance company

4 day-to-day, that ambulance repairs and maintenance and

5 medical supplies are very critical and are essentially

6 a first tier priority, right up there with payroll and

7 fuel?

8 A. I would say from a day-to-day operation,

9 they're absolutely very, very important, and...

10 Q. And?

11 I heard the word "and," so I don't want to

12 interrupt you.

13 A. No, I'm fine. I'm done.

14 Q. Okay. Okay.

15 So you wouldn't call them a second tier

16 priority, would you?

17 A. I'm not sure exactly what second tier means.

18 Q. I'll move on.

19 Mr. Blackburn testified that it was

20 impossible to provide a roughly estimated lump sum for

21 the needs assessment required for a mobile integrated

22 healthcare program into a current budget, aka, in other

23 words, the ARCR.

24 Do you agree with that?

25 A. I agree that it -- as I understand the


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1065

1 process of the ARCR, that it would not be an item that

2 would be reflected in the ARCR because it wasn't --

3 isn't specific to the ambulance service.

4 Q. Okay. Let's step away from that. Let's say

5 you're just doing a first year budget, and you have

6 your costs that are appropriately included in the ARCR

7 and then you have other costs that wouldn't be included

8 in the ARCR.

9 A. Okay.

10 Q. Do you agree that it would be impossible to

11 roughly estimate the lump sum needed for a needs

12 assessment?

13 A. As I understand, there is a significant

14 amount of research and review that needs to be done for

15 the specific market, and that that needs to be done

16 before they can give me a sense of what the cost is

17 going to be to operate the integrated health.

18 Q. Right, and I wouldn't ask you to try to

19 estimate that.

20 I'm talking about in the plan put forth by

21 Priority Ambulance for doing a mobile integrated

22 healthcare program, one of the very first steps in that

23 plan is doing a needs assessment; and I'm just asking

24 you, do you agree it's impossible to roughly estimate

25 what a needs assessment would cost?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1066

1 MR. BELANGER: Objection. It was asked

2 and answered.

3 ALJ MIHALSKY: I'll let her answer it

4 again. Overruled.

5 If you know.

6 THE WITNESS: I'm not sure that I know

7 if it can be done. I don't know all the components of

8 integrated health and what that includes. So I'm not

9 sure if it has to do with quantifiable things such as

10 population or if it has to do with a bunch of

11 intangible, you know, things. I'm not sure. I don't

12 know enough about it to answer that.

13 BY MS. FICKBOHM:

14 Q. So even though it's included in your

15 application as basically one of the legs that your

16 application is based upon --

17 A. Uh-huh.

18 Q. -- you haven't made any inquiries into the

19 expense associated with doing it, even the expense of a

20 needs assessment?

21 A. That's correct, I have not.

22 Q. You heard Mr. Blackburn's testimony that he

23 was unaware of all the applicable Arizona statutory

24 definitions when the Maricopa Ambulance application was

25 completed?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1067

1 MR. BELANGER: Objection. I don't

2 believe she was here.

3 BY MS. FICKBOHM:

4 Q. Were you here when Mr. Blackburn testified?

5 A. Only for a couple hours.

6 Q. Okay. Did you hear that part of his

7 testimony?

8 A. I don't recall that.

9 Q. Were you aware of all the applicable Arizona

10 statutory definitions when the application was

11 completed?

12 A. I am not.

13 Q. Can I talk to you for a minute about the

14 Central Ambulance purchase in Georgia?

15 A. Yes.

16 Q. Because I tried to ask Mr. Chandra about

17 that, and he didn't know too much about the payor mix

18 there; but I assume that you know more about the payor

19 mix than he does?

20 A. So if I could take a moment and explain the

21 due diligence around an acquisition just a bit, to

22 provide some light into my involvement in the billing

23 review and APC in that market.

24 Q. I guess as opposed to that, if I could just

25 ask you, do you know what the payor mix is in Central


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1068

1 Ambulance?

2 A. I do not know off the top of my head, no.

3 Q. Are you doing revenue projections for Central

4 Ambulance right now?

5 A. We are in the process of closing our first

6 month of ownership of them, and we'll be doing that in

7 that analysis.

8 Q. Do you know what percentage of those

9 transports are Veterans Administration-related?

10 A. I do not.

11 Q. What is the impact of depreciation on an

12 ambulance operation?

13 A. Depreciation expense flows through their

14 profit and loss statement and is added back in our

15 evaluation of them as we look at EBITDA.

16 Q. I guess my question -- sorry. You think of

17 everything from finance. I tend to think of

18 operations.

19 I was talking about it from an operations

20 perspective. Would you agree that from an operations

21 point, depreciation reflects aging equipment that

22 eventually is going to need to be replaced or repaired?

23 A. Yes, as the fleet ages, it will need to be

24 replaced.

25 Q. Priority's done two start-ups and five or six


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1069

1 acquisitions in the last --

2 A. Five acquisitions.

3 Q. Five in the last year?

4 A. No, in the last --

5 Q. Year and a half?

6 A. -- 19 months.

7 Q. And is in negotiations to possibly acquire

8 three more, correct?

9 A. I wouldn't say we're in negotiation. We are

10 looking at several targets, but we are not in active

11 diligence on any targets today.

12 Q. Okay. And so Mr. Blackburn told us that

13 there were three that you've gone far enough to have

14 confidentiality agreements in place?

15 A. Yes.

16 Q. Would you agree with me that with each

17 addition, Priority has an increasing risk of missing

18 its revenue recognition estimates?

19 A. No, I would not agree with that.

20 Q. Okay. So bigger is not more risk?

21 A. Not in the way we look at it, because we look

22 at revenue recognition at a very -- the lowest level.

23 In many cases it's five or six different cost centers

24 in a given market. So we would have more markets, but

25 individually we're looking at them by themselves.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1070

1 Q. But if you look at Priority as a whole, which

2 is a sum of its subparts, correct?

3 A. Correct.

4 Q. Would you agree with me that the more

5 acquisitions that Priority takes on, the larger its

6 risk of missing -- associated with missing revenue

7 recognition grows dollarwise, from a dollarwise

8 perspective?

9 A. I would say on a percentage basis, no. By

10 the nature of my revenue dollars getting larger,

11 dollars could be larger.

12 Q. So the dollar risk becomes bigger?

13 MR. BELANGER: Objection.

14 MS. FICKBOHM: What's the form? What's

15 wrong with that question, Jim?

16 MR. BELANGER: I don't believe that's

17 what she said. She didn't --

18 MS. FICKBOHM: It was a question.

19 MR. BELANGER: The objection assumed you

20 were asking her to agree with a risk as if she had just

21 stated that.

22 If I may, Judge. I don't want to do a

23 speaking objection unless you're okay with it, but just

24 the form of the question. She didn't agree that there

25 was a greater risk. She said that --


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1071

1 MS. FICKBOHM: I was just closing the

2 loop, like getting back to -- she didn't really answer

3 the question, so --

4 ALJ MIHALSKY: Okay. I keep telling the

5 witness answer if you can. If the questions misstates

6 your earlier testimony, if the question appears not to

7 understand your earlier question, although it's a

8 leading question that does elicit a yes or no answer, I

9 don't understand or that doesn't necessarily follow

10 or -- you still have a range of responses.

11 THE WITNESS: Okay.

12 ALJ MIHALSKY: I am overruling the

13 objection.

14 BY MS. FICKBOHM:

15 Q. Do you remember the question?

16 A. No.

17 Q. Okay. So I was just asking if your prior

18 answer meant that you agreed that as the company did

19 more and more acquisitions, the dollar figure of the

20 revenue recognition risk itself grew; not

21 percentagewise, but just the dollar figure?

22 A. It could, yes.

23 Q. You were the CFO at Rural/Metro when the

24 company known as PMT was acquired?

25 A. No, I was not.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1072

1 Q. Were you there when Rural/Metro was doing the

2 due diligence to acquire PMT?

3 A. We had started that when I was there.

4 Q. And did that include revenue recognition

5 predictions?

6 A. Not that I was involved in at the time. The

7 company had engaged a third-party firm to do that

8 analysis.

9 Q. So were you involved at all in the efforts by

10 Rural/Metro to acquire PMT?

11 A. I was involved in some preliminary review of

12 the acquisition, but preliminarily.

13 Q. And at any time, did you say we should not

14 acquire this company?

15 A. I would answer by saying internally there was

16 significant conversation of concern of that enterprise.

17 Q. Well, I assume anytime you're doing an

18 acquisition there's going to be concern about the

19 acquisition, right?

20 A. If there is, we would walk away.

21 Q. Okay. But Rural/Metro didn't walk away from

22 PMT, right?

23 A. I understand they acquired them, but I wasn't

24 involved in that.

25 Q. As the CFO of Priority, you're basically


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1073

1 where the buck stops when it comes to the ARCR,

2 correct?

3 A. From a financial perspective, I signed the

4 ARCR, so I take responsibility for the ARCR.

5 Q. So is that a yes?

6 A. I would say that the CEO has an equivalent

7 level of responsibility for our --

8 Q. And here that is --

9 A. Bryan Gibson.

10 Q. Mr. Gibson. So you and Mr. Gibson share

11 equal responsibility for the ARCR?

12 A. Clarification. Do you mean the submission of

13 the application, or could you clarify what you mean by

14 responsibility?

15 Q. Well, an ARCR, which is a pro forma first

16 year financial statement, has to be prepared and

17 presented to the Bureau as part of your application,

18 correct?

19 A. Yes.

20 Q. And in connection with this matter, one was

21 submitted with your original application package,

22 correct?

23 A. Yes.

24 Q. And you signed that, correct?

25 A. Yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1074

1 Q. And then in late September of this year, you

2 submitted an amended ARCR?

3 A. Yes.

4 Q. And you signed that one also, correct?

5 A. Yes.

6 Q. And I think you testified earlier that you

7 reviewed it to make sure it was reasonable?

8 A. Correct.

9 Q. But part of your team prepared it, correct?

10 A. Not part of my team. That's an operational

11 responsibility.

12 Q. So who was the person from operations who did

13 the most work on it?

14 A. So consistent with how -- my experience in

15 our response to ARCRs previously in Maricopa County, is

16 we have hired a third-party expert to prepare our ARCRs

17 and review and coordinate and provide our input. And

18 in this instance, consistent with our historical

19 practices on that from my years at Rural/Metro, we

20 engaged Marty Brandau as the preparer of our ARCR.

21 Q. Okay. But then you, with your extensive

22 ambulance transport service background, your CPA

23 degree, et cetera, reviewed it to make sure it was

24 appropriate and reasonable before it got submitted to

25 the Department, correct?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1075

1 A. I did review it for reasonableness and

2 consistency and from my historical knowledge of the

3 market.

4 Q. And is it reasonable and consistent?

5 A. Yes.

6 Q. And did you revisit it to ensure it was

7 entirely accurate when it was resubmitted on

8 September 25th, 2015?

9 A. I provided commentary to our expert that

10 there were some errors in the document.

11 Q. And did you draw the Bureau's attention to

12 those errors?

13 A. I did not, personally.

14 Q. Wouldn't that be your responsibility, as the

15 CFO?

16 A. I take responsibility for that, yes.

17 Q. Okay. You would agree with me that when you

18 resubmitted the amended ARCR, you didn't correct any

19 errors?

20 A. I had pointed out to the expert that those

21 errors were still in there.

22 Q. And so what types of errors are we talking

23 about?

24 A. I have to look at it. Specifically, I do

25 recall that the net income did not flow to the


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1076

1 statement of cash flows as you would expect. My memory

2 serves me that somewhere in the document, that there

3 was a reference to a DSO that was different than what

4 was being calculated. Those are the things I can

5 remember off the top.

6 Q. In addition to not correcting some of the

7 errors that you observed, you also didn't accept or

8 incorporate the Bureau's comments and suggestions that

9 it made when it did its review in the document we

10 looked at earlier in your testimony, correct?

11 A. I can't answer that question.

12 Q. Okay. Well, and, you know, I'm sorry, it's

13 probably unfair to ask you without having the Bureau's

14 comments, et cetera, right up in front of you so

15 they're easy to look at.

16 ALJ MIHALSKY: And for the record, this

17 is ADHS-18.


19 Yes.

20 BY MS. FICKBOHM:

21 Q. So on Page 3 of DHS-18, when you go down to

22 the Findings, they found at Subsection F that the

23 AHCCCS settlements were low, correct?

24 A. Correct.

25 Q. And you made no adjustment for that in


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1077

1 submitting the amended ARCR, correct?

2 A. That's correct. Although, I must say I'm not

3 sure when the expert received the Bureau's report

4 versus when we resubmitted.

5 Q. So the Bureau's findings letter went out to

6 Mr. Gibson on March 5th, 2015?

7 A. Oh, yes. Right, right, right. So -- that's

8 correct.

9 Q. And, again, you can grab the mouse and move

10 this around just so you know what date documents are

11 too, if you want to. I don't mean to hide the date

12 from you. We can only look at one page at once.

13 A. Okay.

14 Q. So going back to Page 3, under the Findings,

15 under Subsection H the Bureau found the proposed total

16 deductions from revenue was in the low range.

17 You didn't do any adjustments for that in

18 submitting the amended ARCR, correct?


20 Q. And the Bureau, as discussed, also found that

21 the proposed ratio of bad debt to total routine

22 operating revenue was in the low range, correct?


24 Q. So they're basically, at that Subsection I,

25 saying that they believe -- well, is it your


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1078

1 understanding from Subsection I that the Bureau's

2 analysis is that Maricopa Ambulance's proposed bad debt

3 ratio is a little overly optimistic?

4 A. Yes, that's how I interpreted their report.

5 Q. And those are the issues that led the Bureau

6 to ultimately recalculate the bottom-line number,

7 correct?


9 Q. And you will agree with me -- now, we don't

10 have a new analysis from the Bureau like this one since

11 you submitted the amended -- I'm sorry, I'm making

12 myself dizzy while I'm talking and moving this

13 around. -- the amended ARCR; but would you agree with

14 me since all that the amended ARCR does is bump the

15 rates proposed to be part of the uniform rate structure

16 a little bit, that the Bureau's bottom-line number,

17 which was close to $1,500, is going to move up a

18 little, but not a lot?

19 A. I would agree, based on the Bureau's

20 analysis.

21 Q. Now, you've been out of the Arizona market

22 since 2011, correct?

23 A. I've been in the Arizona market? Can you

24 clarify?

25 Q. Well, you haven't been involved in the


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1079

1 ambulance transport business within the Arizona market

2 since 2011, correct?


4 Q. I'm going to get out of this document.

5 I'm going to pull up the amended ARCR, the

6 one that's highlighted that has the changes, which is

7 MAR-167, just for ease of reference, because it shows

8 us the highlighted changes.

9 MS. FICKBOHM: I see somebody has looked

10 at it. I don't know if it's been admitted or not,

11 but...

12 Is it in evidence?

13 MS. HOFMEYR: Uh-huh.

14 BY MS. FICKBOHM:

15 Q. Okay. Now, the first page of the ARCR

16 requires attachment of a list of all affiliated

17 organizations, such as parents and subsidiaries, that

18 have at least a 5 percent ownership interest. Do you

19 see that?

20 A. Yes.

21 Q. Would you agree with me that Maricopa

22 Ambulance did not provide that information?

23 A. I would have to reference our filing to

24 confirm that. I didn't actually submit the document.

25 I signed, and it was submitted on my behalf.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1080

1 Q. Okay. Would you agree with me this says to

2 attach a list of all affiliated organizations?

3 And you can take the mouse -- and we already

4 looked at it once. -- and move around, if you want to;

5 but would you agree with me there's no such list

6 attached to this?

7 A. I can scan around. I don't know. I did not

8 actually formally do the submission, so I'm not sure.

9 So I'm going to make everybody sick.

10 Q. That's okay. I'm going to close my eyes.

11 Tell me when you're there.

12 A. Yeah. I'm not there yet.

13 I agree that I don't see anything attached to

14 this document.

15 Q. And can you point me to anywhere where that

16 list would be?

17 A. Not that I'm aware of in the exhibits.

18 Q. I noticed that on Page 10 you've got an Other

19 line of $210 [sic] for Professional Services, Line 5.

20 Do you see that?

21 A. I do.

22 Q. And then if you go to Page 11 --

23 MR. BELANGER: Object, Your Honor. I

24 think that was 210,000.

25 MS. FICKBOHM: I'm sorry, 210,000.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1081

1 Thank you, Mr. Belanger.

2 BY MS. FICKBOHM:

3 Q. And then when you go to Page 11, that's

4 broken out as Contributions, which I assume that's

5 donations and such?

6 A. Correct.

7 Q. $90,000. Lobbyist, $90,000?

8 A. Right.

9 Q. And Medical Director, $30,000?

10 A. Right.

11 Q. How does that lobbyist figure compare to

12 other providers in the market right now?

13 A. That, I do not know.

14 Q. Would you agree with me it looks kind of

15 high?

16 A. I don't know.

17 Q. Okay. Is that already being spent?

18 A. I believe we have engaged someone, that part

19 of what they are doing is that type of work.

20 Q. I'm looking for depreciation. Can you remind

21 me where that is?

22 A. It should be -- here it is.

23 Q. Oh, I made that mistake of thinking the page

24 after 5 was going to be 6. That's the problem with

25 these things, isn't it? It's 5, 5.1, 5.2.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1082

1 A. Yes. Line 1.

2 Q. And so what's the Depreciation line item?

3 And just for purposes of the record, I'm

4 going to jump up to the top of the page here, which is

5 MAR-167 at Page 14, also called Page 6 of the ARCR.

6 Can you tell us how much depreciation is?

7 A. $768,652.

8 Q. And this is one of the figures that the

9 EBITDA item removes, correct?


11 Q. So tell me what this represents on the ARCR.

12 A. So in our ARCR we have committed to a capital

13 expenditure investment in the community of just over

14 $4 million, which is primarily made up of the

15 acquisition of vehicles. And this is the write-off of

16 that capital investment over a period of five to seven

17 years, depending on the asset.

18 Q. And as we discussed earlier, in part, that's

19 intended to reflect the fact that those vehicles are

20 going to wear out and you're going to have to replace

21 them and repair them, right?

22 A. That is correct.

23 Q. An expense of running an ambulance

24 transportation company?

25 A. Correct.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1083

1 Q. Also on Page 6, I see no line item, no money

2 allocated for education and training at Line 20. Am I

3 going to find that figure somewhere else?

4 A. Yeah. You'll find that up in payroll

5 expense, because we factor that into our wages, the

6 time we commit. We pay the employees when they're

7 being trained. So it's up in payroll/wages.

8 Q. Okay. Well, what about the equipment or

9 outside individuals providing the training or the

10 equipment necessary for training; where does that show

11 up in here?

12 A. So some of that would be down in the -- down

13 in maintenance contracts. Some of that is going to be

14 the IT and the equipment. Some of it will be in

15 dispatch, because we put a lot of IT work in there.

16 Some of it would -- you know, it would depend. Some of

17 it -- if we're utilizing an in-house educator, some of

18 it would be in wages.

19 Q. Okay. So under -- you said under maintenance

20 contracts?

21 A. Yeah. That can be some. You asked for

22 equipment and that sort of thing in training, and some

23 of our equipment is maintenance contracts, like online

24 software and things for training.

25 Q. So how much of that maintenance contract line


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1084

1 is for education and training?

2 A. I don't have that figure on the top of my

3 head.

4 Q. How much of the -- you said it's also in

5 dispatch. How much of the dispatch figure is education

6 and training?

7 A. I don't have that off the top of my head

8 either.

9 Q. Is there some kind of schedule attached to

10 this that breaks that out, since education and training

11 is a specific required line item?

12 A. You know, we have a very detailed P & L; but

13 pursuant to the ARCR, we drop it into the Bureau's

14 format. This is their format, and we have a much

15 lengthier EBITDA statement that shows the detail,

16 broken out for detail.

17 Q. And did you give that to the Bureau with

18 this?

19 A. I do not believe we did. I don't believe

20 that was part of the request.

21 Q. But you would agree with me that it is

22 requested by the Bureau at Line 20 that you

23 specifically tell them how much you're going to spend

24 on education and training?

25 A. I absolutely see the Line 20 on there, and I


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1085

1 would imply from that that they're interested in

2 knowing that. I don't know what the requirement is.

3 Q. Moving to -- so I'm at Page AMR-167-0025,

4 where we get into the detail of the interest Maricopa

5 Ambulance expects to pay in its first full year of

6 operation, correct?

7 A. Yes.

8 Q. And I see that, basically, the interest

9 that's going to be -- that Maricopa Ambulance expects

10 to pay is $163,905, correct?

11 A. Yes.

12 Q. And that's also one of the items that the

13 EBITDA figure doesn't include, correct?

14 A. That was our assumption at the time we did

15 this application, that we would borrow 4 million for

16 the fixed assets; and, yes, that implies that that 163

17 would be added back to get EBITDA.

18 Q. Okay. But you would agree with me that if

19 Maricopa Ambulance has to pay interest in its first

20 year, that's money it's actually going to have to

21 spend, right?

22 A. If we end up financing our capital commitment

23 investment in the community through debt, that would be

24 correct; but at this point we've brought the 7 million

25 into the organization, and that a piece of that will be


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1086

1 utilized for equipment versus debt, potentially.

2 Q. And are you going to pay any interest on the

3 7 million?

4 A. No, because it's equity.

5 Q. When you put together a cash flow statement,

6 what's the first number you look at?

7 A. Net income or loss.

8 Q. So we can look at the second page -- or is it

9 Page 2? Page 2, which is not the second page of the

10 ARCR, which is 004, to get that number, correct?

11 A. Correct.

12 Q. So we see that according to the pro forma

13 ARCR, the anticipated net income is $1,064,783,

14 correct?

15 A. Correct.

16 Q. And you would agree with me that when you go

17 to the very end of your ARCR, Page 16, which is your

18 statement of cash flow, this is what your cash flow

19 statement should start with, correct?


21 Q. But that's not the number that this starts

22 with, correct?

23 A. That's right. That was one of the errors

24 that I had pointed out. I can explain what their

25 thought process was.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1087

1 Q. I guess what's more important to me is that

2 we're in agreement that that number is a wrong number,

3 right?

4 A. The wrong number was pulled off of the

5 schedule, correct, as it's presented.

6 Q. And you haven't provided -- you haven't

7 alerted the Bureau to the fact that the number you

8 start your cash flow statement with that accompanies

9 your ARCR is wrong?

10 A. I'm not sure if the expert notified the

11 Bureau or not.

12 Q. Wouldn't that be important for you to know?

13 A. Yes.

14 Q. I want to ask you another question. At the

15 end we've got the statement of cash flow, and we also

16 have a pro forma balance sheet, right?

17 A. Correct.

18 Q. I see that your opening balance sheet has --

19 if you even out the accounts receivable minus your

20 allowances, you've got about $1.3 million worth of

21 accounts receivable?

22 A. Yes.

23 Q. Actually, what I'm looking at is the -- yeah.

24 How can an opening pro forma balance sheet

25 for a brand-new start-up company have $1.3 million of


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1088

1 accounts receivable?

2 A. So I understood what the expert did on this

3 worksheet is he took the Priority Ambulance enterprise

4 balance sheet. So that this reflects the Priority

5 Ambulance balance sheet along -- in addition to the

6 assumed 7 million of equity coming in the organization,

7 plus the 4 million of incremental debt coming into the

8 organization to be used to acquire fixed assets.

9 Q. So you would agree with me that that's wrong?

10 A. In relationship to what?

11 Q. Submitting a pro forma balance sheet.

12 This is a pro forma balance sheet for

13 Maricopa Ambulance, LLC, not for Priority and all of

14 its other operations, correct?

15 A. It is titled Maricopa Ambulance, LLC and not

16 Priority Ambulance, LLC, I would agree with that.

17 Q. So you would agree with me that listing

18 $1.3 million worth of accounts receivable as your --

19 for a brand-new start-up is an error?

20 A. I would -- for Maricopa Ambulance, they did

21 not have 1.3 million of AR, I would agree with you.

22 Q. And would you also agree with me that nowhere

23 in this ARCR is there any indication of this $7 million

24 that I think I understand just got deposited into

25 Priority Holdings the very beginning of October of this


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1089

1 year, correct?

2 A. I would say that it's reflected in the cash

3 of 12.3, and if I may drive for a moment. It is

4 noted -- it's noted on MAR-167-0027 on Line 24, Capital

5 Contributions. A year ago we had estimated it to be

6 6.7 million. It turned out to be 7 million.

7 Q. But that's a capital contribution, not an

8 account receivable?

9 A. Oh, I thought you asked me about

10 the 7 million cash infusion.

11 Q. Oh, okay, okay. So I thought you mentioned

12 the 7 million in connection with the discussion of the

13 accounts receivable.

14 A. No.

15 Q. Okay. Well, let's look at Page 16 a little

16 bit more. Line 5 has an Accounts Receivable also,

17 which is shown as a decrease in cash because it's a

18 start-up?

19 A. Because it's a start-up, and the assumption

20 there, as I understood in their preparation of this,

21 that the assumption was they would have about 68 days

22 of start-up AR that primarily had to do with obtaining

23 a Medicare provider number.

24 Q. Right, right. Yeah, it takes time.

25 A. Uh-huh.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1090

1 Q. So this is telling the Bureau that you

2 believe the accounts receivable are going to grow by

3 $2,437,077 in year one, correct?

4 A. Correct.

5 Q. Okay. So then let's jump back to your

6 pro forma balance sheet. And if you look at Lines 2

7 and 3, that's the net AR, correct?

8 A. Yes, but this is representative, as in the

9 title, it states that this is a January 1st, 2015

10 balance sheet, not a December 31st, 2015. So this does

11 not reflect the operations of the business for the

12 first 12 months. This is a start-up balance sheet with

13 just the Priority Ambulance.

14 Q. But isn't the balance sheet supposed to

15 reflect your first full year of operations?

16 A. I am not sure about that in terms of how the

17 expert prepared this.

18 Q. Because if the balance sheet was just a

19 pro forma balance sheet for a start-up, looking at day

20 one, January 1st, 2015, it would be really easy to fill

21 out, wouldn't it?

22 A. They could have absolutely created a balance

23 sheet for 12-31, yeah.

24 Q. For January 1st, 2015.

25 A. Can you ask the question again?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1091

1 Q. Yes.

2 So if what you're saying is this is just

3 supposed to reflect what the company looked like on

4 January 1st, 2015 -- I think that's what you said?

5 A. Correct.

6 Q. Okay. If that were true, wouldn't this be a

7 really easy balance sheet to fill out for a start-up?

8 Most of those lines would be zeros, right?

9 A. For a start-up, that is true, yes.

10 Q. Okay. So this wasn't filled out with a bunch

11 of zeros, right?


13 Q. So let's assume that this is your first year

14 pro forma balance sheet which reflects your first year

15 of operations, correct?

16 A. Correct.

17 Q. So would you agree with me that if you look

18 at Lines 2 and 3, this is telling the Bureau what the

19 net AR is going to be; it's accounts receivable minus

20 the allowance for doubtful accounts, correct?

21 A. Correct.

22 Q. And that if you take that 3 million

23 259-and-change and subtract the 1 million

24 955-and-change, would you agree with me you get about

25 $1.3 million?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1092

1 A. Yes, but that was not -- this document does

2 not reflect the first year, so it does not reflect that

3 2.4 million of AR growth.

4 Q. What does it reflect?

5 A. This was -- so the way our enterprise is

6 structured from Priority Ambulance, LLC down is we

7 operate, from a cash perspective and a funding

8 perspective, as one entity.

9 So when we are looking -- what we were trying

10 to show here is this is our enterprise, as I

11 understood. So this is our January 1st, 2015

12 enterprise that we're bringing and committing to the

13 Arizona market. So that's what we were -- that is what

14 this balance sheet reflects. So this is effectively

15 the Priority Ambulance, LLC balance sheet at

16 January 1st of 2015.

17 Q. So you gave them -- instead of giving them

18 Maricopa Ambulance, LLC's pro forma balance sheet, you

19 gave them one for Priority as an entire organization,

20 including its two start-ups and five acquisitions?

21 A. That's correct. And I understood the

22 dialogue with the expert at the time was -- and it

23 looks like the title is wrong on this; but the dialogue

24 at the time was it would not be useful to the Bureau to

25 see this page with zeros, and so we were showing them


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1093

1 our organization and how we -- our organization.

2 Q. But didn't you understand that as part of the

3 ARCR submission, what the Bureau wanted to see was the

4 balance sheet pro forma for Maricopa Ambulance, LLC's

5 first full year of operations?

6 A. I can't speak to exactly the requirements for

7 the Bureau on this document.

8 Q. But let's just go ahead and look at the very

9 first page of the ARCR. And this is reporting, would

10 you agree with me, MAR-167-0001, this document is

11 reporting from January 1st, 2015 through December 31st,

12 2015? Do you see where that says that?

13 A. Yes, I do.

14 Q. And the person who signed this, but right

15 below that, is you, right?


17 Q. So when you signed that, you were plainly

18 aware that that's the period you were reporting for,

19 correct?

20 A. I was, correct, that that was the reporting

21 period reflected on here. I would say that I was not

22 aware of the requirement specifically in the details,

23 but I was aware that we were presenting a first year

24 financial P & L. But when I reviewed this, the

25 document said January 1st, 2015, and I acknowledged


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1094

1 that that's what this was.

2 Q. And you thought that on January 1st, 2015

3 this is what Maricopa Ambulance, LLC's balance sheet

4 would look like?

5 A. I understood from the expert at the time that

6 it would be misleading to just leave this blank, and so

7 they deemed that what would be appropriate is to show

8 them the strength behind the organization and that this

9 was the organization.

10 Q. But it doesn't say that, does it?

11 A. No, the title says "Maricopa Ambulance, LLC."

12 Q. And so maybe if you had put down Priority,

13 you might have got a note back from the Bureau saying,

14 "Well, wait a minute, we don't want Priority. We want

15 Maricopa Ambulance's first year pro forma balance

16 sheet"?

17 A. I don't know.

18 Q. So would you agree with me that we could go

19 through and find a lot of other places, because of what

20 you're telling me, where your pro forma balance sheet

21 does not match up with your statement of cash flows,

22 because we're comparing, basically --

23 A. You are comparing two different time periods,

24 that is correct.

25 Q. Well, we're comparing two different entities,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1095

1 right?

2 A. Um, two different entities.

3 Q. I think what you're telling me is that --

4 A. No, I would consider this statement of cash

5 flows part of the Priority Ambulance, LLC entity, and

6 so this statement of cash flows could roll into the

7 balance sheet properly.

8 Q. So I want to make sure I understand what you

9 just said. Are you saying that Page 16, the statement

10 of cash flow, is not the statement of cash flow for

11 Maricopa Ambulance, LLC, like it says at the top of the

12 page; but it's a statement of cash flow for Priority as

13 a whole, Priority Holdings?

14 A. The line -- if I may drive.

15 Q. Sure, you may drive.

16 A. Okay. I'm sure you're happy to relinquish

17 this.

18 Q. Absolutely.

19 A. The Lines 1 through 26 reflect the cash flow

20 results of the first 12 months of operating Priority

21 Ambulance, LLC.

22 Q. Not Maricopa Ambulance?

23 A. I mean, correction, Maricopa Ambulance, LLC.

24 Line 27, or cash at the beginning of the

25 year, that 5.6 million, that is Priority Ambulance,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1096

1 LLC's cash.

2 Q. So you don't think that that's something that

3 should have been -- that the Bureau's attention should

4 have been drawn to; that you're using another entity's

5 cash to support the cash flow statement?

6 A. I don't know what the dialogue was with the

7 Bureau. I never spoke with the Bureau in this review

8 process back and forth.

9 Q. I guess I'm asking you more as the chief

10 financial officer for Priority, including for Maricopa

11 Ambulance, the person at the top of the food chain for

12 accounting procedures and information, didn't this

13 cause you concern when you saw this; that it was an

14 inaccurate report given to the Bureau?

15 A. I would say that my review of the ARCR was

16 focused on our projected EBITDA and what we believed --

17 how we believed we could perform in the market and what

18 capital was going to be required to invest in that

19 market.

20 So I was not focused on the Bureau's format

21 of their documents. I was focused on the reality of

22 our expected performance in the market and the capital

23 that was going to be required to invest in that market

24 to make a go.

25 Q. So your concern was the EBITDA analysis?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1097

1 A. The EBITDA analysis, the capital requirements

2 to invest in the market, the capital infusion we would

3 need to commit to this market. That was my focus.

4 Q. Okay. You, of course, recognize that the

5 Bureau's purposes may be a little different than yours,

6 right?

7 A. I don't -- I could not assume I know what the

8 Bureau's --

9 Q. Well, can we assume that if the Bureau gives

10 you a form that's a required part of a package, that

11 you should be completing the form for them, for their

12 use; not for your use?

13 A. I agree, and that's why this is presented --

14 that's why I wasn't focused on this, because we engaged

15 an expert, Marty Brandau, to submit this on our behalf;

16 and he was submitting it, as I understood, to the

17 requirements of the Bureau.

18 Q. Wouldn't you agree with me that it's -- that

19 within accounting there's what's called a matching

20 principle?

21 A. Correct.

22 Q. And that is that your pro forma balance sheet

23 should flow through and be able to be tracked item for

24 item in your statement of cash flow, right?

25 A. For comparable periods, correct.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1098

1 Q. Okay. And so you would agree with me that

2 that is not happening here?

3 A. Well, I don't see in this document a 12-31-15

4 balance sheet.

5 Q. And, again, I'm going to take you back to the

6 first page of this, and would you agree with me that

7 what's required is reporting for the period of

8 January 1 through December 31, 2015?

9 A. Yes, that's what it says, report periods,

10 yes.

11 Q. Could you have prepared a projected

12 12-31-2015 balance sheet using Priority Ambulance plus

13 your investments?

14 A. Yes.

15 Q. But that wasn't done?

16 A. As I see in this, it was not.

17 Q. And is Marty Brandau still working with

18 Priority Ambulance?

19 A. He does not work with Priority. He was

20 engaged as an expert for this.

21 Q. Okay. So there's some, kind of, important

22 items on this I just wanted to highlight. I'm not

23 going to go through all the mistakes, because obviously

24 15 isn't going to track 16 at all, is it?

25 A. What's 15?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1099

1 Q. 15 is your cash flow -- balance sheet, and 16

2 is your cash flow.

3 A. So I would say that on the statement of cash

4 flow, Lines 1 through 25, which is the substance of the

5 cash being produced through our first year of

6 operations, is consistent, and we can walk through

7 those items.

8 ALJ MIHALSKY: Unless Ms. Fickbohm wants

9 to, we won't. You may do it later.

10 THE WITNESS: Okay.

11 BY MS. FICKBOHM:

12 Q. But those aren't going to be reflected on the

13 balance sheet?

14 A. Correct, because they're a different time

15 period.

16 Q. And it's also correct, isn't it, because

17 Page 16, the statement of cash flow, mixes numbers from

18 Maricopa Ambulance, LLC only and Priority Holdings, LLC

19 as a whole?

20 A. It does include on both documents the cash

21 from Priority Ambulance sitting on the balance sheet.

22 Q. So let's look at the cash at the end of the

23 year. I'm on Page 16, and I'm looking at Line 29 --

24 A. Yes.

25 Q. -- Net Cash Provided.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1100

1 A. Correct.

2 Q. Or, I'm sorry, cash at the end of the year.

3 A. Yes.

4 Q. The $11,371,841.

5 A. Right.

6 Q. So would you agree with me that somebody

7 looking at this, given the heading of the document,

8 would think that you're suggesting that Maricopa

9 Ambulance, LLC is going to have $11,371,841 at the end

10 of the year?

11 A. That is what this states, yes.

12 Q. And that's wrong, right?

13 Maricopa Ambulance isn't going to have that

14 money at the end of your pro forma first year, because

15 you're telling me that that's Priority Holdings as a

16 whole, including all of the subsidiaries, correct?


18 Q. And that number right there, 29, should tie

19 on your -- given the matching principle, to your

20 pro forma balance sheet, Page 15, by looking at your

21 Cash on Line 1, correct?

22 A. Well, the difference is the 800,000 -- the

23 168,000 -- the difference between the 12.3 million here

24 and the 11.7 -- whatever it is. -- 11.4 here is this

25 801,000 of -- whoops. -- this 801,000 of short-term


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1101

1 debt reduction and the 168,000 of negative cash flow

2 that is expected to be produced by the enterprise in

3 the first 12 months. And, again, that's because those

4 two items reflect the activity during the year, which

5 is not represented on that balance sheet.

6 Q. I understand what you're saying, but let me

7 go back to the matching principle. And you've got --

8 so shouldn't that tie right here with Line 1?

9 A. It should if this was a 12-31-2015 balance

10 sheet, but this is presented as a January 1, 2015.

11 Q. So can we agree that whoever did this

12 reporting for you didn't understand that the balance

13 sheet should tie to the statement of cash flow?

14 A. I don't know. I can't say that, if they

15 understood that or not, because they're different

16 periods.

17 Q. So I think that what you're telling me is

18 that if somebody looked at that 11,371,000 and added in

19 your -- the -- which line item; the debt reduction?

20 Not the debt reduction.

21 A. Yeah, the debt reduction.

22 Q. The 801?

23 Can you add those together?

24 A. Well, generally, if you took the 11.4 plus

25 the .8 plus the loss on Line 11, the net cash provided,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1102

1 plus that, you'll get 12.4 million, which is the cash.

2 12.3, 12.4, which is the cash.

3 Q. Well, you get 12 -- did you just add that up?

4 A. Yeah.

5 Q. Didn't you get $12,342,727?

6 A. I rounded. That could be.

7 Q. Okay. So would you agree with me that

8 $12,342,727 is not equal to $12,316,926?

9 A. I would agree that that sounds off. Let me

10 just glance back at this to see.

11 May I recalculate it?

12 Q. Sure.

13 ALJ MIHALSKY: Tell us exactly what

14 you're --

15 THE WITNESS: Doing?

16 ALJ MIHALSKY: -- using to calculate, if

17 you would, please, for the record.

18 THE WITNESS: Okay, yes. I'm on the

19 statement of cash flow, which is MAR-167-0027, Line 29.

20 I'm taking 11,371,841. I'm adding Line 23, Short-Term

21 Debt, 801,980; and I'm adding Line 11, Net Cash

22 Provided By Operating Activities, 168,986; and then I'm

23 moving over to MAR-167-0026, Line 1, and I'm deducting

24 from what I just added.

25 Yeah, there's a 25, almost $26,000


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1103

1 difference between those two figures.

2 BY MS. FICKBOHM:

3 Q. So we can't even line them up that way, can

4 we?

5 A. Those two do not agree.

6 Q. And would you agree with me that -- I've got

7 a couple more pages here, but there are going to be a

8 bunch of other places where these two documents won't

9 match up?

10 A. I can't confirm that.

11 Q. Well, let's just look at a couple more then.

12 On Page 16 of the ARCR, which is on Page 27

13 of the document 167, Line 7, we've got Prepaid Expenses

14 of $40,000; do you see that?

15 A. I do.

16 Q. So this should also be reflected on the

17 balance sheet, correct?

18 A. No, because that balance sheet is a

19 January 1st, 2015, not a 12-31-2015. So that would not

20 be reflected. Different time periods.

21 Q. So we've got Prepaid Expenses there of

22 $595,000, correct?

23 A. Correct, because as stated previously, this

24 represents the Priority Ambulance, LLC balance sheet

25 that will be supporting the Maricopa Ambulance


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1104

1 business.

2 Q. Ms. Ponczak, I'm going to move away from

3 looking at the differences between the two of them and

4 pointing out those and just ask you a few final

5 questions.

6 Do you accept -- well, let me start with

7 you've told us that it can take up to 12 months to

8 collect on charges billed, correct?

9 A. That's right.

10 Q. And would you also agree that when a company

11 files bankruptcy, that doesn't happen overnight; that

12 the financial condition that leads to a bankruptcy

13 builds over time?

14 A. I would say in my opinion, in this industry

15 things can turn and they can turn rapidly, because

16 you're dealing -- our business is a -- I would

17 characterize it as a high-volume, low-reimbursement

18 industry, if you compare it to other industries. So

19 when you're dealing with a high-volume industry, if you

20 lose control of your billing, you can have revenue

21 recognition problems very quickly.

22 Q. You understand, don't you -- did you follow

23 the Rural/Metro bankruptcy with any interest?

24 A. Some, because it broke my heart that it

25 happened.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1105

1 Q. Would you agree with me that one of the

2 reasons that they stated in public filings for having

3 submitted a bankruptcy was that difficulty accounting

4 for revenue that, basically, led them to have to make

5 negative adjustments to revenue to the tune of like

6 $60 million, which was revenue they recognized starting

7 in June 2012?

8 A. I'm not specific with the timing and the

9 amounts, but I am aware that they're claiming there's

10 some revenue recognition matters.

11 Q. Were you aware of the fact that included in

12 the basis for the bankruptcy was Rural/Metro basically

13 confessing that its accounting systems were

14 ill-equipped to account for shifts in payor mix?

15 A. I'm not aware of that.

16 Q. If that's true, is that something that you

17 would accept any responsibility for?

18 A. No, I would not.

19 Q. Do you accept any responsibility for the

20 financial condition that Rural/Metro found itself in

21 that led up to its bankruptcy?

22 A. I absolutely do not. When I left the company

23 in late October of 2011, I felt like I was leaving

24 behind a very healthy organization.

25 Q. You don't think that the estimates of revenue


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1106

1 collection that were in place in late 2011 impacted

2 revenue recognition occurring in 2012?

3 A. I could not say there. Depends on the

4 timing, what months, what payors. I couldn't say.

5 Q. I'm going to show you what's been marked as

6 AMR-88, an exhibit, and this is a declaration of

7 Stephen Farber in support of Rural/Metro Corporation's

8 Chapter 11 petition, and I'm going to skip down to

9 Page 10 of the document, where he begins to address

10 events leading to the commencement of the Chapter 11

11 cases.

12 Have you seen this document before?

13 A. I don't recall if I've seen this specific

14 document, but I'm aware of the filing.

15 MS. FICKBOHM: And, Your Honor, this is

16 a public document, and I would move for admission. I

17 would like to discuss some paragraphs of it with the

18 witness, specifically with regard to her role in the

19 management and direction of Rural/Metro in the time

20 period leading up to its filing a Chapter 11

21 bankruptcy.

22 MR. BELANGER: I'm going to object to

23 the foundation. She said she didn't -- wasn't aware of

24 it, other than generally aware of the filing.

25 MS. FICKBOHM: It's a publicly available


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1107

1 document, and I think that Rural/Metro could probably

2 confirm the accuracy of it.

3 ALJ MIHALSKY: Okay. For what it's

4 worth --

5 MR. ROSENFELD: And, Your Honor, I have

6 no objection to the admission of the document for the

7 limited purpose that Ms. Fickbohm explained.


9 MR. ROSENFELD: In terms of relevancy or

10 other objections, I'm reserving those; but for that

11 limited purpose, I have no objection.

12 ALJ MIHALSKY: Okay, very good. For

13 what it's worth --


15 ALJ MIHALSKY: -- AMR-88 is admitted.

16 BY MS. FICKBOHM:

17 Q. So the first paragraph where he discusses the

18 reason he -- in Paragraph 30, he states that leading up

19 to the commencement of these Chapter 11 cases, the

20 debtors had significant accounting, financial and other

21 challenges.

22 Do you see that?

23 A. Yes.

24 Q. And you would agree with me that leading up

25 to doesn't mean the day the bankruptcy was filed,


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1108

1 correct?

2 MR. BELANGER: Can we just get a little

3 bit of -- who submitted the document or some just

4 whatever else is supposed to be on it? I mean I

5 understand that this was a submission by an individual.

6 MS. FICKBOHM: Right. I said that in

7 the very beginning when I first started talking.

8 MR. BELANGER: I didn't get his name.

9 MS. FICKBOHM: Stephen Farber.

10 MR. BELANGER: Okay. Sorry, Your Honor.

11 BY MS. FICKBOHM:

12 Q. And I don't want to put counsel at any kind

13 of disadvantage, so let's just go back. Stephen

14 Farber, the executive vice president and chief

15 financial officer of Rural/Metro, Page 1.

16 Okay, back down to where we were. Where was

17 I? 10. Okay.

18 And then in Paragraph 31 it says the company

19 has experienced significant challenges and disruptions

20 operating its billing and collection functions, that

21 has resulted in reduced revenue and delayed cash

22 collections.

23 Do you see that? I truncated the sentence,

24 but do you see that as the first paragraph of 31?

25 A. Yes.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1109

1 Q. And what follows is a sentence I was talking

2 about earlier: The company has also had great

3 difficulty appropriately accounting for revenue, which

4 resulted in negative adjustments to revenue aggregating

5 approximately 60 million recognized for accounting

6 purposes from June '12 through March 2013.

7 Do you see that?

8 A. I do.

9 Q. So do you agree with me that the systems that

10 you had in place in 2011 must have had some impact on

11 this situation?

12 A. Based on my interpretation of that read, he

13 is saying that from June 12th -- 2012 through March

14 2013, he was having revenue recognition problems.

15 ALJ MIHALSKY: Is that a no?

16 THE WITNESS: That's a no.

17 BY MS. FICKBOHM:

18 Q. But I thought your testimony earlier was that

19 revenue recognition can happen up to 12 months after

20 billing and collection is initiated, correct?

21 A. No. Collections can happen up to 12 months

22 after. Revenue recognition happens in the month

23 revenue is recorded.

24 Q. Okay. Sorry.

25 So but the billings and collection efforts in


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1110

1 back of this, that led up to this, would have started

2 during the period of time you were at the helm of

3 Rural/Metro with the CEO and COO, correct?

4 A. No.

5 Q. None?

6 A. No. This -- as I read the document, it's

7 referring to June 2012 through March 2013, and I was

8 not at the company at that time.

9 ALJ MIHALSKY: We're coming up on lunch,

10 and I don't mind working through, into the lunch hour,

11 if you're almost done, Ms. Fickbohm. However, I do

12 want to take a short break for the benefit of the court

13 reporter. So it's up to you.

14 MS. FICKBOHM: I can finish in three

15 minutes.

16 ALJ MIHALSKY: Is that a promise?

17 MS. FICKBOHM: Uh-huh.


19 MS. FICKBOHM: Is that all right, Your

20 Honor?

21 ALJ MIHALSKY: That's fine.

22 BY MS. FICKBOHM:

23 Q. Okay. Paragraph 32, where it's detailed the

24 company's difficulties with revenue relate, in part, to

25 changes in the source of payment; do you see that?


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1111

1 A. I'm sorry, 32?

2 Yes.

3 Q. And then if we go onto the next page, 11, it

4 says the company's -- and I'm looking down where I'm

5 showing you right where that is.

6 A. Yes.

7 Q. The company's accounting systems were

8 ill-equipped to account for such shifts. And up above

9 they're talking about shifts in the payor mix. Do you

10 see that?

11 A. I would state that the accounting systems

12 have nothing to do with predicting anticipated

13 receipts. That data comes out of the billing system

14 and analysis off data within the billing system.

15 Q. My question about this is, do you accept any

16 responsibility for the Rural/Metro accounting systems

17 that were in place during the first half of calendar

18 year 2012?

19 A. What do you mean by responsibility?

20 Q. All, or in part, systems you helped put in

21 place in calendar year 2011?

22 A. I didn't put any accounting systems in place.

23 I'm aware of the accounting and ERP system that was in

24 place when I was at Rural/Metro.

25 Q. And the one you were working with for quite a


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1112

1 long period of time, correct?

2 A. Yes. It was in place the entire time I was

3 there.

4 Q. In the years leading up to the bankruptcy,

5 correct?

6 A. I don't know what system they used after my

7 departure.

8 Q. And I'm not just talking about hardware

9 systems. I'm talking about policies, procedures, the

10 way things are done.

11 All that was developed under your guidance

12 for years and years and years, correct?

13 A. I had a very robust revenue recognition

14 program from the early 2000s that was used up to the

15 day of my departure. I understood things changed after

16 my departure, but I have no idea. That's what I heard

17 from people that were still there.

18 Q. Understood.

19 So you are distancing yourself entirely from

20 the bankruptcy?

21 MR. BELANGER: Objection, Your Honor.


23 BY MS. FICKBOHM:

24 Q. You believe what you did when you were at

25 Rural/Metro has nothing to do with the bankruptcy


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1113

1 filing?

2 A. I would say there have been no allegations of

3 me, no claim, you know, of wrongdoing.

4 ALJ MIHALSKY: That's a no?

5 THE WITNESS: No.

6 ALJ MIHALSKY: You don't think that you

7 had anything to do with it?

8 THE WITNESS: No. Yes.

9 ALJ MIHALSKY: We're getting up to

10 lunch. We need to move it along.

11 MS. FICKBOHM: Thank you. That's all I

12 wanted, was a yes or no. That's right. Thank you,

13 Your Honor.

14 ALJ MIHALSKY: Thank you.

15 We'll go to lunch now. We'll be back on

16 the record at 1:15.

17 MR. ROSENFELD: So, Your Honor, are we

18 then -- in light of the schedule of AMR's financial

19 witnesses, there are a couple other parties that still

20 have cross.

21 ALJ MIHALSKY: Yeah, I thought we

22 would -- we're still on the record, I guess.

23 We'll begin with your cross when we

24 get back from lunch. I think Ms. Fickbohm is

25 finished.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1114

1 MR. ROSENFELD: Right. But I know we

2 were trying to finish financial witnesses by noon, but

3 I have a cross for this witness. But Ms. Fickbohm is

4 telling me she's okay with me proceeding, and so I

5 will.

6 MS. FICKBOHM: Your Honor, the applicant

7 was nice enough to agree to not call financial

8 witnesses after noon on Friday because Mr. Bartus has a

9 plane to catch, and he's my financial expert; otherwise

10 he would have to fly home tomorrow.

11 But because they finished their

12 presentation, I've done the cross-examination, I assume

13 they're not going to exceed -- open new areas on

14 redirect, so I'm fine with allowing Ms. Ponczak to be

15 completed today. That's fine with me.

16 ALJ MIHALSKY: Okay. We'll start with

17 Mr. Rosenfeld. If things come up as far as that you

18 believe new areas are being opened, I will address it

19 at that time.

20 MS. FICKBOHM: Absolutely.

21 MR. BELANGER: Judge, that's actually

22 not fine with me, because I thought the schedule was we

23 would be done at noon and then we were going to do

24 Mr. Jaramillo, and like other people in the room, my

25 daughter has been home all week, and I'm supposed to be


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1115

1 home with her at 3:00 this afternoon.

2 MR. ROSENFELD: And I'm fine. I'm fine

3 deferring my cross. I thought you would prefer I

4 finish, but I'm happy not to. So I'm happy to just

5 take --

6 MR. BELANGER: That's my understanding,

7 and I would have to call my daughter, who is sitting at

8 home, and figure this out.

9 MR. ROSENFELD: Don't do it.

10 MS. FICKBOHM: Oh, Jim, I was just doing

11 this to not inconvenience Ms. Ponczak and make her come

12 back.

13 MR. ROSENFELD: Same here.

14 ALJ MIHALSKY: Let's go off the record.

15 (An off-the-record discussion ensued.)

16 ALJ MIHALSKY: We're back on the record.

17 We had a spirited discussion off the

18 record, and we have all agreed that we're going to call

19 it a day today. We'll adjourn until a week from Monday

20 at 9:00.

21 I did inform the parties, those

22 attorneys who have had to drive up from Tucson

23 certainly will be allowed to appear telephonically.

24 Just give me advance notice. I mean you can just make

25 a phone call. You don't need to file anything on the


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1116

1 website. I don't think that anyone's going to object

2 to it. And we do have the technology where we can have

3 multiple people appearing telephonically, and so I'll

4 do the best I can to accommodate the attorneys, the

5 parties, the witnesses.

6 And with that, I will see you a week

7 from Monday at 9:00. Have a good weekend.

8 MS. HOFMEYR: Judge, I would like to

9 clarify.

10 ALJ MIHALSKY: We're still on the

11 record.

12 MS. HOFMEYR: Are we going to start with

13 Kristi Ponczak, or are we going to start with

14 Jaramillo?

15 ALJ MIHALSKY: We'll start with

16 Ms. Ponczak, Mr. Rosenfeld's cross-examination, on

17 Monday, a week.

18 MS. HOFMEYR: Thank you.

19 ALJ MIHALSKY: And I don't know what

20 we'll do after that.

21 Okay, you'll be next, of course.

22 MS. HOFMEYR: Are we still on the

23 record?

24 ALJ MIHALSKY: We're still on the

25 record.


2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1117

1 Okay, we're off the record now. Have a

2 good weekend.

3 (The proceedings adjourned at

4 12:08 p.m.)

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2015A-EMS-0190-DHS VOLUME 5 10/09/2015 1118

1 STATE OF ARIZONA ) COUNTY OF MARICOPA )

2

3 BE IT KNOWN that the foregoing proceedings were taken before me; that the foregoing pages are

4 a full, true, and accurate record of the proceedings, all done to the best of my skill and ability; that

5 the proceedings were taken down by me in shorthand and thereafter reduced to print under my direction.

6 I CERTIFY that I am in no way related to

7 any of the parties hereto, nor am I in any way interested in the outcome hereof.

8 I CERTIFY that I have complied with the

9 ethical obligations set forth in ACJA 7-206(F)(3) and ACJA 7-206 (J)(1)(g)(1) and (2). Dated at

10 Phoenix, Arizona, this 24th day of October, 2015.

11

12 _______________________________________

13 JODY L. LENSCHOW, RMR, CRR Certified Reporter

14 Arizona CR No. 50192

15 I CERTIFY that Coash & Coash, Inc., has

16 complied with the ethical obligations set forth in ACJA 7-206 (J)(1)(g)(1) through (6).

17

18

19

20

21

22

23 _______________________________________

24 COASH & COASH, INC. Registered Reporting Firm

25 Arizona RRF No. R1036


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