Legal ailments surround Dr. Notes
By Brian Bandell
South Florida Business Journal
Updated: 8:00 p.m. ET Oct. 9, 2005
Dr. Dean Banks' clinic recently won a $1.45 million judgment against Dr. Notes, a Boca Raton software company, but, he says, "I don't know
if I'll ever see a dime."
He's not the first to give that type of comment, although his judgment is the biggest. At least 25 other parties are trying to collect after
judgments against Dr. Notes and CEO Dr. Angel M. Garcia.
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The entrepreneur has stayed in business and attracted investors despite evictions, lawsuits, a personal bankruptcy, a business bankruptcy
and tax liens - though the future is questionable. Some parties to lawsuits say they were surprised to find out the CEO with the thinning hair
was born Angela Mary Garcia and had filed personal bankruptcy before changing his gender identity and his name to Angel Marty Garcia.
Federal and state court records for Garcia and his businesses show a tally since 1985 of 43 IRS, state, county and labor department tax
liens and 114 legal actions by an array of plaintiffs - 27 doctors, 13 ex-employees, six landlords and vendors ranging from a public relations
firm and banks to trade booth designers and a limo company.
More than $8.06 million in judgments and back taxes have been sought and 16 lawsuits are pending. A search of court records shows
Garcia and his companies have paid at least $792,321 in 38 cases involving tax liens and judgments.
In the summer of 2004, Dr. Notes appeared on the verge of big success: In company documents and an interview with The Business
Journal, Garcia talked about how 5,000 doctors were using his software. He said the company was exploring an IPO after raising $13
million from 409 investors.
The following March, the company was evicted from its Boca Raton office on Congress Avenue and was recently down to eight workers,
former employees say.
Garcia has refused to respond to The Business Journal's questions as the problems have been uncovered. In a recent e-mail, Garcia called
Business Journal articles on his legal issues "false allegations." Court records show numerous default judgments after the company never
mounted a defense.
Robert N. Reynolds, a Winter Park lawyer who has represented Garcia in a lawsuit brought by Dr. Notes' former chief financial officer, has
not returned repeated calls for comment. Two other lawyers who previously represented Garcia declined comment.
Potential revolutionary software
From 2001 to 2004, Garcia looked to be an immigrant entrepreneur with potentially revolutionary software for doctors. Gov. Jeb Bush's
newsletter in 2001 congratulated him for planning to create 471 jobs and qualifying for state incentives. When Dr. Notes appeared to be at
its peak in 2004, Garcia said the company was developing an Internet-based version of his program to save hospitals and large doctor
practices time and money.
Former employees say Garcia cast the mission of his business as a noble cause to improve health care and employed a paid chaplain who
led prayers, including ones for sales success, in the office chapel.
Garcia's mission started in 1987 when he was an internal medicine specialist in Boca Raton and founded Datamed Forms & Software,
which later became Dr. Notes.
Garcia helped write a DOS computer program to help doctors save time by electronically recording patient records, according to his
biography in private placement memos.
By 1994, the company had sold its AdmitEase and CESAR programs to more than 100 doctors, according to a Sun-Sentinel article at the
time.
But state court records show Datamed had been evicted two years earlier and from 1989 through 1994 had faced 12 lawsuits seeking at
least $123,90, mostly from vendors and lenders, and 18 tax liens seeking $79,571.
"When the money came in, then people got paid but they got paid not necessarily based on any schematic," said Elaine Pacella,
Datamed's VP of business development in 1993 and 1994. "A normal business would decide who the most critical vendor is or who has
been owed the longest. There, it was whoever he [Garcia] felt at the moment needed to be paid."
Pacella said paychecks at Datamed bounced or were withheld and Garcia used stock in lieu of cash to pay some employees and vendors
in the early 1990s. Similar claims were made in lawsuits filed by recently departed employees of Dr. Notes. Pacella settled her lawsuit
against Garcia for non-reimbursed expenses in 1999.
Garcia in 1994 filed personal chapter 11 bankruptcy - common for businesses, but rare for individuals - with $659,744 in claims, many of
them stemming from taxes or vendors who said they weren't paid after doing business with Datamed.
The bankruptcy was discharged in 1996 - a year after Garcia legally changed his name from Angela Mary to Angel Marty, according to court
records. A private placement offering from 2003 said Garcia took the company debts upon himself and resolved all of them.
Leases boost sales
Although Garcia's personal bankruptcy includes contracts for Datamed, the company continued to raise money before, during and after it
was discharged. From 1994 through 1996, the years Garcia was in bankruptcy, Datamed raised $710,569, according to a list of company
shareholders from 2000.
In 2000, Datamed upgraded its program to serve an entire physician practice. Doctors could purchase the software - and hardware, if
needed - with lease financing agreements.
Financing companies such as Hewlett- Packard Financial Services would pay Garcia's company the full price of the products upfront at
about $43,000 per physician. The doctors made monthly payments under multi-year lease terms to the financing companies for the full
amount, plus interest.
The company said the Dr. Notes program was sold to more than 5,000 physicians, which many former employees say sounds right.
Dr. Notes had about 160 employees in the summer of 2004 and was inviting doctors from around the country to its 25,300-square-foot
Boca Raton headquarters for sales pitches and training - along with limo rides to a beachfront hotel for lodging and dinner, according to
former employees and doctors.
Growing revenue, no profits
The company's revenue hit $7.8 million in 2003, according to an audited financial statement distributed with an offering memo. But it wasn't
making profits and accounting firm Daszkal Bolton said in the financial statement that the company had a working capital deficit of $4.9
million at the end of 2003. The firm stated it had reservations about Dr. Notes' ability to continue as a going concern.
Lawsuits were also starting to pile up - at least 17 a year in 2002 and 2003 - and some doctors weren't happy.
At least 22 doctors who sued, charged in their complaints that they couldn't get the Dr. Notes product to work at their practices and weren't
given adequate technical support. The lawsuits also charged that Dr. Notes wouldn't release them from financial obligations, including
leases for equipment and software, even though contracts with Dr. Notes stated that doctors could return the software and equipment at no
charge if they weren't satisfied after six months.
More than a dozen doctors sued the equipment financing companies, which successfully held doctors to their contracts by pointing out that
they weren't responsible for the service of Dr. Notes.
The lawsuits against Dr. Notes for breach of warranty have resulted in 17 judgments against the company totaling more than $3 million, and
five pending lawsuits seeking a total of about $400,000.
That's what led to the biggest single judgment against Dr. Notes. Banks' Florence, S.C., clinic successfully claimed it was stuck with a
$252,000 lease agreement and couldn't use Dr. Notes - leading to the $1.45 million judgment with damages tripled under state law.
Paying for patient data
By 2004, Dr. Notes stopped offering free trial warranties, but its next sales tactic also brought legal action. In 2003, the company offered to
pay doctors $1,000 a month, which nearly covered their lease payments, to send the company their patients' medical and prescription drug
records in non-identifiable form. The doctors were told Dr. Notes was reselling the data to a research group at a university in South
Carolina, according to four former Dr. Notes' employees.
"Doctors started calling me asking, 'Where's my payment from the data acquisition program,'" said Robert Olmedo, who worked as a sales
manager at Dr. Notes in 2003 and 2004 and claims to be owed $32,000 in commissions. "I found the supposed medical college in South
Carolina doesn't exist. There is no acquisition program. I confronted Garcia about it and he demoted me to team leader."
Dr. Mukesh Saraiya, of Denton, Texas, won $12,346 in a lawsuit against Dr. Notes in August over payments he charged he was owed
under the data acquisition program. No other doctors have sued for that reason, but 12 have complained about lack of payment for medical
data in interviews with The Business Journal.
At least 250 doctor accounts were submitting data under the program and Dr. Notes stopped paying all of them, said Steven Avnet,
formerly the company's database manager.
Doctors and former employees started badmouthing the company in February 2004 on Internet message boards.
In the summer of 2004, Garcia started changing the sales strategy to focus on the Internet-based DrNotes.net, which was offered as a
subscription service costing $500 to $700 a month. However, four former Dr. Notes employees said Atlanta-based software developer
Paragon Solutions, stopped working on the program before it was finished because Dr. Notes owed that company money. A spokesman
for Paragon, since renamed FCG Software Services, declined to comment.
By the fall of 2004, Dr. Notes apparently began to have problems paying its bills, based on the time period covered in subsequent vendor
suits.
The company was evicted from its offices in March owing $152,249 in unpaid rent for the last four months of 2004, according to the notice
from its landlord. That fall, Dr. Notes stopped paying vendors such as Federal Express, a limo service and the Holiday Inn of Highland
Beach, according to lawsuits they subsequently filed.
Some former Dr. Notes employees said they loaned the company money to pay its business expenses. Among them is ex-CFO Michael
Trachtenberg, who loaned the company $120,000 in 2004 and wasn't repaid, according to his pending lawsuit against Dr. Notes and
Garcia.
On Dec. 17, Dr. Notes comptroller Greg Hilliar sent an e-mail to all employees criticizing them for not holding Friday's checks until after 2
p.m. on Monday as instructed and adding: "Dr. Notes will not be handing out checks until monies are readily available for everyone."
Non-compete clauses
Three former Dr. Notes employees, who said they were owed pay, showed letters from the Boca Raton law firm of Blank Rome warning
them about violating a non-compete clause in their employment contracts by working for competitors.
Douglas Curren, who worked in sales for Dr. Notes in 2004, said he left after three weeks without a paycheck and the company owing him
$1,300.
"Management had a meeting of everyone and said if you just want to collect a paycheck and nothing more, you shouldn't be working for Dr.
Notes," he said. Curren is one of five former Dr. Notes sales employees who filed a federal class action labor lawsuit seeking unpaid
overtime and weekly wages. It was settled for an undisclosed amount in August.
The U.S. Department of Labor confirmed its wage and hour division is investigating Dr. Notes.
Most of the employees left Dr. Notes in late 2004, prior to its March eviction. The company now operates in Boca Raton's One Park Place
building with about eight employees. Dr. Notes is charging tech support fees of about $2,400 per physician annually, according to invoices
received by doctors.
Garcia, Dr. Notes and Datamed Worldwide, a company Garcia formed to work with Dr. Notes, currently have about $3.41 million in
judgment liens and more than $1.2 million in federal, state and county tax liens outstanding. Sixteen pending cases are seeking at least
$667,000 in damages.
Both Dr. Notes and Datamed Worldwide didn't file their 2005 annual reports, causing the state to administratively dissolve them on Sept. 16.
State statute says they can apply for reinstatement but meanwhile shouldn't be carrying out business, unless they are winding down,
liquidating assets and notifying creditors, said Jenny Nash, spokeswoman for the Division of Corporations.
Many former employees are dismayed that a promising idea has come to this.
"We had a great team of talented people there, but Garcia made a lot of people very angry," said Suzanne Finnen, a former Dr. Notes sales
employee who left in 2004 after her pay was late. "I can't believe he's still doing business."