An Indiana judge’s findings are being used to bolster UC San Diego’s lawsuit against a prominent doctor accused of fraud and misuse of a massive $10 million research donation.
The Indiana court order concluded that former UCSD program vice chairman Kevin Murphy misused his businesses to shield himself from debt, noting the doctor made misleading statements about his controversial brain stimulation clinics in the process.
Why this matters
UC San Diego is one of America’s premier research institutions, relying on public money and resources to fund its research efforts and pay employees.
The ruling, issued in late 2020, marked the culmination of an almost two-year dispute over Murphy’s treatment clinic in South Bend, Indiana. It’s one of at least three lawsuits Murphy has faced over his brain stimulation companies.
Murphy was the subject of an extensive 2020 inewsource investigation, which delved into unsubstantiated claims the doctor made about his treatment program. It told the story of a former Navy SEAL who had a psychotic break after undergoing at least 234 of Murphy’s treatment sessions.
The reporting was also the first public report describing how more than half of a $10 million gift to UCSD was wasted and no studies were performed using the funds.
The Indiana lawsuit was brought in early 2019 by the accounting firm Weidner and Company, which was subleasing office space to Murphy’s brain treatment clinic when the doctor abruptly shut it down and stopped paying rent.
Court records show a staff psychiatrist left the treatment center in October 2018, and Murphy — the sole owner of the clinic — was unable to hire a replacement. Business waned until the doctor dissolved the limited liability company that operated the clinic, called Mindset Medical South Bend.
In court, Murphy argued that he and his other businesses should not be responsible for any of the outstanding payments owed by the defunct LLC.
The court disagreed.
Following a two-day trial, St. Joseph Superior Court Judge Jenny Pitts Mainer ruled there was “more than sufficient evidence” to show Murphy set up his Indiana company specifically to protect himself from liability — and did it without following the rules and procedures expected of Indiana corporations.
The judge cited the South Bend LLC’s “paper-thin existence,” failure to file property tax returns and lack of record-keeping for loans and licenses. In the year it existed, Murphy’s business lost more than $90,000, the court order states.
If Murphy did “all that was required to cloak oneself in immunity for one’s debts, one can imagine legions of disingenuous Hoosiers forming their own LLC doppelgänger,” the judge wrote.
Murphy did not respond to requests for comment at the advice of his attorney, Mark Quigley of Greene Broillet & Wheeler LLP, who is representing him in his countersuit against UCSD. The suit accuses the university of whistleblower retaliation and wrongful termination.
In the Indiana case, Weidner and Company used the judge’s ruling to seek monetary damages from Murphy. The doctor agreed to settle the case out of court and pay at least $94,000 in outstanding rent, plus an undisclosed amount of additional damages.
Attorney James Lewis, who represented Weidner and Company, said Murphy has since paid the full amount of money owed to his client.
“Murphy set up a company and really ran it just like it was his own personal checking account,” said Lewis, a partner at Tuesley Hall Konopa LLP.
“When an owner of a business doesn’t respect the corporate formalities, you can’t be surprised at the end of the day when you have to belly up to the bar and pay the bill.”
Murphy’s research efforts
Murphy’s technology is based on a therapy called transcranial magnetic stimulation, or TMS, which involves sending electromagnetic pulses into the brain. The treatment is proven to help patients with severe depression, anxiety, chronic pain and other disorders.
Starting in 2014, Murphy — an oncologist by training — began to develop his own version of TMS that “personalizes” the treatment. He uses EEGs of patients’ brains to fine-tune the frequency and intensity of the pulses.
Standard TMS is well studied, and the machines that deliver the treatment are approved by the FDA. But Murphy’s version of the treatment, coined PrTMS, has not gone through independent clinical trials.
Despite that, Murphy has repeatedly said that his technology is even more effective than standard TMS and can successfully treat a wide range of mental and physical health problems — as well as a bad golf swing.
In the court order, the Indiana judge stated that Murphy “believes PrTMS is a treatment almost everyone could benefit from, even patients who report no subjective concerns.”
According to the judge, Murphy’s marketing “seems clearly intended to convey that PrTMS has been approved by the FDA for treatment of all the various conditions and complaints patients brought to MindSet South Bend seeking help.”
READ THE 2020 INVESTIGATION
An experimental brain treatment blows up two lives
In response to inewsource’s 2020 investigation, Murphy changed his website to help clarify the lack of scientific evidence behind his treatments. It now states that PrTMS “has not been evaluated by the FDA.”
At least one complaint has been filed against Murphy with the California Medical Board. Former Navy SEAL John Surmont alleged in 2019 that Murphy engaged in unethical practices and abandoned him after he had a psychotic break while undergoing treatment sessions, which inewsource detailed in its 2020 investigation.
In April 2020, the board ruled against Surmont, highlighting the very high burden of proof that must be met to take administrative action against a doctor.
Murphy continues to practice medicine at his San Diego PrTMS clinic, and his brain stimulation technology is currently being used in 11 states, according to his website. In June, the doctor presented company data at an annual TMS conference showing that PrTMS treatments substantially improved combat veterans’ post-traumatic stress.
“These data justify a full prospective study in veterans,” Murphy’s conference poster states.
As inewsource previously reported, Murphy made many unsuccessful attempts to conduct clinical research at UC San Diego, the San Diego VA and other facilities. Two years ago, Murphy was supposed to partner on a study with U.S. Special Operations Command, but it was put on hold because of the pandemic.
In August 2020, an operations command spokesperson said staff members were aware of the inewsource’s reporting and “will take into account any facts that come to light to determine their impact on future studies.”
In January, another spokesperson added that “any additional relevant information will be considered as part of the review” of the research plan when the project resumes.
If the research comes to fruition, Murphy won’t perform treatments on military personnel himself. Instead, he will train officers at the Air Force Research Laboratory and Walter Reed National Military Medical Center to use his technology, and the officers will measure the effects of PrTMS on “human performance.”
Reassurances for rent
The Indiana court order described how Murphy misrepresented aspects of his brain treatment businesses to help him secure rental space from Weidner and Company.
Murphy had told the firm’s president, Daniel Weidner, that he had an exclusive contract with the University of Notre Dame and that the school was a major client of his, according to the court filing.
While the doctor had provided the university with PrTMS equipment, he did not treat student athletes, perform any research or receive payments from the school during that time, the judge concluded.
Weidner was also under the impression that Murphy would have an influx of insurance reimbursements from his treatments that would help him pay his bills, the judge wrote. But because his technology is not widely accepted in the medical community, Murphy’s patients are almost always expected to pay in cash — and many did not pay what they owed.
Weidner was further reassured the rent would be paid when he met Murphy’s wife.
Lisa Murphy serves as UCSD Health’s chief administrative officer for cardiovascular services and is a Certified Public Accountant. According to the court order, Lisa Murphy told Weidner she “took care of Dr. Murphy’s business and its financial affairs.”
Weidner had a relative who worked with Lisa Murphy’s relative at an Indiana accounting firm, the judge wrote, providing “an additional level of comfort that Dr. Murphy had income available to pay the rent.”
inewsource previously reported that Lisa Murphy sent estimated revenues and expenses to investors interested in taking over two of Murphy’s personalized TMS clinics in Indiana.
Lisa Murphy told inewsource in January 2020 that she did not work for her husband’s businesses and had only informally advised him from time to time “as many spouses do.”
Quigley said he is representing Lisa Murphy, in addition to her husband, and advised her not to comment for this article.
UC San Diego lawsuits continue
After the Indiana court ruled against Murphy, UCSD entered the findings as evidence in their case against the doctor.
“This is, not coincidentally, the exact type of misconduct alleged by” the university, a court filing states.
The lawsuit, filed by the Regents of the University of California, alleges Murphy held onto income that belongs to UCSD, misused a $10 million research gift to enrich himself and treated patients outside the university without permission.
The UC system brought the suit after finishing an internal investigation with the help of the law firm Boies Schiller Flexner LLP. Once the findings were completed, UCSD chose not to extend Murphy’s employment contract, ending his 15 years of work for the university.
Quigley, Murphy’s attorney, said the doctor was wrongfully terminated and the investigation against him was unfair.
“I think the University of California has a lot of explaining to do in how it was that the findings and conclusions that they released to the media were supposed to be the end result of a fair, objective, independent and unbiased investigation,” said Quigley, who specializes in wrongful termination and whistleblower lawsuits.
“We’re digging deeper into the attorney-client relationship, lack of objectivity, fairness and independence of this Boise Schiller investigation,” he added.
UCSD declined to comment because of the ongoing litigation.
In a sworn declaration, Murphy told the court that he had permission from “key members of UCSD leadership” to start his businesses. He added that the university is now trying to compete against him by offering a new TMS treatment program out of his old office.
Four high-level UCSD employees have filed their own declarations contradicting Murphy’s claims, including associate vice chancellor Andrew Ries and psychiatry department chair Zafiris Daskalakis.
Murphy’s former boss, Arno Mundt, wrote in his declaration that he was not aware Murphy was running a private brain stimulation clinic for profit.
“I certainly never approved that,” wrote Mundt, the senior deputy director of the Moores Cancer Center.
The university system has ordered three Texas corporations that have worked with Murphy to turn over contracts, payments, equipment sales and emails. It has asked for a plethora of financial documents from Murphy and his companies, which his lawyers have contested.
At one point, the UC office wrote a blistering plea to the court, asking a judge to fine Murphy and his attorneys for their failure to provide income statements and bank accounts. At a July hearing, a judge ruled the doctor would have to disclose some financial records, but others were not relevant enough to the case.
A status conference in the lawsuit is scheduled for late February, and a jury trial has been set for January 2023.
Type of Content
News: Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.