CLEVELAND, Texas – The owner of Texas Rural Hospitals LLC, the hospital system for which a hospital which abruptly closed in Cleveland was affiliated with, has been arrested following a federal indictment in Washington State.
Daryle Jawon Rutherford was indicted on five counts of wire fraud as well as two counts of aggravated identity theft. He was arrested on May 14.
Rutherford is listed as the owner of Texas Rural Hospitals LLC, the system which owned Texas Emergency Hospital in Cleveland.
The federal indictment accuses Rutherford of lying to obtain millions of dollars in real estate financing for his business, Graykey Equity Properties LLC, which owned and operated adult family homes throughout the country.
Rutherford and his agents allegedly told sellers that Graykey would convert the properties he purchased into AFH’s or other businesses to sell for a significant profit.
However, the indictment alleges Rutherford and his agents misrepresented the nature of his businesses, provided false financial information (including doctored bank statements), used straw purchasers and made other false statements and promises material to the victims’ decisions to loan money to his companies.
Instead of using the funds for the stated purposes, the indictment alleges Rutherford used portions of the loan proceeds to pay management fees to his own companies and to fund unrelated projects. Rutherford then defaulted on the loans, leaving the sellers with millions of dollars in losses.
The indictment alleges through the scheme, Rutherford obtained more than $40 million in loans for properties in Arizona, Washington and California. Approximately $13 million of these loans were for properties located in Washington State. Rutherford’s subsequent defaults of the loans caused losses to Washington seller victims that totaled more than $6 million.
KPRC 2 first reported on the closure of Texas Emergency Hospital in Cleveland back on May 13, when several distraught employees reached out and notified us about the closure. The employees were also concerned because they had not received their final paychecks.
Some employees said they received layoff notices from Texas Emergency Hospitals back in February. Their letters said the closure was due to changes in reimbursement from payers and the unexpected decrease in the hospitals Medicaid interim rate.
The hospital was formally owned by Emergency Hospital systems who sent the following statements:
“Texas Emergency Hospital in Cleveland is no longer part of the Emergency Hospital Systems (EHS) network as of April 4, 2025. Emergency Hospital System’s lease agreement of Texas Rural Hospital was severed in March of 2025. The owner of the facility entered into an agreement with HealCrest Network LLC to continue operations at the 300 E. Crockett St facility in Cleveland, Texas. Emergency Hospital Systems has no affiliation with the ownership of HealCrest Network LLC. We are unaware of the actions taken by the company in regards to any operational decisions that have occurred at Texas Rural Hospital.”
The hospital also noted that with ever increasing costs associated with the hospital’s operations, a situation occurred that required the closure of its Cleveland campus.
At the time, Rutherford sent KPRC 2 a statement, saying the closure was only temporary. The statement is below:
We deeply regret to confirm that Texas Rural Hospital in Cleveland did temporarily suspend operations on May 12th. This difficult decision was made solely as a precautionary measure due to funding shortfalls that affected our ability to maintain appropriate care standards for our community. Patient and staff safety is our absolute priority, which necessitated this temporary closure.
Regarding employee compensation, we sincerely apologize for the delayed payroll. This is the first time we’ve been unable to meet our payment schedule, which is completely unacceptable to us. We understand the significant hardship and stress this places on our dedicated team members and their families. All employees are scheduled to receive their payments this week, and we are committed to making appropriate amends for any financial difficulties this delay has caused.
The timing of these challenges coincides with our ongoing ownership transition. We stepped in to temporarily operate the facility to prevent a permanent closure while finalizing the transaction. Unfortunately, unexpected delays in closing the acquisition created a funding gap that ultimately led to our difficult decision to temporarily suspend operations. We are working diligently to complete the necessary capitalization and anticipate reopening within one week.
We understand this situation has created uncertainty and hardship for our employees, patients, and the community. Please know we are doing everything possible to resolve these issues quickly and transparently. We remain deeply committed to providing healthcare services to Cleveland and will share updates as soon as they become available."
Two months later, employees tell KPRC 2 they still have not received their final paychecks. Another former employee says despite Rutherford’s statement that the closure was only temporary, the hospital remains closed. Cindy Palmer has been a nurse at the hospital for three years. She said the roughly 45 employees are still owed a month’s worth of pay.
“You have no idea how much you have devastated and impacted a lot of lives, not just mine. I mean, we weren’t just coworkers, that was a family there. We worked for that money and a lot of people have a lot of opinions about the hospital, but we did some great things there and there were a lot of lives saved there, a lot of people in Cleveland depended on us,” said Palmer.
While nothing in the indictment mentions Texas Rural Hospitals LLC, former employees say they are concerned about whether they will ever see any of the money they worked for given Rutherford’s arrest.
KPRC 2 has reached out to Rutherford but has not heard back.