The owner of Texas Rural Hospitals LLC, the hospital system that included a Cleveland hospital that abruptly closed, has been arrested in response to a federal indictment in Washington state.
Daryle Jawon Rutherford faces five counts of wire fraud and two counts of aggravated identity theft. On May 14, authorities detained him.
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Rutherford is recognized as the proprietor of Texas Rural Hospitals LLC, the system that operated Texas Emergency Hospital in Cleveland.
The federal indictment charges Rutherford with lying to acquire millions of dollars in real estate financing for his company, Graykey Equity Properties LLC, which owned and operated adult family homes across the country.
Rutherford and his agents allegedly promised purchasers that Graykey would turn the houses he bought into AFHs or other enterprises that he could sell for a large profit.
However, the indictment alleges that 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 that influenced the victims’ decisions to lend money to his companies.
Instead of using the cash for the specified reasons, the indictment claims Rutherford utilized some of the loan profits to pay management fees for his own firms and to fund unrelated initiatives. Rutherford then defaulted on the loans, which caused the sellers to incur millions of dollars in losses.
According to the indictment, Rutherford used the scam to get more than $40 million in loans for properties in Arizona, Washington, and California. Approximately $13 million of these loans were for homes in Washington state. Rutherford’s subsequent loan defaults resulted in more than $6 million in losses for Washington seller victims.
KPRC 2 initially reported on the shutdown of Texas Emergency Hospital in Cleveland on May 13, after numerous upset employees contacted us. Employees were also upset since they had not gotten their final salary.
Some employees reported receiving layoff notifications from Texas Emergency Hospitals in February. Their letters stated that the closure was due to payer reimbursement changes and an unexpected fall in the hospital’s Medicaid interim rate.
The hospital was technically owned by Emergency Hospital Systems, which issued 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 stated that due to the hospital’s ever-increasing operating expenditures, a situation arose that compelled the closure of its Cleveland campus.
Rutherford told KPRC 2 that the closure was merely temporary. The statement is as follows
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.”
