Tenet Changes Counsel as Senate Closes In
Melissa Davis
09/26/03 - 01:33 PM EDT
The heavy workload for
Tenet Healthcare's (THC) top lawyer will soon get a
whole lot lighter.
Lead counsel Christi Sulzbach -- accused of steering the company into
legal and regulatory minefields -- will end her 20-year career at Tenet
in November. News of Sulzbach's resignation came less than 24 hours
after the U.S. Senate, one of several powerful bodies investigating the
company, challenged Tenet's pledge to reform itself.
In a letter issued late Thursday to Tenet's nonexecutive chairman,
Senate Finance Committee leader Charles Grassley (R., Iowa) blasted the company
after it failed to deliver two sets of documents by a deadline that passed
on Wednesday. When Grassley initiated the Tenet probe early this month,
he ordered the company to supply an independent study of heart
procedures conducted at Tenet's hospital in Redding, Calif., as well as
business contracts with new heart doctors at the facility, before moving on to more voluminous requests next month.
"As Tenet's new chairman, I expect that you have confidence in [CEO
Trevor] Fetter's commitment that Tenet will cooperate with the
Committee and that Tenet will comply with future deadlines," Grassley wrote to Edward Kangas. "I am interested to learn, however, whether you share my
concerns about the appearance of conflict and lack of a true change in
corporate culture at Tenet."
Tip of the Iceberg?
Grassley pointed out that a majority of Tenet board members are
still holdovers from the regime of former CEO Jeffrey Barbakow, who
profited handsomely before Tenet's stock collapsed on allegations that the
company's business model relied on gaming Medicare for risky -- and
sometimes unnecessary -- procedures. Citing coverage by
TheStreet.com, he went on to question how Tenet directors with financial ties to the company could be labeled independent. In addition, he outlined Fetter's deep ties to Barbakow and Tenet itself as evidence that the newly crowned CEO is no outsider. Finally, he took aim at a "failed" Tenet compliance program that's being led by a longtime Sulzbach sidekick in the wake of Sulzbach's departure.
Sulzbach recently gave up her other position as chief compliance
officer before announcing Friday that she would be leaving the company
entirely.
"It appears that somewhere along the way, Tenet grasped the
inherent conflict in having Ms. Sulzbach wearing two hats as general counsel and chief compliance officer," Grassley wrote. "However ... skeptics may differ with Tenet's proclamation about naming a new 'independent' chief compliance officer."
Jim Moriarty, a Houston attorney who's fighting his second big war
against the company, celebrated Tenet's decision to remove Sulzbach on
the heels of Grassley's complaints.
"That's the first positive thing I've seen that company do in
years," said Moriarty, who scored a big settlement against Tenet after its
last big scandal and now represents hundreds of clients suing Redding.
"They've got to get rid of her before they can start cleaning up shop."
Tenet shares barely budged, slipping 3 cents to $14.79, on the news.
But Tenet -- and even Sulzbach herself -- acknowledged Friday that the
personnel change was necessary.
"While we have made progress in recovering from our many
challenges, I believe that I have become a focal point for some Tenet critics," Sulzbach said in a prepared release. "Thus, I realize it is in the best interest of the company for me to leave at this time."
The New Look
Although Fetter described Sulzbach as a "consummate professional"
and applauded her efforts at the company, he said Tenet would "benefit
from a fresh perspective on legal matters going forward." The company,
known for promoting insiders, has pledged to seek fresh blood for the
challenging role.
Meanwhile, Tenet used a separate legal shakeup -- ahead of Sulzbach's
exit -- as a reason for missing the recent Senate deadline. The company
recently hired a new set of attorneys to address the Senate probe.
Still, the Senate limited its initial request to just two sets of documents
and has since made clear that it expects future deadlines to be met.
For now, the Senate's primary focus is on Redding Medical Center, a
rural facility that ranked as Tenet's most profitable hospital before
federal agents raided it last year for allegedly performing unnecessary
heart procedures. In an effort to reassure the market, Tenet quickly
stepped forward and hired the prestigious Mercer Consulting Group to
conduct an independent study of Redding's bustling heart business. Nearly a
year later, Tenet has yet to release the results of that study, despite
repeated requests -- most recently from Grassley -- to do so.
Meanwhile, Redding has gone on to hire new heart doctors to
resurrect a busy heart program once considered a model for the rest of the Tenet system. Although Tenet has portrayed the new cardiology team
as top-notch, allegations have surfaced that at least one of the new
physicians agreed to validate past surgeries carried out by Redding's
former stars as part of a multimillion-dollar contract with the hospital.
Just for Kicks
By now, Tenet has been accused of bribing physicians outside of
Redding as well. In a mounting probe of Tenet's payments to physicians,
federal prosecutors this week filed charges against a second administrator
at Tenet's Alvarado Hospital Medical Center in San Diego. The
government has accused Mina Nazaryan, associate administrator at Alvarado, of arranging illegal kickbacks for doctors who referred patients to the
hospital and then taking a cut of the pie for herself. Prosecutors have
portrayed Nazaryan as a hospital administrator who spent years breaking
the law, and then, faced with getting caught, tried hard to cover her
tracks.
Just last week, Nazaryan allegedly made a final, desperate call to
doctors involved in the scheme.
"Please help me, for God's sake, so I don't go to jail," she said,
according to a
Los Angeles Times report based on the federal
complaint. "Do whatever you can in your power [so] that I don't go to
jail."
But Nazaryan has apparently spent a night or two in jail already.
After surrendering to authorities on Tuesday, the
Los Angeles
Times reported, Nazaryan remained at the Metropolitan Correctional Center the following day.
The
San Diego Union-Tribune, which covered Nazaryan's bail
hearing, reported Thursday that the hospital official was still waiting
Thursday for two friends to pledge their homes as collateral for the
$250,000 bond that would permit her release.
Moriarty, for one, described the San Diego prosecutor as a "genius."
He said that only individual prison sentences, rather than fat
corporate fines, will cure companies like Tenet going forward. And he pointed to Nazaryan's desperation as a sign that hospital-level executives will ultimately catapult -- exposing corporate brass -- in an effort to save themselves.
"That assistant U.S. attorney out in San Diego knows exactly what
she's doing," he said. "If you start getting the individuals ... the rats
start leaping from the sinking ship, and then the game is over."
