Top Lawyer Bailed Before Tenet Tanked

Meanwhile, Redding -- like Tenet itself -- remains under investigation for potentially overbilling Medicare for high-ticket procedures. The company also faces a formal securities probe for failing to disclose its heavy dependence on these Medicare "outlier" payments, which have all but evaporated, for much of its past earnings growth.

At the same time, Tenet has come under intense scrutiny for rewarding doctors with valuable contracts that may violate anti-kickback laws. Moreover, the company is suspected of reneging on a "corporate integrity agreement" -- fashioned with help from Sulzbach herself -- pledging to refrain from the very behavior that nearly leveled the company a decade ago.

Tenet, which has previously insisted that it engaged in no illegal wrongdoing, declined to comment for this article. But Peter Young, a business consultant at HealthCare Strategic Issues, shook his head at the situation.

"This casts a very long, dark shadow over Ms. Sulzbach," said Young, who counts hospitals among his diverse base of clients. "All of these events happened on her watch."

On Wednesday, Tenet fell 15 cents to close at $14.56.

The Sequel

Pete Stark, a Democratic congressman in Tenet's home state of California, suspects that Tenet is "up to its old tricks." And in many ways, the current scandal does seem hauntingly familiar.

Nine years before raiding Redding, the FBI swarmed Tenet's psychiatric hospitals in search of evidence that they had been locking up juveniles for unnecessary treatment and then billing the government for the services. As with Redding, Tenet allegedly ignored -- or even punished -- physicians who complained about the strategy and instead rewarded those who participated in the scheme.

But bad publicity took its toll. Like Tenet's recent outlier profits, the company's psychiatric income slowed to a trickle, spiraling from $234 million to $3 million in just two years. Senior management, including the founding CEO, hit the door. Barbakow, then an outside director, took over and began replacing board members. The company hired a former top gun from the inspector general's office -- as it has now done once again -- to revamp its compliance program. And Sulzbach, tapped to handle addresses to the public, declared Tenet a changed company.