Top Lawyer Bailed Before Tenet Tanked

Certainly it looked different. Forced to shed its psychiatric hospitals as part of a $379 million deal with the government, Tenet quickly snatched up an acute-care chain that had a much better reputation than its own. It also began weighing a number of new names -- including one described by Modern Healthcare as the Spanish word for "gravedigger" -- before finally settling on Tenet in 1995.

By the following year, Tenet was growing profits again. But company insiders, including its former president, began registering paperwork to sell massive amounts of their stock. Not until 1999, the year federal authorities finally loosened their oversight of Tenet, did insiders start placing serious bets on the company again.

Winning Ticket

That summer, just two months after Tenet's corporate integrity agreement expired, Barbakow dug into his own pockets for money to buy 1.1 million Tenet shares. Trevor Fetter, who has since replaced Barbakow as interim CEO, purchased 31,300 shares. And Sulzbach herself, promoted early that year to general counsel, picked up 1,000 shares.

By the following year, former CFO David Dennis -- fired last year for his role in the outlier billing scheme -- had jumped on the bandwagon as well. He purchased 27,000 shares just months after the company prevailed in a nasty proxy battle led by a Florida physician whose warnings have since come true.

"During the middle of the proxy contest, results from the [outlier] scheme, implemented in FY 1999 according to management, miraculously appeared," said M. Lee Pearce, chairman of the Tenet Shareholder Committee. "Even though virtually everyone that we talked to agreed with us in principle, few would vote against Tenet's management or nonmanagement board members with a rapidly rising stock price."

The proxy fight came at a time when Tenet -- like Sulzbach herself -- was basking in spectacular success.

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