Top Lawyer Bailed Before Tenet Tanked

In early 2001, about halfway through a muscular rally that took Tenet (THC Quote) stock to $50, a top corporate executive -- charged with keeping Tenet in line -- began cutting her stake in the company.

Lead counsel Christi Sulzbach, who then doubled as Tenet's chief compliance officer, raked in $7.25 million through option transactions at a time when the company's prospects had never looked better. HCA (HCA Quote), Tenet's larger peer, was embroiled in a massive fraud investigation and had long replaced Tenet as the black sheep of the industry. Meanwhile, Tenet -- slammed years earlier with fraud charges of its own -- had managed to reinvent itself as the ethical hospital chain that could behave itself and still dazzle Wall Street.

The company's profits, quietly boosted by aggressive Medicare billing, kept setting records. And the stock kept rocketing, allowing former CEO Jeffrey Barbakow to collect $111 million in a notorious insider sale just nine months after Sulzbach cashed in.

Barbakow's stock transaction made him America's best-paid corporate executive in 2002. But Sulzbach had some bragging rights, too. Her own stock sales ranked among the largest carried out by in-house attorneys in 2001. And it made her one of the best-paid corporate lawyers in America that year.

Her duties? As lead counsel, she was supposed to defend the company if it found itself in trouble. But as chief compliance officer -- and the captain of Tenet's promised journey to the straight-and-narrow -- she was supposed to make sure the company didn't wind up in hot water in the first place.

Instead, Tenet now appears to be in the direct path of a legal volcano. Burning questions, which simmered just below the surface for years, have exploded into a slew of government allegations and patient lawsuits. Earlier this month, Tenet agreed to pay a $54 million fine to limit its exposure in an investigation of a single Tenet facility. The surprising settlement came less than a year after federal authorities first accused Tenet's cardiac center in Redding, Calif., of engaging in a number of unnecessary heart procedures.