In early 2001, about halfway through a muscular rally that took

Tenet

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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

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, 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.

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.

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

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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.

"It's a wonder that any health care company stays afloat," the trade publication

House Counsel

wrote in a May/June 2000 issue featuring Sulzbach on the cover. But "somehow, Santa Barbara-based Tenet has thrived."

Despite a powerful endorsement from Institutional Shareholder Services, which accused the incumbent board of showing "brazen indifference" for shareholders, Pearce's dissident team picked up only half of the votes that it needed. More than two years would pass, with Tenet insiders reaping millions on well-timed stock sales, before the stock came crashing down.

Barbakow claimed that he -- and even the executives he quickly fired -- had committed no wrongdoing. But Pearce holds Tenet's senior management anything but blameless.

"Did Ms. Sulzbach, or anyone in management or on the board, ever question how it was possible to legally and ethically do so much profitable business?" he asked. "Grounds may exist for shareholders to demand the return of some or all of Mr. Barbakow's bonus payment and gains from stock option exercise, and they may similarly make demands on other corporate officers and all directors who have sold stock in the last three years."

In 2000 -- the year before Sulzbach cashed in -- Tenet insiders sold around $3 worth of stock for every $1 they spent investing in the company. In 2001, they sold $100 worth of stock for every $1 they spent. And in 2002, when Barbakow executed his big sale, they cashed in $275 for every dollar they invested.

According to Tenet's latest proxy, Sulzbach owns fewer than 13,000 Tenet shares -- a fraction of the number she sold in 2001 -- although she still has the option of purchasing 312,500 more.

Tenet stock has lost 72% of its value since scandal engulfed the company last year.

Still Clocked In

By now, several top executives have been booted from the company. But Pearce continues to call out for Sulzbach and Fetter, who's a veteran of the company, to follow their colleagues out the door.

And Pearce is not alone. As recently as last week, analysts expressed a fresh wave of frustration with Tenet management -- and Sulzbach in particular -- after the company waited two months to disclose yet another government investigation.

"We were a bit startled at this revelation," wrote Prudential analyst David Shove, who has a sell rating and a $10 price target on the stock. "We believe disclosures like this one would erode investor confidence in management, which sets the stage for a much-needed management overhaul."

For now, Sulzbach continues to do quite well. During the company's last fiscal year, she collected salary and bonuses totaling more than $1.37 million. She also picked up 270,000 stock options for a seven-month "transition period" that ended in December. Even if she were to leave the company, she would still be entitled to her salary and target bonus for the next three years. She would also receive health insurance, a car allowance and "other benefits and perquisites," according to the company's proxy.

Pearce -- who has already expressed outrage over Barbakow's generous "golden parachute" -- clearly sees little reason to reward Sulzbach's performance.

"During Ms. Sulzbach's tenure as chief compliance officer, the company has repeatedly paid the government for violations of Medicare billing and is now embroiled in allegations of over-utilization of surgery and other cardiac services," Pearce wrote last year to Tenet's board. "Do you think she has adequately protected patients from abuse or shareholders from unnecessary losses. ... Does this sound like someone who has done an effective job?"