Another Cautionary Tale about Conflicts of Interest: the CEO's Stretch Limousine, Golden Parachute, and Slush Fund

It remains fashionable in academic medicine to tolerate, if not celebrate conflicts of interest as necessary to support the "collaboration" needed for "innovation," while minimizing their risks (e.g., look here). 

Recently, another cautionary tale about how conflicts of interest signal the risk of all sorts of unpleasantness has appeared in the media.

A Sentinel Event: the First Conflicts Uncovered

In 2009, we wrote about some conflicts of interest at Wyckoff Heights Medical Center in my hometown of Brooklyn, NY.  The New York Daily News had reported that Dr. Addagada Rao, the hospital's chief of surgery was simultaneously the president and part-owner of a Caribbean medical school that funneled medical students to clerkships at Wyckoff.  The hospital's CEO, Rajiv Garg, was an investor in the same school.  At the time, I wrote,

This story illustrates another twist on conflicts of interest affecting the leaders of not-for-profit health care organizations. Many of the smaller not-for-profit hospitals, of which there are thousands in the US, may have minimal conflict of interest policies, which may be minimally enforced, without much transparency or accountability. The coziness of the leadership culture of such smaller institutions may preclude anyone within the culture from asking tough questions. The results may be total confusion as to whose interests particular leaders are serving. In particular, the interests of each hospital's patients may get lost in the shuffle. In this case, the interests of medical students may also get lost in the shuffle. Although the institutions involved may be small, and hence the conflicts may seem small in terms of their monetary value, they aggregate to contribute to the moral miasma that now is the atmosphere of health care.

You heard it here first.

The CEO's Golden Parachute

Fast forward to 2012. In January, the Daily News again reported that CEO Garg had been ousted, but that

Trustees at Wyckoff Heights Medical Center asked to consider a whopping $875,000 severance payout for its former CEO are balking at the package....

It seems that Garg's attorney claimed

They were on the verge of bankruptcy when he arrived. He reduced the debt by tens of millions of dollars.

However,

the hospital’s financial situation remains grim. According to the work group’s final report, Wyckoff’s liabilities are $91 million greater than its assets and it is saddled with $114 million in long-term debt.

So here is yet another example of a CEO personally profiting while his or her organization's finances fester.

The Chauffeured Cars, the Stretch Limousine

The the Daily News began chipping away at the other ways CEO Garg benefited from his leadership of the fiscally troubled hospital. A notable symbol of these benefits was a stretch limousine:

The ousted CEO of a debt-riddled Brooklyn hospital had his security guards ferry friends to the U.S. Open and his wife around town in a stretch limo, the Daily News has learned.

Rajiv Garg, the disgraced honcho of Wyckoff Heights Medical Center, also enjoyed his own commutes in the hospital-issued ride — a sleek, black $33,000 Lincoln Royale.

Garg rolled in style,

The beleaguered hospital bought the fancy car — equipped with a mini-bar, four champagne flutes and a fridge for chilling Dom Pérignon — last summer for Garg It also owned two other cars for his use, sources said.

Several times a week, the limo was dispatched to take Garg’s wife from her job near the hospital to the couple’s midtown apartment, said an employee.

Sometimes, it picked her up and then swung by the hospital to get Garg and whisk them to dinner before dropping them home, sources said. Two or three times a month, the limo picked her up at home and took her shopping.

'I haven’t had a raise in seven years,' said the employee. 'They always tell us they don’t have any money. They spent it on cars.'

The limo has comfy leather seats with room to spare for six passengers and a stereo system capable of drowning out highway noise when Garg and his wife were driven in it to Washington.

More Conflicts of Interest Discovered

Then the Daily News started to reveal conflicts of interest beyond the ones we discussed in 2009:

Then-trustee Frank Chiarello was in a partnership that loaned money to hospital entities, according to a list of board members’ conflicts the Daily News eyeballed. The $2.5 million loan had an 18% interest rate, sources said, costing the hospital hundreds of thousands of dollars.

Chiarello, a real estate exec, resigned from the board last week.

Another trustee who quit the board last week, attorney John Rucigay, serves as a lawyer for other trustees, owns real estate with other trustees, and rents space to the Polish and Slavic Federal Credit Union — whose head of operations is yet another Wyckoff trustee, Agnieszka Poslednik.

Additional trustees on the conflicts list first reported by Crain’s New York Business, include Andrew Boiselle, whose Cebco Check Cashing Corp. does check-cashing business with hospital employees, and attorney Fred Haller, who provides legal services to Wyckoff employees about issues not related to the hospital.

Slush Funds and Bribes

Last week, the Daily News reported about findings by a judge that the CEO kept slush funds used to pay bribes:

Wyckoff Heights Medical Center kept a secret bank account that a former CEO used to bribe a disgraced state assemblyman, an upstate judge said in a court decision.

Orange County Supreme Court Judge Elaine Slobod’s decisionk brought to light new details about the Bushwick hospital’s alleged dealings with Tony Seminerio (D-Far Rockaway), who died in a North Carolina prison last year.

The bank account used for the Stockholm St. hospital’s payoffs to the corrupt pol belonged to 397 Himrod Corporation.

Former Wyckoff board chairman Emil Rucigay originally set up the company to buy real estate for the hospital to turn into a parking lot, the judge’s order said.

The bank account was kept active — though the corporation was dissolved in 2001. The bank account still had approximately $130,000 in it in 2008.

“[Wyckoff’s] CEO was using monies in the Himrod account to bribe Seminerio,” Slobad wrote in her decision last week, referring to Dominick Gio, who was the hospital’s head honcho at the time.

Gio refused to talk a reporter last week. Wcykoff’s interim CEO Ramon Rodriguez also declined to comment.

Money from the Himrod account was used to make payments totaling $15,000 to Seminerio, other court filings charge.

A Lexus, a Bentley, Oh My

Then the story really hit the big time when the New York Times picked it up yesterday. That report added some colorful details about how magnificently the CEO traveled:

In August 2009, Mr. Garg said, he fell asleep at the wheel and crashed his Lexus into a truck. He then lost his license. Asked why in the interview, he said he was not certain, though he offered several explanations, including unpaid tickets and previous accidents.

He then used the hospital’s cars — a Lincoln Town Car and a Cadillac Escalade — for himself and his family around the clock. They were driven by two security guards on overtime, a hospital official said.

He parked his other car, the $160,000 Bentley, at Wyckoff and had the hospital put the vehicle on its own insurance policy.

The limo only came later,

Mr. Garg said in the interview that he suspected that the drivers of the Town Car and the Escalade were eavesdropping on his conversations. So he had the hospital purchase a used stretch limousine for about $33,000.

Yet More Conflicts of Interest Discovered

The Times story also found more conflicts of interest. Some involved CEO Garg:

Mr. Garg introduced hospital officials to Skyscape, a provider of mobile medical references, in which he had a financial interest. Wyckoff signed a contract with the company worth at least $38,700, hospital records show, though the deal eventually fell through.

Others involved hospital trustees. This example might have affected patient care at the hospital:

Dr. Theophine Abakporo arrived at Wyckoff in 1996 from Harlem Hospital to work in emergency medicine. Originally from Nigeria, he said he found his way to the top blocked by what he believed was a clique of doctors at Wyckoff.

In 2009, according to data provided by MapLight.org, Dr. Abakporo, an American citizen, began donating money to the campaign of Representative Edolphus Towns, the Democrat who represents a nearby area. Mr. Towns, a longtime board member of Wyckoff, had by then been replaced by his chief of staff, Albert Wiltshire, on the board.

Dr. Abakporo gave $1,000 to the Towns campaign, then $750, according to election records.

With Mr. Wiltshire’s support, Dr. Abakporo became chairman of emergency medical services.

This example might also have affected patient care:

With his solicitous manner and tailored sport jackets, Gary Goffner, a pharmacist who serves on Wyckoff’s board, has long endeared himself to customers and doctors alike.

He inherited his pharmacy, Kraupner, from his father, a prominent Bushwick landlord as well as a pharmacist, who died recently. It is an old-fashioned store, crammed with supplies, the opposite of an orderly Rite Aid.

It is also a half-mile walk from Wyckoff, a disadvantage Mr. Goffner overcame through a contract that gave him exclusive access to Wyckoff patients as they were being discharged, and allowed him to keep an employee at the hospital to promote his business.

In summary, the Times found,

According to internal hospital documents, 13 of the hospital’s 22 board members declared at least one conflict of interest.

Summary

So, from a single story about conflicts of interest affecting the CEO and a medical leader at the hospital, we have gone to stories about widespread conflicts of interest affecting the hospital's board and leadership, about lavish payments and benefits to the CEO while the hospital's finances suffered, and allegations (by a judge) of bribes and slush funds. 

Recall that the Institute of Medicine's report on conflicts of interest in medicine and health care defined conflicts of interest as “circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest.” While no particular conflict of interest is guaranteed to cause someone to abuse entrusted power, conflicts of interest create the risk of such abuse. The case of the leadership and governance of Wyckoff Heights Medical Center shows how such risks may manifest.

Yet we have noted again and again how leaders of supposedly mission-oriented non-profit medical organizations seem to be ignoring these risks while pursuing ever more money from health care corporations. We noted how the Chancellor of the University of California-San Francisco "has no qualms" about faculty's financial relationships with industry. Just this week at Brown University, my alma mater, while discussing a new conflicts of interest policy, we heard,

'People do have conflicts of interest, and it’s not the end of the world,' said Janet Blume, associate dean of the faculty.

Conflicts of interest may not lead to the apocalypse. However, they certainly may lead to all sorts of unpleasantness. As Joe Collier stated, “people who have conflicts of interest often find giving clear advice (or opinions) particularly difficult." Conflicts of interest clearly lead to conflicted, and confused thinking, and such thinking may lead to bad decisions, and hence bad outcomes for patients' and the public's health. Worse, as the IOM asserted, conflicts of interest are a risk factor for outright corruption.

True health care reform might start with a reasoned discussion, based as much as possible on evidence, about the risks as well as the supposed benefits of conflicts of interest affecting those who make decisions about individual patients' health care, and about public health and health care policy.