Hospital Trial Week 4: Witnesses Give Details of Audit Report, Rabbi Trust

Schneider Regional Medical Center on St. Thomas (File photo)

Prosecutors with the V.I. Department of Justice continued presenting their case against three former St. Thomas hospital officials by pressing the details of an audit report of executive spending. The trial of defendants Rodney Miller, Peter Najawicz and Amos Carty concluded its fourth week on Friday.

One juror was dropped from the jury pool by Superior Court Judge Michael Dunston. Illness was cited as the cause in discussions taking place in the courtroom while the jury was out. Uncertainty as to when the panelist would return posed the prospect of delaying the proceedings, Dunston said.

An alternate juror, picked during October’s jury selection, was moved into place. When the Schneider Regional Medical Center re-trial began Oct. 9, there were more than two dozen names on the witness list. But by the end of Week 4 a little over a dozen witnesses had testified.

Some testimony lasted for more than a day. Continued questioning of attorney Steve Russell kicked off the week’s proceedings.

At the time Miller served as chief executive officer of the Roy L. Schneider Hospital and after his successor, Amos Carty, served as legal counsel/chief operating officer, Russell’s law firm stepped in as an outside counsel for the hospital. He told the court about his role in helping prepare the hospital’s response to a joint audit report prepared by the U.S. Department of the Interior and V.I. Office of the Inspector General.

Russell also recounted how the response to a report detailing lavish compensations doled out to Miller, Najawicz and Carty led the then-attorney General Vincent Frazer to direct the hospital to fire the outside counsel.

During last week’s testimony Russell was asked by prosecutors to tell how a special retirement package called the Rabbi Trust was proposed for Miller. By mid-week, the government official who advised the former hospital chief on the benefit option took the witness stand himself.

Former Public Finance Authority Chairman Julito Francis said he provided details to Miller about how to set up a Rabbi Trust, how it worked and what he would have to do to contribute to the fund. It was the first time since the topic was raised in Week 3 that the jury heard it was Miller who was supposed to fund the trust with his own money.

But for the second or third time in the trial the jury heard a witness say the Rabbi Trust — which Miller ordered Najawicz to pay $1.5 million into a Pentagon Federal Credit Union Account belonging to him — was never approved by the hospital board.

Specifically, Russell said the board took no action up through the time Miller resigned from the institution then known as Schneider Regional Medical Center in 2007.

Several documents memorializing this were displayed in the courtroom. One, addressed to Carty by the law firm Epstein, Becker and Green, asked for follow up responses raised to questions posed by auditors from Interior on the subject of the Rabbi Trust. Part of the response, coming from the outside counsel, said the trust, “never had been fully implemented.”

From there, witness responses to questions posed by Assistant Attorney General Quincy McRae became vague. On one hand, Russell affirmed an assertion by the prosecutor that approval of the benefit was never discussed in a hospital board meeting.

On the other hand, the witness said the Rabbi Trust was part of what was known as a 457 agreement, and the members of the board knew the 457 agreement was in place.

By mid week, jurors also heard from former Management and Budget Director Debra Gottlieb.

Gottlieb, along with former Finance Commissioner Angel Dawson, served on the hospital board.

The following day saw testimony by V.I. Inspector General Steven van Beverhoudt. Van Beverhoudt began his testimony by responding to statements found in the hospital’s response to the findings of the joint audit.

In the response, lawyers representing Schneider Regional said auditors did not understand the nature of semi-autonomous institutions like theirs. They also said it was none of the auditors or the Legislature’s business how the hospital raised or spent revenues apart from those supplied by the central government. That included compensation to top hospital executives in excess of salaries listed in their notice of personnel action documents.

The inspector general gave a clear response. “We have the authority to audit the three branches of government, as well as the instrumentalities. We have full authority to audit all agencies of the government,” van Beverhoudt said.

After describing a series of hurdles that had to be overcome in order to complete a two -year investigation and produce an audit report, the witness summarized the findings. He said excessive compensation of top hospital executives, “came at a time when there were significant shortages of funding at the hospital.”

Auditors also blamed the hospital board for failing to perform administrative oversight. “In light of the medical center’s operating losses, the amounts paid to the chief executive officer was excessive and fiscally irresponsible. Between 2002 and 2007, the CEO was paid $3.8 million under three employment contracts laden with lucrative and questionable perquisites,” the report said.

In another finding, auditors cited overcompensation of Carty, as chief operating officer, and Najawicz, as chief financial officer, receiving additional compensation of $166,000 and $140,000 respectively

Under questioning by Assistant Attorney General Sigrid Tejo-Sprotte, van Beverhoudt said he did not have general knowledge about a Rabbi Trust. But based on information found in the auditor’s worksheets, Miller received payments from the hospital under the guise of funding a Rabbi Trust. However, he said, there was no evidence that the hospital board established or approved the trust for their chief executive.