Hospital CEO, board had vendor conflicts of interest

The chief executive and board members of Salinas (Calif.) Valley Memorial Healthcare had financial conflicts of interest with vendor firms with which it did $21 million worth of business during the past five years, according to a state audit released Thursday.

In 11 instances between 2006 and 2010, board members had economic ties to vendors related to salaries, stocks and other payments, the Los Angeles Times reported. And in two of those cases, the state found that hospital officials may have violated conflict-of-interest laws.

Both cases have been turned over to Monterey County district attorney's office for investigation, one related to former CEO Samuel Downing, who had $50,000 in investments with 1st Capital Bank, where the hospital agreed to a $1 million deposit, and the other regarding board member Harry Wardwell who is regional president of Rabobank, where the hospital made $5.6 million in disbursements, the LA Times noted.

Shortly after the audit details were released, employee unions sharply criticized the hospital's business practices. The National Union of Healthcare Workers and the California Nurses Association Thursday called for board members to step down, The Monterey County Herald reported.

"This board has shown it no longer deserves the confidence of the public," California Nurses Association copresident DeAnn McEwen said.

"This sheds light on some of the most egregious fiscal practices I've ever seen, and which were certainly the norm at the hospital for many years," said Assemblyman Luis Alejo (D-Watsonville), who initiated the audit, in the LA Times.

Salinas defended the actions and questioned the state report.

"The audit report irresponsibly alleges serious violations of conflict of interest rules without conducting a thorough consideration of the laws and how they might apply," the board members wrote in response.

The state audit came about after reports of the generous compensation of Salinas executive Downing with $3.67 million in 2009 total compensation.  

For more information:
- read the Los Angeles Times article
- read the Monterey County Herald article
- here's the audit report (.pdf)

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