Testimony continued in the Schneider Hospital corruption case, producing information gleaned from documents obtained through subpoena by a federal auditor. Jurors hearing the case also witnessed a reenactment of eight-year-old testimony from a witness who was once a defendant.
The audit conducted by the U.S. Interior Department’s Office of the Inspector General was one of two investigations conducted during the tenure of defendant, former chief executive officer Rodney Miller. The other one, conducted by the Virgin Islands’ Office of the Inspector General, led to the indictment of Miller, former Chief Operations Officer and legal counsel Amos Carty and former Chief Financial Officer Peter Najawicz.
That report can be viewed online.
It is customary for the agency cited in an audit to get an opportunity to respond to the auditor’s findings. One witness who appeared towards the end of the third week of testimony explained the points raised in that response. The witness was an attorney who succeeded Carty as the hospital’s legal counsel.
Legal counsel Steve Russell also explained how an added benefit called a Rabbi Trust came under consideration as part of Miller’s compensation.
He also explained why lawyers representing the defendants argue that while Miller, Carty and Najawicz may have received overly generous compensation, and while internal financial controls failed to correct it, that was not the defendant’s fault.
A financial services official who served as custodian of records testified Monday and Tuesday, Oct. 21 and 22. Gail Gonzalez-Herreira told the court about her management of a secure room where documents handed over under subpoena were delivered, sorted and passed along to investigators.
In previous testimony, federal auditor Hannibal Ware told the court how his team’s requests for documents was met by resistance by Miller and Carty. Many of the requested documents were not handed over. The ones that were came by issuing seven subpoenas to the top executives and a court hearing at which they were ordered to do so.
Among the things, the documents revealed, a May 17, 2007, order by Miller to Najawicz to deposit $966,456.45 into the chief executive’s personal account at the Pentagon Federal Credit Union. During cross-examination, defense attorney Robert King checked the breakdown of the payment request.
It included $625,000 under a Rabbi Trust stipulation. Another $625,000 was included in King’s breakdown of Miller’s order to Najawicz to deposit $789,660 into the Pentagon account. That line item was also attributed to the Rabbi Trust.
In the rereading of testimony from former hospital board chairman June Adams from the first trial in 2011, she was asked to explain the Rabbi Trust. She said she did not know exactly what it was – some kind of pension.
Other documents obtained through subpoena showed how Adams instructed executives at Banco Popular to add the names Miller, Carty and Najawicz to hospital personnel authorized to conduct transactions on the main bank account and the accounts for Myrah Keating Smith Clinic on St. John and the Charlotte Kimmelman Cancer Institute.
Miller then began sending correspondence directing payments to himself, to Carty and Najawicz in excess of the salaries authorized for government employees under the Division of Personnel.
The prosecution team asked if there was any documentation submitted with requests for educational stipends or the $10,000 spousal travel benefit bestowed on Miller’s wife, Ronica, or documentation on how much was spent against Najawicz’s $400/mo. automobile allowance.
Herreira said no.
“We Were Desperate”
Superior Court Judge Michael Dunston, Assistant Attorney General Sigrid Tejo-Sprotte and defense attorneys King and Gordon Rhea played roles in the reenactment of June Adams’ testimony from the 2011 trial.
At the time Adams was arrested and charged with perjury in 2008, she was 82. Two days after the start of the first trial, she was declared acquitted. A few days later, the former defendant turned witness against her co-defendants.
A source close to the case said she is now, eight years later, at an advanced age and would not appear at the retrial.
One of the questions Adams was asked was why the hospital board picked Miller, and why did they set starting pay at $150,000.
“We were desperate,” she said. Nine months had passed since the former Schneider Hospital Chief Executive Officer Eugene Woods had left. There were two other candidates to consider.
One had problems and dropped out. The other turned down the job offer when the starting salary offered was $135,000.
Miller was young and he seemed eager to help the hospital board achieve some of the goals they had wanted to reach for several years. From the 2011 trial transcript, Adams said she, as board chair, became convinced that Miller was the man for the job after an introductory visit to Keating Clinic.
The staff there was enthusiastic and excited to see a young black man ready to lead them as chief executive, she said. At the interview where the readjusted salary was offered, the candidate called it a good offer.
In his testimony later in the week, Russell said the medical community believed that $150,000 was too low and a good chief executive could not be expected to stay on the job at that price point.
Once he was on the job, Adams said Miller produced results. Accreditation was achieved. The cancer center – something the board wanted to achieve for 20 years – became a reality.
Along the way the former board chair – like her predecessor Beverly Chongasing said in testimony in the retrial – signed documents awarding compensation without question.
That included raises of the base salary to $265,000 in 2005 and $310,000 in 2007, although Adams acknowledged in her testimony that by that point, Miller was looking for other opportunities elsewhere.
They signed documents at Carty’s direction or when placed before them by Carty’s assistant, Allison Spencer. We didn’t question it, Adams said in 2011, without reading over the documents or questioning the figures.
The Rabbi Trust
Russell offered insights into authorizations and agreements crafted by Carty, his predecessor. He also gave the jury an explanation of a Rabbi Trust, approved by the hospital board for Miller.
On display for the jury, a July 16, 2008, document written to Carty by the law firm, Epstein, Becker and Green.
“What is your understanding, based on your investigations of the Becker firm?” said Rhea on cross-examination.
“The Becker firm was giving the hospital advice on how to set up a Rabbi Trust,” the witness said. “But the end result was the trust was never set up, not by the hospital.”
Yet, in King’s lengthy breakdown of the numbers to Herreira, two payments of $625,000 were made to Miller under the Rabbi Trust.
The current legal counsel for Schneider Regional did not dispute the prosecution’s claim and opening remarks made by Rhea, saying Miller got paid “way too much.”
“We determined there needed to be more accounting controls on payments made to high ranking hospital officials. There were accounting controls in place. Those controls did not work,” he said.
An explanation was also offered about what appeared to be massive overpayments to Miller, payments of educational allowances to Miller, automobile allowances to Najawicz that were not expressed in the contract filed with the Division of Personnel. Russell said that as a semi-autonomous entity, Schneider Regional had the right to do so; it was not the Division of Personnel’s business how the hospital board chose to compensate its top executives.
As a semi-autonomous entity, the hospital had the right to raise its own revenues and spend them, independent of the central government’s personnel system, Russell said.
In the next comment, he addressed a question by the defense about a claim by auditors that raises, stipends, perks and benefits resulted from collusion.
There was no collusion, he said, because nothing about the documents was a secret.
From the witness stand, the legal counsel also explained a document shown to the jury. It was a resolution signed by the board in 2008, retroactively granting Miller the authority to sign contracts with a threshold on the dollar amount. Contracts exceeding the threshold were subject to board approval.
The hospital trial entered its fourth week Monday, with the prosecution still presenting its case.