NUHW Calls for SVMH Board Members Gattis and Wardwell to Resign in Light of Audit Report

NewsMarch 8, 2012

Union reiterates auditor’s call for criminal investigations by County District Attorney

Salinas, California – The National Union of Healthcare Workers (NUHW), representing 750 caregivers at Salinas Valley Memorial Hospital (SVMH), applauds the California State Auditor’s report, released this morning, that describes the pervasive lack of transparency and numerous conflicts of interest that characterize the hospital’s governing Board of Directors, and furthermore calls for Jim Gattis and Harry Wardwell to step down from the Board in light of the report’s findings.

The report states that the audit unearthed “11 instances in which the Health Care System had business relationships between 2006 and 2010 with entities in which its executives or board members had economic interests,” most notably former CEO Sam Downing’s $50,000 investment in a bank with which the Board voted to deposit $1 million, and Board Member Harry Wardwell’s role in overseeing the hospital’s finances while also serving as Regional President of a bank that holds over $15 million in SVMH deposits. 

Last April, NUHW members at SVMH picketed the Salinas branch office of Rabobank to protest Wardwell’s clear conflict of interest.  The hospital claimed then that “there was no conflict of interest.”

NUHW concurs with the auditor’s conclusion that, contrary to the hospital’s claims, “the board may have violated conflict-of-interest laws” in the case of Wardwell’s financial relationship with the bank, and that “the board itself may have violated Section 1090 because one of its members arguably is financially interested in the contract, in that he receives a salary from the bank, and because the bank likely received a financial benefit as a result of its contract with the Health Care System.”

The auditor further notes that “willful violations of Section 1090 are criminal acts punishable by a fine or imprisonment, and the public officials committing these violations are forever disqualified from holding any office in the State,” and that “(b)ecause of our concerns regarding possible violations, we referred this matter, as well as the one involving the former CEO, to the Monterey County District Attorney.”

The auditor’s report describes numerous other instances of financial mismanagement and possible corruption, including the hospital’s donating $54,000 to the California Rodeo for a sponsorship that included perks such as tickets to box seating without considering how the donation furthered any public purpose.

Another major beneficiary of hospital donations is the California International Airshow, which was founded by Jim Gattis and for which Harry Wardwell serves as Executive Director.

According to the auditor’s report, the hospital distributed to employees tickets to the rodeo and to the California Airshow that it had received in exchange for sponsorships without tracking who it distributed them to. The auditor notes that:

“When public officials receive tickets to events such as the airshow and the rodeo from their agencies, the tickets could be considered either income or gifts. State regulations require the agencies to publicly disclose who received the tickets. If the tickets are considered gifts, they may also be economic interests that could prohibit the officials receiving them from making decisions involving the entities that provided the gifts….”

NUHW wholeheartedly agrees with the auditor’s findings that the hospital failed to ensure transparency in its consideration of executive compensation levels, particularly for former CEO Sam Downing, who at the time was the third highest-paid public employee in the state. The auditor’s report asserts that the Board repeatedly violated the Ralph M. Brown Act by conducting meetings in closed session that are legally required to be open to the public. Notably, the auditor discovered that the Board violated the Brown Act in discussions related to the retirement benefit enhancements for Downing that led to the Los Angeles Times article that brought state and national media attention to the hospital’s gross financial mismanagement.

Currently, some hospital board members are resisting the implementation of a new district-based election system for three of its five seats, including those of Gattis and Wardwell. NUHW believes that given the possibility that some of the Board’s members engaged in criminal conduct, it is more urgent than ever to ensure that the Board is more directly accountable to Salinas voters through a district voting process. NUHW also believes that to restore public trust in the hospital’s leadership, it is necessary for Jim Gattis and Harry Wardwell to relinquish their seats on the Board immediately.