Use of hospital funds argued

A member of the defunct South Coast Medical Center Foundation Board of Directors has accused Adventist Health of pillaging foundation funds and is calling for an investigation.

Member Susan D. Morrison, of Dana Point, has asked an intermediary to contact the state attorney general’s office to review all Adventist Health practices, including the alleged taking of foundation assets and the transfer of donations restricted for specific uses to unrestricted status without the permission of the donors.

“My gift of stock of $10,000 for the linear accelerator was restricted, but that hasn’t stopped Adventist Health from reclassifying it as unrestricted,” Morrison said Wednesday.

Adventist Health spokeswoman Alicia Gonzalez denied any wrongdoing by the Roseville-based health system, which put the center on the market this summer for the third time in five years.

“We are surprised by all of this because the closing of the foundation was simply a necessary and ordinary part of the sale process,” Gonzalez said Wednesday.

Adventist is in the process of selling the facility to St. Joseph Health System. (See related story on this page.)

Foundation dissolved

Adventist Health officials dissolved the foundation at a meeting at 7:30 a.m. Nov. 14 and presented documents, Morrison said, that authorized Adventist’s takeover of foundation assets, including the Medical Center West office building and the adjacent parking lot on one of the four separate parcels that make up the medical center campus.

“The foundation bought the medical building in 2002 with a down payment of $1.9 million that was restricted for a cancer center, with the understanding the building would be used for a cancer center,” Morrison said.

“We were notified at the meeting that the SCMC Governing Board had signed an agreement with Adventist Health 10 years ago that if after seven years [of ownership] Adventist was losing money, it could be recovered from the foundation,” Morrison said.

“I never would have joined the foundation if I knew [Adventist] could sweep the funds.”

Withdrawing gift

Morrison advised center officials Saturday that she was withdrawing her estate gift and is disputing all donations totaling $35,000 with Chase Visa.

Adventist claimed in a document presented to the foundation board total losses of $44,735,000 — most recently $5.3 million in 2005, $3.4 million in 2006, $6.4 million in 2007 and $6.9 million from January through September.

Morrison provided a copy of the document, which was stamped attorney-client privileged.

Morrison said the losses could be accounted for by the $500,000 monthly fees paid to Adventist, which about equals the stated annual losses, and the salaries paid center officials, which Adventist declined to confirm.

According to Morrison, center Executive Officer Bruce Christian was paid $360,000 a year, the chief financial officer was getting $300,000 a year, and the center Chaplain received a salary of $200,000.

Morrison said the foundation board had asked for audited financial statements for the hospital and the foundation and a copy of the appraised value of the medical office building, but was denied the documents.

She voiced her allegations at the Laguna Beach City Council meeting Tuesday. The council took no action on the complaints.

Although no longer employed by the medical center as foundation executive director, Councilwoman Elizabeth Pearson left the Council Chambers when Morrison spoke.

Morrison sought assistance from city officials in her quest to get information to the attorney general’s office about the assumption of foundation assets by Adventist, but the city has no jurisdiction over the sale or the conditions, Assistant City Manager John Pietig said.

Gonzalez said Adventist had to close the Foundation in order to proceed with the sale.

“Since a qualified bidder has now been selected for South Coast Medical Center, the mission of the foundation is essentially concluded,” she said.

“The foundation attorney concurred with the facts and legal conclusion as presented by Adventist.”

Morrison publicly disputed Adventist’s contention that the sale of the center required the dissolution of the foundation.

“Not true,” Morrison said. “Adventist has a history of doing this. When Adventist sold Paradise Valley Hospital in San Diego, and did the same thing to its foundation, the attorney general forced Adventist to return $3 million to the foundation.

“It is easier to stop them than to recover the funds.”

Wendi Horwitz, state deputy attorney general, had not returned a phone call by press time asking for confirmation of the restoration of funds to Paradise Valley and that her office had been contacted by Morrison’s intermediary.

Long-standing agreement upheld

Gonzalez said Adventist was acting in accord with a long-standing agreement regarding the distribution of assets.

“In preparation for transfer of ownership, the foundation has merged into South Coast Medical Center and its assets formally transferred into the hospital in accordance with the original understanding between the parties and the formal governing documents,” Gonzales said.

According to the document presented to the foundation board last Friday, the foundation is solely responsible for any losses sustained by Adventist that meet or exceed $3 million and further that the assets of the foundation can legally be distributed to the medical center upon dissolution of the foundation.

The document also states that contributions to a not-for-profit organization are donated for a specific project, the contribution is considered only temporarily restricted and that portion of the organization’s assets are restricted until the donor’s purpose has been met.

Cancer center not built

Funds for the down payment on the building were specified for the establishment of a cancer center, which has not taken place, which leads Morrison to believe that the building has been hijacked by Adventist.

“At a meeting on Oct. 16, Adventist Health indicated that it wanted us to sign over Medical Center West, but we refused,” Morrison said.

Gonzalez said Adventist has acted appropriately and legally in the matter.

“The decision was made to sell the hospital, and a qualified not-for-profit bidder was selected,” Gonzalez said. “Now the process is moving forward, as it should.

“We thank the foundation board members for their hard work and dedication and continue to share their desire to see South Coast Medical Center remain an acute-care hospital for the community.”

BARBARA DIAMOND can be reached at (949) 494-4321 or [email protected].