Additional commentary by Timothy Horrigan
(member of the House Petitions & Redress Committee)
PETITION
25
PETITION FOR REDRESS OF GRIEVANCE
TO: The
Honorable House of Representatives
FROM: Petitioner
Representative Kathleen Souza, Hills. 11
DATE: October
26, 2011
SUBJECT: Grievance
of the Community Action Group to Save CMC Again
Your Petitioner, Representative Souza on behalf of the Community Action Group to Save CMC Again, hereinafter presents the following summary of grievance involving the Attorney General's Office and invokes the constitutional authority and duty of the Honorable House of Representatives pursuant to said Articles 31 and 32 to bring about redress:
Grievance involving the Attorney General, Michael Delaney, for failure to investigate and issue a report on the issue of the salary of the chief executive officer of Catholic Medical Center (CMC), after the attorney general found, during a review of a proposed affiliation transaction in which Dartmouth Hitchcock Health was to acquire CMC, that not only was the transaction illegal, but that the salary of the CMC chief executive officer was "significantly higher than her peers" and "an area of significant concern to the attorney general."
Wherefore, your Petitioner prays that the House of Representatives consider this proposed remedy:
Request by resolution that the Attorney General report his office's findings and recommendations for legislation within 30 days to address excessive chief executive officer compensation for certain charitable organizations in the 2012 legislative session and that the Attorney General publicly reprimand the chief executive officer of CMC and the CMC board of trustees.
Respectfully Submitted by Petitioner Representative Souza on behalf of the Community Action Group to Save CMC Again.
October 26, 2011
I am not sure if the House should be asking the Attorney General to be doing the things which Rep. Souza and the "Community Action Group to Save CMC Again" want him to be doing. But this is a much more reasonable request than most of the other things we have been asking him for. For whatever it's worth, Attorney General Delaney, even though he is the target of this petition, actually worked to stop the merger.
For whatever it is worth, here is a May 21, 2010 press release by Michael S. DeLuca, the Director of Charitable Trusts and the Office of the Attorney General about the CMC-DHMC controversy:
News Release For Immediate Release Contact: Report of the Director of Charitable Trusts Regarding the Proposed Acquisition Transaction Between CMC Healthcare System and Dartmouth-Hitchcock Health |
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On May 21, 2010, The Office of the Attorney General, through the Director of Charitable Trusts (the "Attorney General"), released its Report on the proposed acquisition transaction between Dartmouth-Hitchcock Health ("DHH") and CMC Healthcare System ("CMCHS") . At its essence, the Transaction reorganizes the corporate structures of CMCHS, and its affiliates, Catholic Medical Center ("CMC") and Alliance Health Services ("AHS"), resulting in these organizations ceding control to DHH and becoming a part of a regional integrated health care delivery system overseen and controlled by DHH. New Hampshire RSA 7:19-b IV provides that within 120 days from receipt of a notice of a proposed transfer of control of a health care charitable trust, the Attorney General shall determine whether the health care charitable trusts' boards of trustees have fulfilled their fiduciary standards. The Attorney General must determine either that no further action will be taken, or that the Attorney General objects to the transaction on specified grounds. The law sets forth specific standards to be considered by the Attorney General in his review. Having reviewed the documents submitted by DHH and CMCHS, heard testimony at public hearings, reviewed comments submitted to the Attorney General and participated in numerous meetings, the Attorney General objects to the Transaction on three grounds. First, the Transaction is not permitted by applicable law. The Transaction would result in DHH obtaining control over core functions of the CMC Charities, which until this point have operated as an independent Catholic hospital. The Attorney General concludes that the Transaction will result in a profound change to the governance structure of the CMC Charities and diminish the fiduciary duties of the Boards of Directors of the CMC Charities which will inhibit the ability of the CMC Charities to carry out their charitable missions. The Attorney General also concludes that Probate Court approval of this transfer of control would be necessary in order for it to be permitted under New Hampshire law. Second, the Attorney General objects to the Transaction because the Parties have not provided adequate information upon which the Attorney General can determine whether it exercised due diligence in determining whether the Transaction is in the best interest of the health care charitable trust and the community which it services. Specifically, the Parties have not demonstrated due diligence in determining the effect of the Transaction on the cost of delivering health care. Third, the Attorney General has concluded that while the consideration exchanged in connection with the Transaction constitutes fair value, the Attorney General objects to the Transaction as there are insufficient safeguards in place to ensure that the calculation of the Post-Affiliation Surplus is not subject to manipulation or abuse by the Parties. The Attorney General also reviewed the employment agreements for certain executives of DHH and CMC. Salaries are disclosed annually to the Attorney General. CMC's Form 990 was due to the Attorney General on November 15, 2009 for the fiscal year ending June 30, 2009. CMC sought an automatic extension, and its Form 990 was not delivered until May 17, 2010. Based on the IRS Form 990s filed by CMC, the compensation of the President and CEO of CMC was as follows:
A comparison of Ms. Pitman-Giles' total compensation with other hospital presidents in the region reveals that Ms. Pitman-Giles' compensation is significantly greater than her peers based on total compensation and as a percentage of operating revenue. The reasonableness of the compensation paid to Ms. Pitman-Giles is an area of significant concern to the Attorney General. One of the basic duties of the governing board of a charitable organization is to establish reasonable compensation. Integrity, stewardship and accountability are the fundamental precepts that govern decisions made by any charitable board of directors, including executive compensation. Attorney General Michael Delaney said "nonprofit leaders must be aware that they are the stewards of the charitable asset they oversee, and those assets are held in trust for charitable purposes, not individual gain." The review that is the subject of this Report is limited to the statutory factors listed in RSA 7:19-b. Ms. Pitman-Giles' compensation was established by the CMC Board of Directors prior to the Transaction, and the Transaction does not directly affect her salary. Because the Transaction itself does not result in a pecuniary benefit to Ms. Pitman-Giles, her salary is not a basis to object to the Transaction. Her salary, however, will be separately reviewed under the statutory and common law authority of the Attorney General, and a separate determination will be made regarding the compensation paid to executives at CMC, as well as the executives of other hospitals in New Hampshire.
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See Also: |
The committee eventually gave the petition a unanimous "Unfounded" vote:
Petition #25: grievance of the Community Action Group to Save CMC Again.
REPORT |
Grievance Unfounded.
Committee Findings: Complaint involving the AG's office for failure to follow through with its promise to investigate the high salaries of Catholic Medical and other charitable non-profits appears to be premature. AG's office testified that it is indeed working on the investigation and hope to have something to those involved in, optimistically, about six months.
Vote 10-0.
Rep. Robert F. Willette for the Committee
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Other 2012 Petitions:
Petition 21: The Ginsberg Petition (on behalf of Arthur Ginsberg of Nashua)
Petition 22: The Joe Haas Petition (on behalf of Joseph Haas)
Petition 23: The Cloutier Petition (on behalf of Bill and Mary Cloutier of Epping)
Petition 24: The Donovan Petition (on behalf of William J. Donovan, III)
Petition 25: The CMC Petition (on behalf of Community Action Group to Save CMC Again)
Petition 26: The Youssef Petition (on behalf of Joshua Youssef)
Petition 27: The Prince Petition (on behalf of Monique Prince)
Petition 28: The Breton Petition (on behalf of Ghislain Breton)
Petition 30: The Capen Petition (on behalf of Bethany Capen)
Petition 32: The Rochester Petition (on behalf of 300-plus citizens of the City of Rochester)
Petition 33: The Nicholas Haas Petition (on behalf of Nicholas Haas of Hooksett)
Petition 34: The Shepard Petition (on behalf of Daniel Shepard of North Hampton)
See Also:
Attorney General Delaney's April 9, 2012 Letter to Speaker Bill O'Brien
Chairman Ingbretson's January 6, 2012 letter to me & some related letters
May 18, 2011 Nashua Telegraph editorial "Let's not confuse the law with ethics"
Official Petitions & Redress committee page (not much to see here)
Rep. Kevin Avard's "Speak Up!" videos