Cape Coral (Fla.) Hospital board members said last week that they fired five top executives this month for insubordination and because they had lost confidence in the managers' abilities.
In response, three of the fired executives, including J. Michael Ward, former president and chief executive officer for 17 years, filed wrongful discharge lawsuits June 10 against the hospital to recover their benefits and salaries, according to a hospital spokesman.
In a two-page statement, the 13-member Cape Coral board gave four primary reasons for the unusual firings (June 13, p. 6).
One, the executives "failed to respond to and cooperate in an appropriate, efficient and timely manner" when asked in February to assist attorneys in the Tampa, Fla., offices of the law firm Foley and Lardner in a "legal compliance audit" of several business deals in which the 201-bed hospital lost money.
The audit was part of the "due diligence" process Cape Coral was following before its proposed merger with 602-bed Lee Memorial Hospital in Fort Myers, Fla., said Fred Cull, a Cape Coral board member and retired newspaper publisher. That merger has been challenged by the Federal Trade Commission.
Mr. Cull said the fired executives were "insubordinate" in refusing to provide the requested documents.
Secondly, Mr. Ward improperly approved "five-year golden parachutes," or severance arrangements, for the other executives that amounted to excessive compensation, the board said.
The severance agreements with "certain other" of the five executives allowed them to be fired only if they were convicted of a felony, according to Cape Coral's statement.
"We were startled when we learned of the contracts. The board had no idea," Mr. Cull said. "No one had ever seen anything like it before. Our sentiment was that they (the contracts) were far from reality." He said the contracts were dated Jan. 26, retroactive to Jan 1.
The board's third reason was that the employment contracts were negotiated by people who were both officers and directors of the corporation at a time when the hospital was losing money and when they had inside knowledge of merger negotiations with Lee Memorial.
Mr. Ward and Daniel Edgar, chief operating officer, were slated to become the No. 2 and No. 3 officials of the new Lee Memorial organization after the merger.
Mr. Ward and the other fired executives were unavailable for comment at press time. Messrs. Ward and Edgar filed their lawsuits in federal court in Fort Myers and are asking for their rights under the contracts to be determined. Jay Murphy, chief financial officer, filed his lawsuit in Lee County Circuit Court in Fort Myers and is asking to be reinstated.
The fourth reason the Cape Coral board cited for the firings was "a lack of management controls" and oversights in spending. Board members didn't elaborate on what projects the spending involved, and executives wouldn't go into further detail because of pending lawsuits.
Mr. Cull said financial losses were expected this year, and the proposed merger was unrelated to the firings.
On April 28, the FTC filed an antitrust suit to block Lee Memorial's planned acquisition of Cape Coral (May 9, p. 16). A hearing is scheduled for July 11 before the U.S. 11th Circuit Court of Appeals in Miami.
On May 23, Standard & Poor's Corp., a New York-based credit-rating agency, placed Cape Coral on CreditWatch, indicating that continuing financial losses could put the hospital into technical default on two bond issues totaling $89 million. A rating decision is expected in August.
In the first nine months of fiscal 1994, which ends June 30, Cape Coral lost $10.4 million, compared with net income of $2.6 million for the same period in 1993, Standard & Poor's said. Net patient revenues for the period totaled $60.2 million, compared with $62.9 million in the year-ago period, the agency said.
Much of the loss was attributed to $6 million spent on a new employee retirement program required by the federal government three years ago, $2 million for construction of an outpatient facility and $2 million spent on the proposed merger, Standard & Poor's said.