Cape Coral (Fla.) Hospital sued three former executives last week, accusing them of using hospital credit cards to buy jewelry and using hospital funds to buy a warehouse that they leased back to the hospital at an above-market price.
The accusations were contained in two separate countersuits filed by Cape Coral in state and federal courts in Fort Myers, Fla. The suits respond to lawsuits filed last month by the three fired executives, who want the hospital to honor their lucrative employment contracts (June 20, p. 3).
In its lawsuit, Cape Coral has requested more than $15,000 in damages from each of the executives. It also claims the executives should not receive their benefit packages because they are excessive and were not approved by the board.
The three executives are J. Michael Ward, former president and chief executive officer; Daniel Edgar, chief operating officer; and Jay Murphy, chief financial offer.
Mr. Ward and the other two fired executives were unavailable for comment. Lawyers for the executives said several of the allegations were false but would not comment further on the hospital's lawsuit.
In court documents, Cape Coral alleges that Mr. Ward used his hospital credit card to buy jewelry for unspecified persons. Messrs. Edgar and Murphy also used hospital credit cards for purchases unrelated to the hospital, the hospital said.
In addition, the three executives conspired to conceal lucrative employment contracts that included salaries, benefits and severance pay, and spent excessive amounts on their expense accounts, the suit said.
Mr. Ward, who had worked at the hospital for 17 years, earned $180,000 a year in base pay; Mr. Edgar, with 16 years tenure, made $165,000; and Mr. Murphy, who had been with Cape Coral for 13 years, earned $153,000.
Cape Coral also alleges that Mr. Murphy improperly put his ex-wife on the hospital's health insurance plan.
In the warehouse deal, the three executives allegedly conspired to buy a building in Fort Myers through a company controlled by Mr. Edgar called River City Properties, the suit said.
"The warehouse was purchased with hospital funds but put in the name of River City Properties," the hospital said. "The warehouse was leased to the hospital at rates exceeding the fair market value of the facility."
The suit did not state how much the hospital paid on the lease or whether the board had approved the lease.
The revelations came one week before an antitrust hearing on the proposed acquisition of Cape Coral by Lee Memorial Hospital.
In April, the Federal Trade Commission filed an antitrust suit to block the deal (May 9, p. 16).
A federal district court judge in Tampa said the acquisition is immune from federal antitrust scrutiny because Lee Memorial is a public hospital. The FTC appealed, and oral arguments in the matter are scheduled for July 12 before a three-judge panel of the 11th U.S. Circuit Court of Appeals in Miami.
In the first nine months of the fiscal year ended June 30, Cape Coral lost $10.4 million, compared with net income of $2.6 million for the same period in 1993. Net patient revenues for the first nine months was $60.2 million, compared with $62.9 million in 1993.
To help stem the losses, Cape Coral announced layoffs of 200 of its 4,500 employees (June 27, p. 16).