The board of U.S. Diagnostic, the nation's largest operator of diagnostic imaging centers, has placed Chief Executive Officer Jeffrey Goffman on administrative leave and removed him as board chairman.
The move comes less than a week after the West Palm Beach, Fla.-based company severed its relationship with consultant Keith G. Greenberg, a convicted felon whose murky relationship with the firm has drawn four shareholder lawsuits (Jan. 13, p. 28).
The board also named current president Joseph Paul as interim CEO and placed general counsel Michael Karsch on administrative leave.
In addition, U.S. Diagnostic, the owner and operator of 118 outpatient diagnostic imaging centers, said the Securities and Exchange Commission and the NASDAQ stock market are investigating the company's actions related to Coyote Consulting, Greenberg's consulting firm. U.S. Diagnostic said it is cooperating fully with the investigations.
An internal probe by a special board committee is looking into senior management's handling of the relationship with Coyote Consulting, through which Greenberg directed U.S. Diagnostic's aggressive mergers and acquisitions program.
"This company has decided to take draconian measures to assure its credibility in the marketplace," U.S. Diagnostic board chairman Laurans Mendelson said during a recent conference call with Wall Street analysts. Mendelson was elected earlier this month to replace Goffman as chairman of U.S. Diagnostic's board.
Mendelson characterized the leaves granted to Goffman and Karsch as necessary to avoid any appearance of conflict of interest during the probe.
Mendelson, an outside director also serving on the special committee, said the inquiry had reached no conclusion regarding Goffman's or Karsch's guilt or innocence. Nevertheless, Mendelson added: "We have reason to believe they knew of these potential disclosure items."
The board's actions are directed at shareholder allegations that management camouflaged Greenberg's role as a virtual executive despite his technical employment as a consultant.
Documents obtained by MODERN HEALTHCARE show a longstanding connection between furloughed CEO Goffman and Greenberg that dates back at least eight years and several troubled companies.
For example, Goffman, a certified public accountant, was the managing partner of an accounting firm that, beginning in 1989, served as auditor for Advanced Marketing Technology, a money-losing marketer of interactive video kiosks. Greenberg was president and CEO of that company and in 1994 pleaded guilty to federal fraud charges for failing to disclose payments related to the sale of limited partnerships and misstatements on tax returns related to the company.
In another senior healthcare management controversy, there has been no change in the situation at Memorial Hospital of Salem County in Salem, N.J., which last June fired its chief executive, Joseph Michael Galvin Jr., for allegedly misusing $2.1 million of hospital funds.
Following an internal investigation, the hospital said it determined that Galvin used hospital funds for travel, entertainment, legal and other personal uses (Dec 23-30, 1996, p. 8).
Galvin's attorney said the charges are "grossly exaggerated."
The hospital also disclosed the existence of a federal probe into the matter, although the U.S. attorney's office in Newark, N.J., would neither confirm nor deny an investigation.
Memorial continues to work with Galvin's attorney to resolve the matter and has not fielded any further inquiries from the U.S. attorney's office, a hospital spokeswoman said.
With Karen Pallarito