Windham Community Memorial Hospital in Willimantic, Conn., has agreed to pay back nearly $2 million to its own endowment funds to settle charges that it misspent the money on a construction project rather than on purposes specified by donors.
Hartford (Conn.) Superior Court Judge Marshall Berger approved the settlement between the 92-bed not-for-profit hospital and the state of Connecticut late last month. It ends a two-year investigation by Connecticut Attorney General Richard Blumenthal into the hospital's use of donated funds.
In a lawsuit filed simultaneously with the settlement, the state accused the hospital of improperly tapping into its endowment funds to help finance a $23.5 million construction project. It said the hospital breached its fiduciary duty and violated state laws by spending the endowments.
"Generous people have given to this community hospital over the years with the understanding that their contributions would have a lasting impact," Blumenthal said. "By using these funds for other purposes, the hospital violated that trust."
Under the settlement, the hospital admitted to no wrongdoing but agreed to repay $1.8 million plus interest to replenish nine specific endowment funds that allegedly were misspent. The settlement agreement allows Windham to make payments through 2002. With interest, total payments will exceed $2 million.
In 1988, Windham's legal counsel advised then-President Fred Hyde, M.D., that only investment income from the endowment funds could be spent on unspecified purposes, not the endowments themselves, the state said. But in 1991 and 1992, the hospital's board voted to use the endowment funds for ongoing operations and construction, the suit alleged.
Windham's current president, Duane Calberg, assumed the post in late 1994. He said the hospital has been discussing a repayment schedule with the state since last summer and actually began paying the endowment funds this April.