After a yearlong investigation, the FBI has filed court documents alleging that two former high-ranking executives of City of Hope National Medical Center in Duarte, Calif., conspired to extort money from the 145-bed cancer specialty hospital.
Both executives deny the allegations.
Documents the FBI filed recently in U.S. District Court in Los Angeles allege that in the months leading up to their departures from the hospital in 1996, City of Hope President Sanford Shapero and Chief Operating Officer Andrew Leeka conspired to damage the hospital's vaunted donor base. About a quarter of the hospital's $250 million annual budget comes from donations.
Shapero did not return repeated telephone calls seeking comment but has denied the allegations in recent published reports. His current employment status wasn't known.
Leeka, now president of Good Samaritan Hospital in Los Angeles, was not available for comment. His former attorney, Frank Nemecek, said, "Mr. Leeka absolutely, unequivocally denies he has engaged in any wrongdoing as to City of Hope."
MODERN HEALTHCARE later learned that Nemecek also represented Shapero. But he did not volunteer that information, and subsequently he did not return telephone calls.
In February City of Hope won arbitration cases against both men alleging they had violated the terms of their employment agreements by disparaging the hospital and improperly taking documents. Shapero was ordered to pay more than $1.1 million in damages and attorneys' fees; Leeka was ordered to pay $250,000.
Last week Los Angeles County Superior Court rejected Nemecek's request to vacate the rulings. Nemecek had argued that the rulings should not have been made public. Following the Superior Court decision, Nemecek ceased to act as Leeka's attorney. His status as Shapero's attorney wasn't known.
Glenn Krinsky, City of Hope's general counsel, said the rulings were on public file as a prelude to being certified.
The judgment records, along with an affidavit supporting a search warrant of Shapero's office executed by the FBI, tell a bizarre tale of the unraveling of the two men's employment at the hospital after three sexual harassment suits were filed against them in 1994 and 1995. City of Hope reached settlements with the former employees who filed the suits.
The arbitration judgments and the FBI affidavit allege that as their departure became imminent, Shapero and Leeka crafted a smear campaign against the hospital, using it as leverage to fatten their termination agreements.
"The facts . . . could be the basis for a movie script if they were not so convoluted," remarked the arbitrator in Shapero's case.
"While their allegations (against the hospital) were completely false, had their scheme been brought to fruition, it could have wreaked an enormous amount of damage on the hospital," Krinsky said. City of Hope contacted the U.S. attorney's office in Los Angeles about its suspicions in late 1996; the FBI immediately began an investigation.
The FBI alleges that the men copied thousands of corporate documents and spirited them out of the hospital under the guise of using them for an earthquake preparedness program. Instead, the documents were going to be used in the men's campaign to damage the hospital's reputation. Confidential City of Hope donor lists were among the 75 items seized from Shapero's private office last month, but according to Krinsky, the bulk of the documents have never been recovered.
The FBI affidavit also alleges that several months before his departure from City of Hope in January 1996, Shapero hired Fairfax Group, a Washington-area healthcare consulting company, and Powell Tate, a Washington-area public relations firm, to "gather dirt" on the hospital and forward it to CBS television's "60 Minutes" news program.
According to the arbitration documents, Shapero alleged to the news program and the California attorney general's office that the hospital's outside law firm had overbilled the facility and that the hospital had rigged a fund-raising raffle. The arbitrator concluded the allegations were exaggerated or false.
In addition, the FBI and arbitration documents allege that Shapero, who originally received about $1 million in severance pay and benefits when he left City of Hope, drew up a secret employment contract for Leeka. The contract would have allowed Leeka to receive more than $600,000 should he leave within 90 days of Shapero's departure. Shapero resigned Jan. 12, 1996; Leeka resigned April 11. The hospital later settled with Leeka for a far smaller amount, estimated at about $50,000 by Krinsky, but Shapero allegedly injected himself into the negotiations and demanded an additional $250,000 for himself.
The FBI also contends that Shapero and Leeka's campaign poisoned relations with the hospital to the extent that Krinsky twice wore a wire monitored by FBI agents when meeting with the attorney who handled the sexual harassment charges, Hugo Gerstl of Monterey, Calif.
According to FBI documents, Gerstl allegedly told Krinsky and other City of Hope attorneys that a lawsuit he was handling for another City of Hope employee held a "blackmail value," because the hospital had a history of paying hush money in the past. Gerstl, who is considered to be a co-conspirator according to the FBI documents, emphatically denied the allegations. Krinsky wouldn't comment on the matter.
It's unknown if the case is being presented to a grand jury. A spokesman for the U.S. attorney's office declined comment.
Meanwhile, the California attorney general's office confirmed that it is investigating allegations made by Shapero. It would not disclose the nature of the allegations.
The attorney general recently denied City of Hope's application to administer the $50 million Centinela Valley Trust from the 1996 sale of Centinela Hospital Medical Center in Inglewood, Calif., to OrNda HealthCorp (Oct. 27, 1997, p. 22). OrNda and Centinela now are owned by Tenet Healthcare Corp., Santa Barbara, Calif. However, Deputy Attorney General Jim Schwartz said the controversy surrounding Shapero and Leeka had nothing to do with the denial.