Wrapping up a three-year criminal investigation, a federal jury in Charleston, W.Va., last week found C. David Morrison, the former administrator of Logan (W.Va.) General Hospital, guilty of 23 counts of embezzlement, tax fraud, money laundering, conspiracy and other crimes involving misuse of hospital funds.
U.S. District Judge John Copenhaver accepted the jury's verdict on 22 of the 23 counts and has yet to rule on one. Morrison faces from five to 30 years in prison for each count and $250,000 in fines for each, or $5.5 million.
Morrison remains free on bail, and Copenhaver has scheduled a sentencing hearing for Feb. 14. Copenhaver also ordered Morrison to forfeit more than $477,000 involved in the money laundering counts of the conviction, according to the U.S. attorney's office in Charleston.
Morrison's attorney, James Lees, did not return repeated telephone calls for comment, but has said his client would appeal a conviction. Morrison could not be reached for comment.
Prosecutors alleged that Morrison did not turn over to the Internal Revenue Service $4.5 million in taxes withheld from hospital employees. In addition, Morrison allegedly embezzled hospital money to pay for a private airplane and for personal debts on property he owned. His actions, which included spending hospital money to fund the development of a shopping mall just outside Logan, helped propel the hospital into bankruptcy in 1998, prosecutors alleged (April 17, p. 52).
"I think in particular (the verdict) shows that trust fund taxes have to be handled very carefully by not-for-profits," said Assistant U.S. Attorney Hunter Smith, whose office prosecuted Morrison.
Morrison, 53, resigned from the 132-bed hospital in December 1998, two months after it filed for Chapter 11 bankruptcy protection after missing several bond payments. The hospital has yet to file an amended plan of reorganization with the U.S. Bankruptcy Court in Charleston.
Lees did not call Morrison or any other witnesses to the stand during the eight-day trial. The judge had rejected an earlier attempt by Morrison to plead guilty to two of the charges because Morrison refused to admit criminal intent.
Donald Gene Cabell, the hospital's former credit and collections manager, testified against Morrison and pleaded guilty Nov. 16 to one count of aiding and abetting embezzlement of $20,789. Cabell faces up to 10 years in prison and $250,000 in penalties. His sentencing is scheduled for Jan. 30.