Closing a chapter in the disturbing story of a once-promising young New Jersey hospital executive-and adding another name to a growing roster of hospital chief executive officers who have dipped into hospital funds-Joseph Michael Galvin Jr. last week pleaded guilty to tax evasion, admitting he siphoned off hospital money for personal use.
Galvin, 55, the former president and CEO of 122-bed Memorial Hospital of Salem County, said in U.S. District Court in Camden, N.J., that he failed to report and pay taxes on $310,000 in personal expenses paid by the hospital from 1992 to 1995. The expenses included legal fees for a divorce, accounting fees and a personal letter of credit, Assistant U.S. Attorney Gail Zweig said.
The amount cited in the criminal charges represents a fraction of what the hospital accused him of taking. In 1996 after a routine audit for 1995 results, hospital officials accused Galvin of spending $2.1 million of the hospital's money on travel, entertainment, home renovations, furnishings for a beach house and legal fees related to his divorce (Dec. 23, 1996, p. 8).
The hospital eventually recovered its money-and then some. It filed a civil suit in 1997 in Superior Court in Salem County against Galvin and others, including Paul Fredericks, the hospital's former senior vice president and director of fiscal affairs, who was fired with Galvin in 1996. The suit was settled in 1999 for $5.6 million.
The settlement money was drawn from deferred compensation plans, hospital insurance and money paid by Galvin and the other co-defendants. But Galvin's contribution to the settlement through forfeitures and other payments represented the majority, Matthew DelDuca, the hospital's lawyer, said at the time. No criminal charges ever were filed against Fredericks.
Galvin, who was named young executive of the year in 1978 by the then-American College of Hospital Administrators and served as chairman of the New Jersey Hospital Association in 1990-1991, faces a maximum of five years in prison and a $100,000 fine.
Federal prosecutors said Galvin, who evaded approximately $118,000 in tax liability on his overall income, had instructed employees to pay his personal expenses but not to charge his personal clearing account. The account had been created to track the personal expenses he incurred so he could reimburse the hospital.
Galvin, his attorney and Memorial Hospital officials could not be reached for comment.
Free on $100,000 bond and living in Palm Beach Gardens, Fla., Galvin stated in court that he works in property management, Zweig said. Sentencing is scheduled for July 27.
Galvin is the second former hospital executive to appear in federal court in New Jersey in recent weeks. In March, Victor Botnick, 46, a former senior executive of four-hospital Cathedral Healthcare System, Newark, was charged with defrauding the system of more than $200,000 during a three-year period. He is awaiting trial.
Some former executives who tarnished their hospitals' reputations have captured headlines in recent months. C. David Morrison, the former administrator of 132-bed Logan (W.Va.) General Hospital, is awaiting sentencing after being found guilty last November of 23 counts of crimes involving misuse of hospital funds, including embezzlement, tax fraud, money laundering and conspiracy. Morrison was found to have used hospital funds to help finance development of a strip mall as his hospital sank into bankruptcy.
And in February, a jury in U.S. Bankruptcy Court in Dallas found Randolph Gillum, the former chairman and CEO of defunct Tri-City Health Centre, liable for breaching his fiduciary duty, filing false claims, unjust enrichment and other charges. Gillum was ordered to pay $1 million to Medicare and $9.8 million to the trustee of Tri-City.