Suspect deals have history at Hacienda
Board members who oversee the Phoenix care facility where an incapacitated patient was raped have a long record of self-dealing and nepotism. An investigation by The Arizona Republic found Hacienda HealthCare board members and their relatives benefited financially from their positions.
Some board members do business directly with Hacienda, and some board members have business dealings with each other.
Some of their children were hired at Hacienda.
The issues raise questions about the non-profit board’s independence and ability to police itself.
Hacienda’s board chairman, for example, brokered health insurance for
roughly 800 Hacienda employees through his private company for decades, reaping lucrative commissions on the contracts.
And at least four children of board members got jobs at Hacienda, including one who serves as a manager and another who works as a vice president.
Hacienda board members describe their positions as voluntary and say they follow strict conflict-of-interest policies that require them to abstain from voting on issues involving their businesses and relatives.
Under those policies, board members gave the green light to contracts benefiting their colleagues.
And they left hiring decisions to Bill Timmons, the chief executive officer — the one person they were directly responsible for overseeing.
Of the current eight-member board, two have private businesses that deal directly with Hacienda and three have children who have obtained employment there.
Some members served together for years. Current and past board members also worked with one another in private businesses outside of Hacienda, records and interviews show.
The board members’ actions came to light in a
investigation after a patient with intellectual disabilities delivered a baby boy on Dec. 29.
Hacienda operates two non-profit facilities for children and adults with specialized medical needs near South Mountain.
Many patients are unable to breathe or eat on their own and require 24-hour-care.
At last count, the facility had 37 patients from ages 16 to 68, with most listed as “non-ambulatory.”
Under its non-profit arm, Hacienda also runs two small children’s hospitals, several group homes and immunization clinics in the Valley.
It also owns two for-profit companies that sell medical equipment and provide home-health care.
Non-profit watchdogs said self-enrichment by board members raises red flags and can be illegal in some cases.
Boards of directors are supposed to serve as fiduciaries for an organization.
That role becomes murky when members have longstanding personal relationships, conduct outside business with one another or use their positions for financial gain.
“My biggest concern is if they had business decisions between the policymakers and the organization itself,” said Brenda Blunt, an accountant specializing in non-profit taxes with the firm Eide Bailly. “What does that say about the organization?”
Blunt said non-profits typically detail potential conflicts of interests in tax forms as a matter of transparency and due diligence.
She noted Hacienda’s recent tax forms do not document any conflicts of interest involving board members.
“If they are not being diligent about that, what else are they not being diligent about?” she said.
Chair brokered employee health plans
Board Chairman Tom Pomeroy said he always acted in the best interests of employees while working as Hacienda’s insurance broker on and off for the past 30 years.
Pomeroy joined the board in 1981.
He said his company, Pomeroy & Associates, negotiated superior health benefits at lower costs than employees would have gotten elsewhere.
Employees saw no premium increases on medical coverage in four of the past six years, he said.
Pomeroy said he received “normal broker compensation,” which ranged from 4 percent to 7 percent annually. But he denied taking advantage of his position.
“There are no excess benefits received by me,” he said in an interview with The Republic. “Hacienda receives excellent and above-standard service in their account negotiations.”
Pomeroy acknowledged the potential for a conflict of interest. However, he said as a Hacienda board member he didn’t participate in any vote relating to his company.
He also said the board periodically sought bids from other health-care insurance vendors and sometimes opted to go with other companies.
“There is, therefore, no actual conflict of interest,” Pomeroy said.
At least two Hacienda board members were connected to Pomeroy’s insurance company outside of Hacienda.
One board member worked for a private company that also got its health insurance through Pomeroy & Associates.
A former board member was named with Pomeroy in a 2012 civil lawsuit filed by the Las Vegas Metropolitan Police Department over allegations of insurance fraud and kickbacks.
Pomeroy said he was unaware of any board member ever raising objections to his company.
He also pointed to an IRS audit two years ago that he said “confirmed there were no conflicts of interest.”
Board member Dr. Kevin Berger acknowledged “a small number” of Hacienda patients use his private practice for primary-care office visits.
Berger, who is a pediatrician and hospice and palliative medicine physician, said in a statement the arrangement is not unusual, especially given that few pediatricians in the Phoenix area treat young people with the complicated medical conditions of Hacienda’s patients, he said.
Berger’s practice “has been a leading Medical Home for Children with Special Health Care Needs for over 40 years and has been a staunch advocate for this population,” he said in the statement.
Berger said the arrangement allowing him to see patients existed long before he joined the Hacienda board in 2012.
Berger said he has no relatives employed by Hacienda and has no financial interest in Hacienda.
He said he receives no compensation for his service.
‘Does it pass the public-trust test?’
Robert Ashcraft, professor of nonprofit leadership and management at Arizona State University, said even the appearance of conflicts raises questions about a non-profit board’s ability to govern.
“Does it pass the public-trust test?” Ashcraft said. “Even on legal parameters, it might pass. But it just doesn’t look good.”
Ashcraft would not speak about Hacienda. He said the best non-profits adopt “clear firewalls” that prohibit board members from doing business with the non-profit.
He said many impose term limits to prevent boards from becoming insular and to avoid acting out of self-interest.
Non-profits often adopt rules against “private inurement” so members can’t benefit financially from their service, he said.
That includes nepotism.
Even when board members aren’t involved in hiring relatives, the perception of favoritism can be damaging, Ashcraft said.
It becomes a question of transparency, he said. Was there an open employment process? Was the job posted? Was candidate recruited and vetted? Were other qualified candidates considered?
Self-enrichment among non-profit boards is illegal in many states.
Self-dealing and nepotism can lead to sanctions, including fines and revocation of tax-exemption.
Ashcraft said dozens of states have specific agencies tasked with overseeing and investigating non-profits.
Arizona is not one of them, Ashcraft said: “We just don’t have that here.”
Hiring influence is denied
Three board members whose children got jobs at Hacienda say they were not involved in hiring decisions.
They said their children were qualified for their positions and received high marks from supervisors once they got their jobs.
Members said they are not aware of any policies or bylaws restricting relatives from being hired.
In statements to three members said they abstained from votes that might affect their children.
But that didn’t stop them from putting their children’s names and resumes in front of Timmons, Hacienda’s long-time chief executive officer, who was responsible for hiring.
Ralph Wallwork, who joined the board in 1994, said he mentioned his daughter as a potential job candidate after Timmons expressed frustration at filling a vacant marketing position.
Wallwork said he told Timmons his daughter had a degree in marketing from Arizona State University; Timmons asked to see her resume.
Wallwork’s daughter, Sierra Kamela, was hired in 2011.
He confirmed that she makes more than $90,000 as vice president of marketing and public relations.
He said her salary is typical of marketing directors in Phoenix.
“I do not believe Sierra’s position in marketing poses a conflict of interest on my part,” Wallwork said.
Children worked their way up
Longtime board member Thom Niemiec said his son and daughter didn’t need his help to get hired.
Niemiec said his daughter, Michelle, first worked as an administrative assistant and was paid “less than the starting rate for graduates at the time.” Working at Hacienda inspired her to become a respiratory therapist, he said.
“(She) cared so much for Hacienda’s clients that she chose to go back to school for respiratory therapist certification,” Niemiec said in his statement. “She joined Hacienda’s RT department at the entry level.”
Niemiec said his son, Thomas, was hired in 2014 after graduating from the University of Advancing Technology in Scottsdale.
Thomas chose Hacienda because it had launched a “first-of-its-kind program” teaching technology skills to autistic clients, Niemiec said.
Thomas in January was promoted to technology program manager. Niemiec said neither of his children made anywhere near $90,000.
Gary Orman, who joined the board in
1991, said his son worked at Hacienda for a year in the early 1990s.
“He earned about $8.50 per hour — and was a bargain,” Orman said in a statement. “He set up and trained the staff on computerized medical records for Hacienda.”
Orman said his son, James, is a certified plastic surgeon and now chief of reconstructive surgery at Kaiser Permanente in Santa Clara, Calif.
Orman said he has never received compensation for his work at Hacienda, which actually costs him money.
Orman said he was drawn to Hacienda and helping children in part because he was misdiagnosed with rheumatic fever as a boy and remembers the impact his sickness had on his parents, who thought he would not live to see adulthood.
“I continue to serve out of love for our caring staff, needy clients and our honorable board members,” he said.
Orman said he is determined to restore Hacienda’s reputation after the rape.
“I am committed to never letting anything like the horrible and inexcusable abuse that took place ever happen again,” he said.
The rape and birth set off a cascade of events at Hacienda, beginning with Timmons’ resignation as chief executive officer after 28 years.
Gov. Doug Ducey last month called for the ouster of the Hacienda board.
He also this month asked for the Arizona Attorney General’s Office to launch an investigation into patient care, financial fraud and sexual-harassment claims at Hacienda HealthCare.
Ducey cited two Republic investigations in his letter to the attorney general.
The stories detailed years of sexual harassment by Timmons and allegations of financial fraud that dogged his administration.
Pomeroy denied turning a blind eye to Timmons’ behavior.
He said the board ordered Timmons to get counseling, attend training sessions and docked his pay.
But financial records show the board continued awarding Timmons raises and bonuses. By 2015, Timmons was making $609,000 annually.
Pomeroy said any discipline had to be weighed against Timmons’ record of service.
He said Timmons was responsible for turning around Hacienda, which faced a bleak financial future when he was hired in 1989.
“Bill had a style of management that presented itself early on, it worked,” Pomeroy said. “He was effective . ... I have no doubt that the board, certainly, did not see the day-to-day actions that occurred. But I don’t think at any point there was anything that was incredibly out of line.”
Pomeroy said he worked alongside Timmons for decades.
Pomeroy said they increased Hacienda’s revenue to $50 million from $3 million with more than 44 programs.
Company faced censure, lawsuit
Even as Pomeroy brokered Hacienda’s health plans, insurance regulators found he engaged in fraudulent practices unrelated to Hacienda HealthCare.
The Arizona Department of Insurance in 2012 fined Pomeroy $15,000 and suspended his license for 60 days over a forged document that allowed his company to generate inflated premium payments totaling $97,292 over three years.
Regulators said Pomeroy used “fraudulent, coercive or dishonest practices” or demonstrated “incompetence, untrustworthy-ness or financial irresponsibility in the conduct of business.”
The state accused Pomeroy of altering a document that allowed his company to collect higher rates on medical indemnity insurance for Dawson Management Group, which owns Scottsdale Plaza Resort. Pomeroy’s company forwarded an inflated rate sheet to the health plan administrator, according to the state.
Pomeroy said last week he was not involved in tampering the document and only learned about it when Dawson brought it to his attention. He said the fraud was committed by a former employee. As owner of the company, he took full responsibility and made a full refund to Dawson, he said.
That was the second time Pomeroy had been accused of fraud. A year earlier, the Las Vegas Metropolitan Police Department Health and Welfare Trust sued Pomeroy and former Hacienda board member Peter Ranke, who is an accountant.
The Metro Trust, which administers health plans for Las Vegas employees, said Pomeroy and Ranke were involved in hiking monthly premiums from 20022010. The trust claimed Pomeroy forged a renewal agreement to prevent other brokers from offering their services.
According to the Metro Trust, Pomeroy signed an agreement limiting a consulting fee to $2 per employee. The trust accused Pomeroy of hiking the fee by adding costs that were passed through Ranke’s company.
The trust claimed it was overcharged $1.1 million over eight years and said Pomeroy took a portion of the overpayment from Ranke’s company in direct violation of his contract.
Pomeroy denied any wrongdoing and said the lawsuit was settled through arbitration. Pomeroy said he and Ranke were “vindicated” and the charges were proven untrue.
“It was probably the only blemish I’ve had in a 44-year career,” Pomeroy said.
‘Highest quality, service, pricing’
Pomeroy said the board was fully briefed on the Las Vegas lawsuit and Ranke’s involvement.
“Yes, of course,” he said. “Other past and present board members have utilized his services on occasion, as well. Absolutely no conflict.”
Board member Mike Wade defended Pomeroy. Wade said Pomeroy for years handled insurance for Tech Mold, the company where Wade worked before retiring in 2013.
“Every year, Tom Pomeroy provided the highest quality, service and pricing of anyone, and by a substantial amount,” Wade said, adding he has known Pomeroy for about 25 years. “I always felt that we lucked into a great relationship with (him).”
Wade said Pomeroy got insurance rates for Tech Mold as much as 25 percent lower than the national average.
Pomeroy said he provided other important services for Hacienda at no cost and used portions of his commissions to make employee premiums affordable.
Which is why Hacienda continues to use him as its insurance broker, he said.
But don’t take just his word for it. Pomeroy provided a statement last week from the board backing him up:
“In the opinion of the management of Hacienda HealthCare and the board of directors, Mr. Pomeroy provides the best service at the most reasonable cost.”