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Ex-CEO alleges plan to close D.C. General
(Published July 17, 2000)
By OSCAR ABEYTA
Defending his record against allegations of financial mismanagement, the embattled former head of the Districtís public healthcare system says he believes his removal is only the first step in an effort by the D.C. financial control board and the mayorís administration to shut down D.C. General Hospital.
And several city council members are in at least partial agreement with ex-CEO John A. Fairman, saying the control board has thwarted full implementation of the Public Benefit Corp.ís independent status to run D.C. General.
"A lot of this is just a smokescreen for what they really want to do," Councilman David Catania, R-At large, said. "We know these are debts that were pre-existing, that preceded PBC. We know the city has not met its obligations to PBC. The control board really wants to close D.C. General."
(See FAIRMAN, page 8)
Fairman was removed June 30 from his position as chief executive officer of PBC, the semi-independent agency that city council created to oversee D.C. General, the cityís public clinics and the school nurse program. He was placed on administrative leave with pay and the PBC Board of Directors announced it was searching for a permanent replacement for him.
Fairmanís removal came amid a flurry of accusations of financial mismanagement concerning a $60 million line of credit the PBC has been extended by the D.C. government. Fairman said in an interview that figure has been mischaracterized by the media as unpaid loans, when in fact the agency has to borrow that money from the city until it receives payment from the city for services it has provided. He said those payments from the city generally come near or after the end of the fiscal year in which PBC incurs the cost of providing services.
Fairman said the hospital agency was forced to borrow money from the city because the control board stymied efforts by the PBC to set up banking relationships with private banks and wouldnít allow it to raise funds by issuing bonds, a power given to it by the council legislation that created PBC.
"In my mind it (PBC) was never given the opportunity to sink or swim," said Councilwoman Sandra Allen, D-Ward 8, who chairs the councilís Committee on Human Services, which oversees PBC.
Allen said she is withholding judgment on Fairmanís tenure until the financial picture at the agency is clarified.
"I donít think he had the tools to really make the reforms that were needed there," Councilman Jim Graham, D-Ward 1, said. Graham, the former executive director of Whitman Walker Clinic, served on the PBC Board of Directors until 1998 when he ran for his council seat.
Fairman came to D.C. General in 1992 as a consultant and became head of the hospital in February 1995. The hospital turned a profit under his leadership until fiscal 1998, after the PBC was formed and the city began cutting its subsidy to the hospital.
Fairman said the control board and the Chief Financial Officerís office Ė going back to Mayor Anthony A. Williamsí tenure when the CFOís office was created ó have been opposed to the PBC legislation since its inception. But when it was founded, PBC had the staunch support of then-mayor Marion Barry.
"We have never been in a position where we have a sitting mayor who is philosophically opposed to the hospital until now," Fairman said.
Fairman laid most of the blame for the hospitalís financial gerrymandering at the feet of the CFOís office. He noted that the financial officers at the PBC as well as the other D.C. government departments that owe PBC money all work for the CFO. He said ultimately Mayor Williams is the person responsible for the financial predicament PBC is in.
"If you point the finger beyond me, itís got to fall on the mayor," Fairman said.
Mayor Williamsí office, asked for comment, referred The Common Denominator to a senior aide who did not respond.
Fairmanís removal also generated controversy when it was disclosed that under the terms of his employment contract the government would have to pay out nearly $1 million in a severance package if he were fired. As amended by the PBC board, Fairmanís contract entitles him to a buyout that would give him full pay and benefits through September 2003.
Control board officials have declared the provision in his contract invalid, although it was approved by the PBC board. Control Board Chairman Alice Rivlin said the control board was unaware of the extension and amendment to Fairmanís original contract. Fairman and his attorney contend that his current contract is binding because the control board approved a provision in his original contract that gave exclusive authority over Fairmanís contract to the PBC board. Former control board executive director John W. Hill Jr. was aware of the contract provision and raised no objections to it in a Dec. 3, 1997, memo to then-PBC Chairman Elizabeth C. Reveal.
"If the control authority gave the power to the PBC board, I donít understand the issue," Councilwoman Allen said. "If the control board relinquished their authority then itís a valid contract."
Graham said that Fairmanís run-ins with the control board and his struggles to get the PBC up and running do not excuse a "greedy"contract.
At least one other council member seems willing to take Fairman to task over the terms of his contract.
"We need to look at this platinum parachute that was given to reward whatís ostensibly mismanagement," At-large Democrat Harold Brazil said. "It just jumps out at you as something that is patently wrong."
Brazil issued a statement July 13 saying the councilís Judiciary Committee, which he chairs, would open an investigation into the financial management at PBC and the terms of Fairmanís contract.
"We donít have a financial expertise on the judiciary committee," Brazil acknowledged, and also said that he had no direct knowledge of any wrongdoing. "I just want to know if there was some sort of criminal activity going on."
At the request of Rep. Ernest J. Istook Jr., who chairs the House D.C. appropriations subcommittee, the General Accounting Office looked into an independent bank account that the PBCís legislation authorized it to open. A GAO spokeswoman said the federal agency forwarded information about the account to the Federal Bureau of Investigation to determine if the matter warranted further investigation. The FBI would neither confirm nor deny that it is investigating the PBC or Fairman.
Fairman has been criticized from the halls of Congress to the halls of city hall both for his management of the hospitalís finances and for his severance agreement. Frederick D. Cooke Jr., Fairmanís lawyer, said city officialsí public criticisms and the at-times false media reports about his client have crossed the line.
"This is mean-spirited and intended to destroy him personally," Cooke said.
Copyright 2000, The Common Denominator