Ex-CFO alleges fiscal misconduct at CCMH

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Robertson claims he was fired; hospital board, CEO say he quit, deny allegations

By Phyllis McLaughlin


The News-Democrat

After just two months on the job, Bob Robertson, Carroll County Memorial Hospital’s chief financial officer, has left.

In a letter to the editor submitted to The News-Democrat on Aug. 27, Robertson, 64, claims to be the messenger “shot” by the hospital board of directors for bringing to light improprieties by the hospital administration – specifically Chief Executive Officer Kanute Rarey and Louis Vetter, regional controller for Alliant, the company that manages the hospital’s operations.

In an interview at The News-Democrat on Thursday, Sept. 4, Robertson said Vetter, who served as interim CFO for several months before Robertson was hired, was using “inappropriate” accounting methods and, in some cases, he believed Vetter and Rarey were “misleading the board” by manipulating accounts to make the hospital appear more financially sound than it was.

In an interview at the hospital Monday, Sept. 8, Rarey, hospital board chairman Jean Pyles and board finance committee chairman Mike Nevin, refuted most of Robertson’s claims.

First, the three said it was Robertson’s decision to leave his position; he was not fired or asked to resign.

 “Bob was well-liked by his staff and well-liked by the management team,” Rarey said. “His performance was not acceptable in some areas. It didn’t appear to be anything that couldn’t be worked out.”

“He had good formats for presenting data that we appreciated,” Nevin said. “They were insightful and helpful.” Nevin said Robertson’s format ideas were one of the “selling points” during the interview process that led to the board hiring him.

One of Robertson’s main points of contention, discussed during the interview with The News-Democrat last week, was “a stack of checks” totaling $250,000, written and signed to pay vendors. Though they had not been sent out, Robertson claimed the checks were entered into the hospital’s accounts payable without sufficient funds to cover them. When he inquired why the checks had been sitting there for many days, he said he was told the checks would be released as money became available in the account.

“So, they held the checks, but made it look like [the hospital was] doing well” and paying its bills, he said, adding, “It’s inappropriate; auditors wouldn’t accept” such a practice.

“There was always money in the bank to cover every check we had,” Pyles countered Monday, adding that until Robertson’s tenure, it had been standard for the checks to be written and signed on Friday and mailed out the following Wednesday.

Pyles said Robertson told her he had voided the checks in the stack because they were several days old. “I agreed,” she said. “But the money was in the bank.”

Nevin pointed out that all of the checks were rewritten within two to four days and sent out.

“That was a good suggestion,” Rarey said. “Everyone has a different way of doing [check] processing; if it wasn’t [an acceptable method] for him, it was OK. … We felt like we were working with Bob; we made changes in regard to his input, which was very valuable.”

Headhunter fees

Robinson also claimed, in both his letter and during last week’s interview, that Vetter and Rarey had tried to conceal from the board the amount paid to the headhunter firm that had brought Robertson in as a candidate for the CFO position.

Robertson that, as CFO, he had negotiated with the firm to allow the hospital to pay the $30,000 “finder’s fee” in two $15,000 installments. After he’d paid the first half, Robertson said Vetter had directed him to pay the other half in $5,000 monthly installments. Robertson claimed the board was unaware of the contract with the headhunter firm and the fee to be paid, and that Vetter wanted him to make the smaller payments to avoid raising “red flags,” he said.

Nevin, who said Monday that he was a member of the board committee that interviewed candidates for the CFO position, refuted that claim.

“We had been interviewing candidates for months and months, and didn’t think we’d found a suitable candidate – a good fit,” he said. “We had to bring in [a consultant]. If that was the price of getting somebody good in here, then so be it. Did we want to pay that much money? No. But we felt we had to.”

Rarey said the $30,000 fee was based on the successful candidate’s first year’s salary. Typically, he said, the fee ranges from 25 percent to 33.3 percent of that amount.

Pyles said she knew a headhunter fee had been paid for hiring Robertson. She said Vetter had directed Robertson to explain the fee to her. “I do ask questions if I don’t recognize the name on a check,” she said.

As for making the decision to hire the headhunter firm, Pyles said it had to be done. “We were desperate. Louis Vetter had been here since April 2007 [as interim CFO], and his company wanted him back.”


Robertson complained that he felt as though he had been “micro-managed” during his eight weeks at the hospital, despite his 35 years of experience in hospital financial offices. Robertson said Vetter was in his office two full days a week to oversee his (Robertson’s) work.

Robertson said he felt frustrated by Vetter’s presence. “I came in and things needed to be changed in many areas, in the business office and in medical records,” he said last week. “But I can’t make changes because of the way Louis has set them up.”

On Monday, Rarey and Pyles both said Robertson had been hired with the understanding that he would be in an “orientation phase,” in which Vetter would be working with him during the week.

Rarey added that anyone hired as CFO at the hospital, “whether they had 35 years or 10 years experience,” would undergo a similar orientation for the first 90 days in order to learn and understand the hospital’s business operations.

“This is a little hospital, but there are numerous financial considerations because we’re purchasing land and taking down buildings,” Rarey said, referring to the razing of the nearby Golden Burley warehouse to make room for medical offices and other hospital projects. “We have developed a lot of good things relating to the physicians and medical practices and clinics. These all have financial implications; we’re building cash reserves, and paying off indebtedness that came when we started over last year.”

Rarey also explained that, though he is responsible for the financial health of the hospital as an employee of the board, “oversight from the financial point of view comes from Alliant.” At the 18 hospitals Alliant manages, “regional controllers [including Vetter] oversee and work with CFOs so they implement a consistent financial reporting process.”

Expense variance;

contract or no contract?

Robertson said his termination followed the last regular hospital board meeting he attended. He said at that meeting, he had included in his narrative account of the monthly financial statements an explanation for an “expense variance” of $12,500. The amount was a monthly payment that wasn’t budgeted, but was being paid for specific services rendered at the hospital by an outside physician’s group.

Once raised during the open meeting, another physician who was in attendance became irate because of the amount being paid to the other physicians.

Robertson said hospital board attorney Ruth Baxter was asked if the contract had been forwarded to her office for review. She said it did not, Robertson recalled, and said Baxter then asked the board why they were paying the fee without a contract.

“I didn’t know they didn’t have a contract.”

In a telephone interview Tuesday, Baxter confirmed that she had been asked by a member of the board if the contract had been submitted to her office, and if she had reviewed it. “I told them no, I had not,” Baxter recalled. She said that was the extent of the conversation she had regarding the contract. She said the board is not obligated to send any contracts for services to her for review.

“There always was a contract” with the physician’s group for the services in question, Pyles said Monday.

Robertson said Rarey accused him of handing out the board packet, which included the payment information, without prior approval. Robertson said he had emailed everyone the entire financial packet earlier in the day, and that in two earlier meetings that day, no one mentioned the information about the payment, nor was he told the information was confidential.

Rarey and Nevin said they had received the e-mail, but neither of them had read far enough into the document to find the disclosure of the $12,500 payment.

“His narrative was 32 pages long,” Nevin said.

Rarey said that while he did not review Robertson’s full report, he said it was Robertson’s job, as CFO, to inform him (Rarey) of such items.

Rarey said the incident has resulted in a review of how contracts are managed and how the board is kept informed of such contracts, which are confidential. “We will discuss those in executive session,” he said. “That’s a good thing that came out as Bob brought to the table.”

After heated discussion during the remainder of the board meeting, Robertson said board members had asked Rarey that night if he felt he could continue working with Robertson as CFO. “He said no, so I got up to leave.” Robertson said he was told not to leave. He said the decision was made that he and Rarey would meet the next day.

During that meeting, Robertson said they had a good conversation and Rarey asked if he wanted to stay. Robertson said he had talked the situation over with his wife the night before, and because the couple was about to buy a house in Carrollton, he said he wanted to stay.

“He looked at me and smiled and said, “I am accepting your resignation.’” Robertson said the comment left him stunned. He further claims that when he got up to leave, Rarey physically closed the door and pushed him away and told him he’d have to stay in Rarey’s office “for security reasons.”

In a follow-up telephone interview yesterday, Rarey denied using physical force to keep Robertson in his office. “No, I would never do that. I work every day to treat everyone with respect and compassion,” he said. “No, I did not do that.”

What the future holds

– on both sides

Robertson said his biggest concern is his future. He said he doesn’t expect to get a good reference from CCMH, and without it, he doesn’t think he’ll find another job.

“I’m 64 years old. The chance of me getting another job is nil,” he said.

He and his wife had sold their previous home and were about to buy a new home in Carrollton. Instead, they have sold all of their  belongings, including his private plane, and are now living with his daughter in Ohio.

Robertson said he has signed up for Social Security, even though he takes a penalty for drawing benefits early. He said he hadn’t planned to fully retire until he was 66.

In the meantime, Rarey said he and the board are reviewing applications for candidates to replace Robertson.

Rarey and Nevin said the headhunter firm is required by contract to help fill the position if a candidate does not work out, at no extra fee.

“They owe us a successful candidate,” Nevin said.