CEO Revolving Door at Tri-City Costly to Taxpayers

Tri-City Healthcare District Chairman of the Board, Jim Dagastino, gushed last week about the appointment of the hospital's third CEO in three years, the promotion of chief financial officer, Steven Dietlin.  "Mr. Dietlin made an immediate impact on Tri-City medical center's financial well-being as CFO when he arrived at the hospital in 2013."

The board chairman had to keep a straight face in his praise of outgoing CEO Tim Moran for his "leadership." Moran, the San Diego Business Journal's Most Admired CEO of 2016, lasted less than two years before being canned by Tri-City. He collected $600,00 in severance pay and a year of medical and dental coverage.

What Dagostino didn't mention is that the CEO they fired three years ago brought Dietlin to Tri-City in early 2013. Larry Anderson needed help to fix serious problems with the hospital's financials. Like Moran, Anderson had been named Most Admired CEO by SDBJ in 2012, apparently the kiss of death for Tri-City executives.

Documents related to Anderson's firing are cited below, including an exchange of letters between the hospital's and Anderson's attorneys, as well as a transcript of the California Unemployment Insurance Board's hearing of March 18, 2014, the only opportunity Anderson has had to respond to any of the charges made against him.

It's a lesson on how not to fire a CEO and may also explain Tri-City's kinder and more generous sendoff of Tim Moran.

On August 25, 2013 an anonymous call is received on the hospital's complaint hotline.

On September 4 Anderson is placed on administrative leave. The hospital hires outside attorneys to launch a secret investigation of the charges, including an 8-hour grilling of the CEO.

On October 16 Anderson's attorney, George Rikos, receives a letter from Greg Moser, the hospital's attorney, informing him the Board of Directors planned to meet the following day to consider "specific complaints and charges" against Anderson in a closed session, to "evaluate his performance," warning that other actions might be taken, including "discipline or dismissal." He's not told what the charges are, but Anderson is offered the right to request a 30-minute open session to respond to them.

On the day of the October 17 board meeting letters fly between Rikos, and Moser. Rikos points out Anderson has undergone an extensive investigation and the time limit to respond to its findings is unreasonable. In response, Moser claims the time limit is "neither arbitrary nor improper," since "until the charges and complaints are specified, it cannot be determined if that limitation is or is not appropriate and fair." He says Anderson could have asked for more time, but the board will proceed with a closed session. Anderson submits his resignation "for cause," not being allowed to do his job for more than a month. He says he expects to receive the severance pay promised in his employment contract. The board ignores Anderson's resignation, voting unanimously that evening to fire him effective the following day, October 18.

On October 29 Rikos demands a list of the charges, as well as an explanation of why Anderson's resignation was ignored. He accuses the board of denying him his rights to a pre-termination hearing as required by California law.

On October 30 Moser promises to provide a list of charges. He says Anderson had an opportunity to hear them either in open or closed session and chose not to do so. That could be because in Moser's letter of October 17 he says charges had not been "specified" before Anderson could meet with the board. Moser says Anderson didn't resign in time, as required by his contract and did not have a right to a pre-termination hearing, since he was an "at will" employee.

On November 4 a letter from the board allows Anderson to see for the first time the 14 charges leveled against him that he'd been expected to respond to three weeks earlier.

After Tri-City refused to contribute to Anderson's unemployment insurance, he requested a hearing before the California Unemployment Insurance Appeals Board. The hospital's top four reasons for firing Anderson, according to the hospital's compliance officer, Matthew Soskins, "violated his duties as CEO." The hearing officer explained, "I'm looking at whether the employer discharged the claimant for misconduct, a substantial breach of an important duty owed to the employer, willful or wanton in nature, that tends to injure the employer."

Here are those top four claims and the findings of Dorothy Johnson, Administrative Law Judge.

1. Anderson wrongfully paid $75,000 to Landreth Development for work not owned by Tri-City.

Finding: Anderson received no benefit from, and was acting within his authority as CEO, in paying for a feasibility study of a development on District property.  

2. Anderson improperly distributed theater tickets in violation of Tri-City's policies and procedures and provisions of the Fair Political Practices Commission.

Finding: Tri-City did not provide specifics on what the policy was or exactly how Anderson violated it. The employer conceded as CEO Anderson was authorized to distribute tickets and also to designate someone else to oversee the distribution of tickets. Anderson and his wife were holders of their own personal tickets which they used for themselves or gave to others as they saw fit.

3. Anderson improperly used district funds/resources to investigate Matt Hall, Mayor of Carlsbad.

Finding: Anderson did not use any district resources to investigate Hall. Farrah Douglas, a Tri-City Hospital Foundation Board Member, who also sat on the Carlsbad City Council, reported to Anderson that Hall had allegedly claimed her participation on the Foundation Board was a conflict of interest. There is no persuasive evidence Anderson used district resources for anything other than a legal opinion.

4. Anderson coerced Alex Yu, former chief financial officer into misrepresenting certain financial information.

Finding: Tri-City's witness testified he had no personal knowledge that Anderson had attempted to deceive the employer in connection with the financials. At the hearing, the employer relied on alleged statements from the former CFO, none of which were signed under penalty of perjury.

The judge's conclusion? "The only witness to testify on behalf of the employer in this case was Matthew Soskins, the hospital's Chief Compliance Officer, who, almost without exception, had no firsthand knowledge about any of the matters at issue and whose testimony was based almost entirely on hearsay." The employer offered no persuasive evidence that any of Anderson's conduct was outside his authority as CEO.

On July 23, 2014 Anderson filed a civil suit in Superior Court of San Diego, accusing Tri-City attorneys of malpractice. On April 22 at 9:00 a.m. the Anderson v. Patterson jury trial will begin. If Anderson wins his case the hospital may be liable for damages. The fired CEO told me he estimates those damages could be in the millions, amounting to more than ten times the $450,000 in severance pay he would have collected if, like Moran, they had fired him quietly, without accusing him of misconduct.