Delta Health Alliance CEO Karen Fox under investigation for possible misuse of funds
Lawsuit spawns action by Northern District U.S. Attorney
Published: December 1,2011
What began as a wrongful termination lawsuit against the non-profit Delta Health Alliance has ended in its CEO under investigation by a federal grand jury over the possible misuse of money at the agency.
James Hahn, former vice president of programs at Stoneville-based DHA, which provides healthcare to the poor in the Mississippi Delta, was fired in May 2010 after he raised concerns about possible misappropriation of funds by DHA’s CEO Dr. Karen Fox. Hahn relayed his concerns to DHA’s board of directors, who initiated an investigation into Hahn’s claims. After the investigation—which Hahn in court papers called a “sham” — turned up no wrongdoing, Hahn said in his complaint that he was asked to sign a release promising not to report any of his concerns to federal agencies. Hahn refused to sign the release, he said in his complaint, and was fired.
In July 2010, Hahn sued DHA in Lafayette County Circuit Court, alleging that he was fired for reporting that Fox had inappropriately spent DHA money, including some for personal expenses. Among the claims in Hahn’s complaint were that Fox used DHA funds (which come mostly from federal sources) to:
• Pay for an attorney in a private legal matter
• Lease a condominium in Oxford
• Pay for childcare
• Pay her interior decorator
• Purchase two late model cars on top of the $3,000 a month car allowance Fox already received
• Increase DHA contributions under the Employee Retirement Income Security Act for DHA executives from 11 percent to 20 percent
• Lobby the Legislature
Hahn’s complaint alleged that Fox’s actions constituted embezzlement and fraud. Roy Campbell III, a Jackson attorney who represents DHA, said an investigation into Hahn’s claims initiated before Hahn’s lawsuit was filed, found that Fox was authorized to pay for each of the expenses with DHA money.
“I am entirely, completely comfortable with the investigation, which continued over the course of the lawsuit,” Campbell said in an interview this week. “Nothing was uncovered that indicated any wrongdoing on the part of Dr. Fox.”
Campbell said that DHA has voluntarily – without a subpoena – turned over about six years’ worth of audits to the United States Attorney in Mississippi’s Northern District. That would span Fox’s time as CEO. “We have cooperated fully with the investigation and intend to continue to do so,” he said. Campbell added that Hahn was not asked to sign a release promising not to report any of his concerns to federal agencies. “He was fired because the board found the situation of one of Dr. Fox’s right-hand people making unfounded allegations against her intolerable,” Campbell said.
DHA funding, according to court filings, for year-end 2008 was $13.5 million, money Delta Council executive vice president Chip Morgan said in a deposition came mostly from earmarks secured by Sen. Thad Cochran. Delta Council, according to court documents, at one time appointed five of the nine members of DHA’s board of directors and once received $275,000 annually from the agency. For year-end 2010, court documents show, DHA funding was $31 million, all of which came from federal sources.
DHA Board of Directors Chairman John Hilpert, who is also president of Delta State University, and former board member and University of Mississippi Medical Center Vice Chancellor for Health Affairs James Keeton each said in depositions that they were unaware what purpose the Oxford condo served for DHA and Fox. Keeton added in his deposition that he was unaware of any services DHA provided in Oxford.
On Oct. 7, 2010, DHA’s board of directors passed a resolution – a copy of which Campbell provided to the Mississippi Business Journal – that approved the expenses listed in Hahn’s complaint and said the condo would be used in lieu of hotel stays for DHA to operate a community outreach center and to offer programs in the area.
Lawyers for DHA, in a motion for summary judgment, sought to dismiss any claim related to the Oxford condo because they said Hahn’s attorney, Jim Waide, was using it as a vehicle to attack Fox’s personal life. They also sought to bar Waide from seeking information related to DHA money funding programs that were not executed well.
DHA attorneys also asked presiding Judge Henry Lackey – and Judge John Gregory, who succeeded Lackey after he retired — to bar Waide from seeking information about possible contributions to Ole Miss made in Fox’s name by Allscripts, a Chicago-based software company that specializes in electronic health records. Such donations would violate the federal Medicare anti-kickback statute, Waide said in his response to DHA’s motion for summary judgment. In 2008, according to court filings, DHA paid Allscripts $1.775 million. DHA attorneys said that Hahn had not mentioned the claims in his original complaint.
In the same motion, DHA attorneys asked Gregory to bar Waide from seeking information about DHA awarding a multi-million dollar grant to UMMC to implement EHRs, contingent upon the hospital using Allscripts as its software provider, again because Hahn had not mentioned the claims in his original complaint. UMMC, as part of the requirements in the Patient Protection and Affordable Care Act, is in the process of implementing EHRs, a five-year process a hospital spokesperson recently said would cost $70 million.
After about a year of discovery, the case settled last May. Terms were confidential.
In September, though, Waide filed a motion asking Gregory to lift the veil of confidentiality surrounding the settlement. Attached as an exhibit to Waide’s motion was a subpoena dated Sept. 20, 2011, commanding him to appear before a federal grand jury empaneled in Oxford. Gregory granted the motion. Waide was subpoenaed again Nov. 15 to appear before the same grand jury, or to turn over documents related to Hahn’s lawsuit.
Waide said by phone from his Tupelo office this week that after he was subpoenaed the first time, he told the U.S. Attorney’s office that he had to receive permission from Gregory before turning over any documents, because the settlement terms were sealed. Once Gregory entered an order allowing Waide to share the information, the U.S. Attorney subpoenaed Waide again. Waide said federal agents picked up his case file from his office shortly after the Nov. 15 subpoena.He would not comment further.
Mike Watts, an attorney at Holcomb Dunbar in Oxford who represents Fox, said he has been given no indication from the U.S. Attorney’s Office as to how long the investigation would last.
“I think the government would probably do it as expeditiously as they can, but they have not told me when it might end,” he said.
Watts said he was not involved in defending DHA or Fox during Hahn’s lawsuit. He would not say when Fox retained him. He did say that, aside from DHA’s internal investigation into the matter, routine audits performed by the federal Health Resources and Services Administration have turned up nothing illegal.
“All these audits, as far as I know, show that everything has been spent appropriately. We believe in the end when the investigation is concluded that it will show that Dr. Fox didn’t do anything improper.”
The U.S. Attorney’s Office in Oxford had not returned a phone message seeking comment by press time.
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