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Enron Medicine 

Published July 31, 2002 at 4:00 a.m.

Tis a mighty foul wind blowing on Hospital Hill this week. And the ghosts of Mary Fletcher and Fanny Allen cannot be resting peacefully these days.

Anyone who thinks the sickening stench is the result of little more than a shaky “creative” financing plan for a parking garage probably still thinks Watergate was just about a third-rate burglary.

To paraphrase a line that President Richard Nixon’s White House counsel John Dean used in his “smoking gun” testimony, “There has been a cancer growing” on Fletcher Allen Health Care (FAHC), a cancer growing at the highest levels of FAHC management and within the inner circle that appears to control the entire board of trustees.

And like Watergate, it’s the testimony of a former “Oval Office” insider that broke this story wide open.

Former FAHC chief financial officer David Cox’s April deposition was given in response to a subpoena by the Department of Banking, Insurance, Securities & Health Care Administration (BISHCA). The hospital’s silk-stocking law firm, Downs, Rachlin & Martin, fought the subpoena all the way to the Vermont Supreme Court and lost.

On April 3, Cox sat down with three BISHCA attorneys, swore he’d tell the truth, and proceeded to spill the beans.

Last week, BISHCA released transcripts of Cox’s bombshell deposition. It’s quickly become Vermont’s No. 1 insider best-seller and the you-know-what has hit the fan. It isn’t pretty, folks.

And we take note that the hospital’s short, carefully chiseled press releases over the last few days have all made the point: “Our number one goal is to restore trust in Fletcher Allen.”

Horse feathers!

The fact is, this sleazy enterprise ought not to taint the reputations of the nurses or the doctors or the x-ray techs or the physical therapists on the hill. They’re the folks who make the Mary Fanny the best it can be, the hospital that does, has done and will do so much for so many in need in our community.

But the “blood, sweat and tears” of the Mary Fanny’s good and decent workers have been completely disregarded in this Enron-style conspiracy concocted by CEO Bill Boettcher and a tiny cabal of wheeler-dealer-friendly hospital trustees.

CFO Cox’s under-oath testimony tells the story of how Boettcher and the board’s executive committee, headed by Phil Drumheller, president of Lane Press Inc., cooked up an “off the balance sheet” scheme to finance the new $55-million parking garage. They did it in such a way that allowed them to keep a straight face while claiming the project did not legally require state review and approval. Boettcher’s crew came up with a financial instrument no one’s ever heard of — a “synthetic lease.”

The scheme involved creating a dummy corporation to build and run the proposed monster parking garage. The financing was guaranteed through the hospital’s offshore captive insurance company.

Captive insurance companies are created by large corporations to essentially self-insure. And with a half-million-dollar annual revenue stream, the Mary Fanny Hospital is a very big operation.

What’s interesting is the fact that Vermont, under Gov. Howard Dean, has developed a booming captive insurance industry, attracting giants like Archer Daniels Midland to set up shop in the Green Mountains. In fact, Vermont has become the third-largest domicile for all the captive insurance companies on Earth. But, surprisingly, Vermont’s largest hospital parked its captive insurance subsidiary not in Vermont, but in Nassau, Bahamas.

State review, by the way, is there for a good reason — to protect the public interest by trying to keep a lid on the soaring costs of health care. Mr. Cox testified that, back in 2000 when he was chief financial officer, he told Boss Boettcher that under Vermont law the proposed garage needed a certificate of need (CON) from the state.

According to Cox’s deposition, however, Boettcher essentially told him to keep his opinion to himself and just “make it happen.” Just do it! His orders were to make the numbers work and keep it off the Mary Fanny balance sheet.

Boettcher also told him that, except for Chairman Drumheller and the other executive committee members — Al Overton, Nancy Port and Bert Sobel, M.D. — the 19 other trustees would be kept out of the loop.

Last July 23, the hospital announced internally that Mr. Cox was leaving “to pursue other career opportunities.”

On April 3, Cox testified that Boss Boettcher had “requested” his resignation. It appears that Cox refused to go along to get along.

Just like Watergate of yesteryear, where the cover-up superceded the break-in at Democratic Party Headquar-ters, it’s the failed cover-up of the megabucks Mary Fanny garage deal that’s going to do the damage. The only good news is that it’s likely going to create a gravy train for a few local law firms.

But the bad news is that the seamy little conspiracy by Boettcher and Drumheller described in Cox’s deposition has parked the darkest of dark clouds over Burlington’s Hospital Hill. They concealed the scheme not only from the people who enforce Vermont law, but from their own board of trustees. This almost sounds like a script for “The Sopranos”!

One major question hanging out there is, where’s Vermont’s doctor-governor stand on this hospital hanky-panky?

According to his official spokesperson, Susan Allen, the Guv “has left it in the hands of the regulators.” Dr. Dean, she informed us Tuesday, “is aware of the latest issues.” In fact, said Ms. Allen, Gov. Dean was personally briefed by a staff member on Cox’s smoking gun “one week after” the April deposition. But surprisingly, Ho-Ho has kept his mouth shut.

That’s odd. You see, recently our lame-duck governor had no problem publicly taking FAHC’s side in the Health South battle. Dean spoke out against BISHCA approval for Health South’s request for a CON to compete with the Mary Fanny in the local surgery business. The Guv sure didn’t leave that one to the regulators.

But Ho-Ho has been busy lately. Busy traveling out of state building his longshot presidential campaign. In the last 10 days Gov. Dean has been coast-to-coast a couple times, from San Francisco to South Carolina, with big splashes in Atlanta, Georgia, and Ft. Lauderdale, Florida. Flaunting his medical credentials, Dr. Dean has been given escorted tours of hospitals wherever he goes. He even won praise for his “grassroots style” in press reports highlighting the fact that he spent the night in the home of a gay couple down South. Wow!

But the big question for our favorite presidential hopeful is not “Did you have a good night’s sleep?” No, the big question for Ho-Ho is, “How come you’ve been fiddling around in the vast reaches of the empire while Rome burns?”

How could you ask the Attorney General Bill Sorrell to investigate UVM’s men’s ice hockey hazing rituals back in December 1999 and not ask the AG to investigate allegations of gross malfeasance, conspiracy and deception at Vermont’s largest hospital? What’s up, Doc?

Dean was due back in Vermont Tuesday night. He has a press conference scheduled for Thursday.

Can’t wait.

Meanwhile, the past nerve-wracking week on Hospital Hill has been compounded by the fact that Boss Boettcher has been missing. “Where’s Waldo?” has been the hot question at FAHC. Sources say Boss Bill has been sailing in the Pacific.

All FAHC spokesman Maria McClellan would say on Monday was that the boss “was on vacation with family and all attempts to reach him have been unsuccessful.”

Great. Nothing like abandoning ship, eh?

On Tuesday McClellan called to inform us Boettcher had finally surfaced the previous evening after a two-week absence. The FAHC CEO, she said, had telephoned Drumheller, the board chairman. She would not say where he had called from, but added that Drumheller had “strongly encouraged him” to be present at Wednesday’s emergency meeting of the hospital board. No one should miss his own execution, right?

Boss Boettcher’s days on Hospital Hill are numbered — probably in single digits. But the Mary Fanny management problems extend beyond Boettcher. There are too many cozy relationships and interlocking directorships. And, like the corporate boards of Enron and Adelphia Cable, there’s been a gross lack of oversight by trustees entrusted with that responsibility.

Take the case of Dr. Henry Tufo. A marvelously successful physician and businessman and a very personable chap. He practices medicine while also serving on the FAHC board.


Dr. Tufo also works as a consultant for IDX Systems Corporations Inc., our locally based medical software giant, and serves on the IDX board. Tufo also has a seat on the board of directors of FAHC’s wholly owned offshore captive insurance company.

Also serving on the FAHC board with Tufo is IDX CEO Ritchie Tarrant, a distinguished rags-to-riches entrepreneur with a wicked jump shot.

Last fall, the hospital contracted to purchase a $9 million software system from IDX. Mr. Tarrant, said McClellan, “recused himself” from all discussion of the deal and also from the board’s vote. But that deal also has a foul smell.

Once again, Boettcher and Drumheller adopted a scheme to keep the state in the dark. A $9- million purchase would trigger state review. The Big Dogs, however, said the hell with that. So, thinking out-of-the-box like the Big Dogs at Enron, the Big Dogs at FAHC divided up the IDX deal into smaller, cheaper “modules” to skirt state review.

Then, last February, FAHC proudly announced that Mr. Tarrant had generously contributed $1.5 million to the hospital’s Renaissance Campaign. Tarrant’s partner at IDX, Bob Hoehl, also made a generous $1.5 million contribution.

God bless ’em!

Ms. McClellan assured us, “There’s no link” between the multi-million-dollar, no-bid October contract awarded to IDX and the multi-million-dollar February donation to the Mary Fanny.

Do you think there’s any chance that, say, in Chicago someone would call it a “kickback?”

Jesus, Mary and Joseph! Thank God we live in Vermont, where money changing hands back and forth like that is pure philanthropy — and tax-deductible philanthropy, too! Got to love that mountain air.

But it gets even worse. You see, our Mary Fanny sources say the new IDX software doesn’t work! And guess what?

They’re right.

FAHC’s McClellan told yours truly she checked with the FAHC manager in charge of the computers. She said he told her, “It’s a very large project and, in his experience, it’s common to have implementation issues.” There are always “bugs” in these things, she explained.

Damn bugs. Don’t you just hate them?

There’s even a discrepancy over who was Cox’s attorney back in April. The former CFO said in his deposition that he was contacted in March by Downs, Rachlin & Martin, the hospital’s law firm. He said he was invited to stop in so they could talk about his upcoming testimony and help him “refresh” his memory about the parking garage financing scheme.

Cox testified he did not accept the Downs, Rachlin & Martin invitation at that time. Instead, he said he retained his own attorney — Spencer Knapp, a principal in the Burlington law firm Dinse, Knapp & McAndrew.

Funny thing is, Spencer Knapp was appointed to the Mary Fanny’s board of trustees in January! Little conflict of interest, maybe?

McClellan, however, contradicted Cox’s sworn testimony. She told us Tuesday that, while Knapp had represented Cox last year when he left the hospital, “He did not represent Cox at the time of his deposition.”

Okay, but someone should at least tell Mr. Cox that.

By the way, Mr. Cox eventually did drop by Downs, Rachlin & Martin the afternoon before his deposition. He testified he spent two hours there talking things over with attorneys David Sylvester and Allen Martin.

Stay tuned. Things are likely going to get a lot worse before they get better.

Saratoga Update — Tough luck at Saratoga Saturday for the Grand Lady of Fairholt. Unfortunately, Amy Tarrant (Ritchie’s ex) did not make it to the winner’s circle. Her star 3-year-old filly, Bold World, was entered in the Grade 1 Saratoga Test Stakes. Bold World flunked the test. Amy’s filly went off at 5-1, but yours truly didn’t bite. This column isn’t called “Inside Track” for nothing.

You see, Bold World has never won a race longer than six furlongs. That’s 3/4 of a mile. The $250,000 Saratoga Test was a seven-furlong race. And true to form, Bold World, running second after six furlongs, suddenly hit the brakes like a cab driver who just spotted an airport fare. She finished out of the money in fifth.

Oh, well. Better luck next time.

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About The Author

Peter Freyne

Peter Freyne

Peter Freyne, 1949-2009, wrote the weekly political column "Inside Track," which originated in the Vanguard Press in the mid 1980s; he brought it to Seven Days in 1995. He retired it shortly before his death in January, 2009. We all miss him.


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