MediSys Board Finally Fires CEO who was Charged with Bribery in 2008

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March 20, 2011; Source: Crain's New York Business | The board of the nonprofit MediSys Health Network fired its CEO, David Rosen, because of charges that he was involved in bribery and other corrupt dealings with the late New York State Assemblyman, Anthony Seminerio. Good move? Probably, except that that information was known back in September 2008.

Now, in the wake of Rosen's indictment for bribing Seminerio, State Senator Carl Kruger, and Assemblyman William Boyland Jr., the MediSys board finally acted. The Department of Health and the Office of the Medicaid Inspector General (the hospitals get $225 million annually from Medicaid) are curious why Medisys and the Jamaica Hospital Medical Center didn't act before this. Apparently, board members at the four MediSys-related boards have "unusually close ties to Mr. Rosen," according to Crain's. Also, the "boards have a higher-than-usual concentration of trustees who also work at the hospitals, making them dependent on Mr. Rosen for their paychecks."

The OMIG investigation might ban Rosen from participating in any Medicaid program in the nation, making him almost unemployable. But due to their failure to act, and perhaps their knowledge of Rosen's activities, the boards of MediSys and Jamaica may also be targets of state investigations. Crain's offers good reasons for why the misdeeds likely occurred, suggesting that "inner-city safety-net hospitals [like MediSys and Jamaica] often struggle to attract trustees who don't have a personal interest in board membership. They frequently are vendors who want to do business with the institutions or real estate developers who want to have a hand in preserving property values in a hospital's neighborhood."

Crain's also noted that "MediSys-related boards are unusual," citing the presence of a Genovese crime family captain from Queens on one of them. In another case, a Brookdale hospital doctor is listed as the chairman, and at age 82, may be paid compensation of $307,000 simply for his board service.

Sometimes one might be reluctant to draw too many nonprofit governance lessons from the misbehavior of hospitals that have their eyes on hundreds of millions of state Medicaid funds, but there are several lessons in the MediSys case: Boards shouldn't be comprised by too many of the friends and colleagues of the CEO; nonprofits should limit how much business they do with board members as vendors; nonprofits should vet the ethics and behavior of potential board members so that they don't end up with crooks in their midst; if board members become rubber stamps for the CEO, they aren't functioning and should be replaced; and when a board learns of the likelihood of potentially criminal behavior on the part of the CEO, it's time to act.—Rick Cohen