Getting What You Pay for in Trustees: A Terrifying Case Study

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December 31, 2012; Source: Baltimore Business Journal

Only 15 years old, Baltimore Behavioral Health Center has filed for bankruptcy after finding itself deeply in (disputed) debt to, among others, the IRS. According to the IRS, BBHC owes $ 4 million in unpaid payroll taxes. Among other alleged debts is $900,000 owed to a contractor providing counseling services. The Baltimore Sun investigated the nonprofit in a series that ran between 2010 and 2011. In a recent summation of their series, the Sun described the situation in brief: “BBH has received more than $65 million over the past five years in government payments, largely from billing the Medicaid program for the poor and disabled.” The Sun’s 2010 coverage revealed unusually high Medicaid billings and detailed the clinic’s control by Hathaway and several family members who earned six-figure salaries.”

But the real facts, according to the Baltimore Sun, are much more astounding. BBH’s clinical standards were under scrutiny as was its relatively high billing. but its array of just administrative issues over the past few years was breathtaking and almost anachronistic. Remember, that this agency was a prominent local provider :

  • It was fined $90,000 for hiring Dr. Roman Ostrovsky as an administrator, a position he held for 14 months he worked there as an administrator. Ostrovsky was on a federal no-hire list because of a fraud conviction fraud;
  • The agency has been sued for allegedly absconding with money that was supposed to go into staff retirement accounts;
  • In 2010, a husband-and-wife team held lead administrative positions with Morris Hill as president and Sandra Hill as Vice President for Clinical and Medical services. Oddly, each was paid $252,992 in 2009.A son of Sandra Hill was paid $347,000 in 2008 for his role as chief executive and chief financial officer. Sandra Hill’s son-in-law was the chief doctor. The organization did not have audited financial statements and Morris Hill prepared BBH’s 990 and no outside accountant reviewed the group’s books;
  • Six family members sat on the board which included eight trustees, all of whom were paid.
  • In 2002, Nicholas Scotto was listed as chief of psychiatry though he was at the time on probation with the Maryland Board of Physicians. In the late nineties he was by his own admission addicted. He was convicted of writing inappropriate prescriptions, went bankrupt and finally entered rehab where he continued to write prescriptions.

We could go on (and on) but why bother? The fact that this agency was able to do business with the government with such an abundance of flaws just re-emphasizes the need for a healthy regulatory and contracting environment and truly independent governance systems. Martha Coakley, the Attorney General of Massachusetts, believes that paying trustees gives them incentive to collude and look to their own interests rather than the interests of the public. What do you think?—Ruth McCambridge

  • Heather Iliff

    As a consultant to nonprofits, I rarely come across organizations that have paid directors. When there are paid directors, there are often other red flags. I find that the organizations with paid directors tend to be larger budget-wise and in the health field with large government funding streams. They tend to operate more like businesses than nonprofits, putting the bottom line ahead of the mission.

    This is all yet another argument for the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector. It calls for volunteers to be elected, unpaid, and unrelated.

    This story also really pains me for all the honest and hard-working mental health nonprofits out there who have to deal with so much red tape from Medicaid and from the state agencies. Its hard for me to believe that with all that over-regulation in the mental health field, this agency could continue to get funding for so long.