SEC May Sue Tenet, 6 Former Execs
The federal government intends to sue Tenet Healthcare Corp., its former Chief Executive Jeffrey C. Barbakow and five other former executives over the hospital chain’s Medicare billing payments, the company said Wednesday.
Tenet, the nation’s second-largest hospital chain, abandoned its controversial billing practice in January 2003, a few months after it came to light. Under the practice, Tenet altered its pricing to make money from a special Medicare fund designed to cover losses that hospitals incur in caring for the sickest patients. The payments were known as outliers.
The company’s Medicare billing practice is already under investigation by the Justice Department and is the basis of a racketeering suit filed against Tenet this year by the Florida attorney general.
So-called Wells notices from the Securities and Exchange Commission were issued to Tenet and six former executives, the Dallas-based company said in a statement after the stock market closed.
Tenet, which moved its headquarters from Santa Barbara this year, had been cooperating with the SEC during the two-year investigation, spokesman Steven Campanini said. The company has until May 11 to respond.
“We will respond to hopefully demonstrate why an enforcement action is not necessary,” Campanini said.
Barbakow’s lawyer, Patty Glaser, said there was no basis for a suit against him.
“We believe that he has done absolutely nothing wrong,” she said. “He has been involved as an officer, director for several companies over a period of many years, and he has proven to be a highly ethical individual.”
Also receiving the notices were Tenet’s former Chief Operating Officer Thomas B. Mackey, former Chief Financial Officer David L. Dennis, former general counsel Christi R. Sulzbach, former chief accounting officer Raymond L. Mathiasen and Steve Dominguez, former senior vice president of government programs. All the executives left the company in 2002 and 2003, Tenet said.
Mackey’s lawyer said he filed his response Monday.
“Tom Mackey always acted honestly and in good faith,” said his lawyer, Ron Nessim. “He has fully cooperated with the SEC’s investigation and expects to be fully vindicated.”
Dominguez also filed a response Monday, said attorney Mark Beck. “He acted in good faith throughout making representations internally in the company that were received and vetted by people in whom he had the utmost confidence,” Beck said. “He never signed anything that went to the SEC.”
Lawyers for the other former executives could not be reached for comment.
“This should be a wake-up call to everybody that the government is moving slowly, but they are moving,” said Jeff Villwock, a financial advisor to the Tenet Shareholder Committee. “This is significant in that it’s going after individuals.”
The SEC could seek fines and other penalties if it files suit.
Tenet shares fell 15 cents to $11.85 in New York Stock Exchange trading.
Bloomberg News was used in compiling this report.
