Tenet settles SEC fraud allegations
Tenet Healthcare Corp. agreed to pay a $10-million penalty to settle Securities and Exchange Commission charges that it inflated its earnings by fraudulently billing the Medicare system, company and federal officials announced Monday.
The accord closes the book on government actions against the nation’s second-largest hospital operator related to its alleged Medicare fraud, which took place while it was based in Santa Barbara.
Now based in Dallas, Tenet admitted no wrongdoing in Monday’s settlement, but said in a news release that the company had “undertaken dramatic changes in its operations, financial safeguards, governance and compliance” since the allegations first surfaced in late 2002.
The SEC also charged four former Tenet officers with fraud. Those charged are Chief Operating Officer Thomas B. Mackey, 58, of Keswick, Va.; General Counsel and Chief Compliance Officer Christi R. Sulzbach, 52, of Santa Barbara; Chief Financial Officer David L. Dennis, 58, of Los Angeles; and Chief Accounting Officer Raymond L. Mathiasen, 63, of Los Angeles.
Dennis and Mathiasen settled. Mathiasen agreed to pay $240,000 in penalties and to be barred from serving on the board of a publicly traded company for five years. Dennis agreed to pay $150,000.
The cases against Mackey and Sulzbach are continuing, federal officials said. They declined to comment further.
Last summer, Tenet agreed to pay $900 million to settle charges that it had bilked Medicare, the federally funded health insurance program for the elderly and disabled. That settled the issue of whether Tenet had deceived Medicare. The SEC charges alleged the scheme also affected Tenet’s shareholders because it artificially inflated the company’s value with ill-gotten revenues.
“By exploiting a loophole in Medicare regulations, Tenet embarked on an unsustainable strategy to turbocharge its earnings,” Randall R. Lee, director of the SEC’s Los Angeles regional office, said in a statement. “Yet even as Tenet’s strategy produced nearly half its earnings per share, Tenet’s management kept investors in the dark about the central business strategy underlying its earnings growth.”
When that strategy was made public, the SEC said, the market value of Tenet’s stock plunged by more than $11 billion.
Tenet shares fell a penny Monday to $6.42, down from a 52-week high of $9.27 a year ago. News of the settlement came after the end of regular trading.
