National Medical Enterprises loaned its founder, Richard K. Eamer, $3 million last year without so much as an IOU, and showered him with hefty severance, consulting and retirement deals as he departed the scandal-scarred hospital chain.
The disclosures, in material prepared for NME’s annual meeting today, came as the company made a separate announcement Tuesday that its first-quarter earnings fell more than 16%.
Shareholders are expected to bombard National Medical’s new chairman and chief executive, Jeffrey C. Barbakow, with questions about its towering legal woes and tumbling stock price at the annual meeting scheduled for a hotel near the firm’s Santa Monica headquarters.
Eamer, a trucker-turned-lawyer who founded National Medical in 1969, built it into a giant with $4 billion in yearly revenue. Often criticized for arrogance and high-handedness, he was replaced as chairman and chief executive this year as allegations of insurance fraud and exploiting psychiatric patients mounted.
While Eamer’s compensation didn’t equal his $19.9 million as California’s highest-paid executive during 1991, it remained extraordinary, considering National Medical’s troubles and slipping stock price.
Eamer’s total compensation was more than $9 million during the fiscal year ended May 31, the day he and co-founder Leonard Cohen retired as executives, National Medical’s proxy said. That included $64,779 attributable to personal use of company planes.
Eamer’s departure agreement awarded him another $2.66 million in a lump sum, $250,000 a year for five years in consulting fees, and increased a retirement payment from $371,578 to $527,670 per year. He also was granted stock options valued at $790,500 during the year, the company said.
In announcing the first-quarter earnings, the company said earnings dropped because state and federal investigations and various lawsuits involving its hospital operations have adversely affected patient volumes and revenue.
The company earned $42 million, or 24 cents a share, for the quarter ended Aug. 31, before an accounting change credit, down from $50.6 million, or 29 cents, in the year-earlier quarter.
Revenue declined 5.2% to $891.8 million. The company recorded a credit of $60.1 million, or 33 cents a share, for the first quarter.
In a statement, Barbakow said the company does not expect “any dramatic turnaround in our earnings performance until we begin to resolve our legal problems.”