Ill Feelings : FHP’s Ousted Founder Says Losing Post Was a Bitter Pill
Robert Gumbiner, the founder and recently deposed chairman of FHP International Corp., isn’t taking his ouster lying down.
He talks bitterly about the people who removed him from the managed care company he started 30 years ago. He blames directors for sacking him at a June 15 board meeting when he was still weak after surgery for prostate cancer.
In a wide-ranging interview at his Long Beach home last week, Gumbinerhad this advice to corporate leaders: “If you want to be chairman of the board, don’t get sick or have surgery or have disloyal board members.”
Tan, impeccably casual in a sport shirt, slacks and loafers, Gumbiner says he feels fit again and wishes he’d felt healthy enough a few months ago to launch a proxy battle. “Right now, I’d probably do it,” he says. “Sixty days ago, I was feeling pretty bad.”
In fact, late last week Gumbiner did show up at the Fountain Valley company’s annual meeting, where he publicly criticized the company. After the meeting, he half-jokingly told managers in charge of investor relations and public relations that he had enough trouble in store to make their jobs secure.
Though he wouldn’t elaborate, he’s already promoting his bitter version of his ouster on several other fronts.
He’s flogging a self-published history of FHP. He’s considering adding a chapter on his ouster that could be turned into a business-school case study. And he’s hired a public relations firm to line up interviews.
So on this day, seated in his circular office studded with artwork from Micronesia, New Guinea and the Pacific Northwest, the 72-year-old physician has his say about his ouster from the company he started.
“This is a classic backdoor takeover by a company we acquired,” he says. After Gumbiner was ousted, the board elected the former chairman of TakeCare Inc., the company that FHP acquired, to replace Gumbiner as FHP chairman.
He blames certain directors for mounting a coup when he was in a weakened condition after his surgeries.
The morning of the meeting, he knew he was under fire but still felt he had a chance to keep the chairmanship. He figured he could count on four votes on the eight-member board: Westcott W. Price III, FHP’s chief executive; Mark B. Hacken, a former executive; his son, Burke F. Gumbiner, an FHP executive; and himself.
*
Half an hour before the meeting, however, Gumbiner got a fax saying Hacken had resigned. Gumbiner, entering the meeting with just three votes on his side, didn’t feel healthy enough to hold out for a session expected to run up to eight hours. He says he also didn’t try to remove the question of his replacement from the agenda.
The board voted him out, 5 to 2. At the last minute, he says, even Price deserted him--an act of disloyalty Gumbiner considers especially galling. He asserts he saved Price’s job several years ago when the board contemplated firing him.
Price declined to comment.
Directors elected Jack R. Anderson, the former chairman of TakeCare Inc., to replace Gumbiner. Assigned the post of chairman emeritus, Gumbiner went home to bed, he says.
Within a week, he resigned from the board in frustration. “Unfortunately, the people who followed me tried to change the philosophy,” he laments.
His diminishing ties to the company now include 150,000 shares of stock and two properties leased to FHP by real estate interests he controls.
*
Though he wasn’t specific about his net worth, he allowed that in 1986, when the company went public, he owned half of its stock, a 5-million-share stake then worth about $60 million.
He’s found another project for himself in the ashes of FHP’s corporate cutbacks.
For years, FHP operated a senior center and art gallery in a building on Alamitos Boulevard in Long Beach that it leased from a partnership he controls. He’s now converting the building into a museum for Latin American art.
On neighboring properties he controls, he recently developed a park and aims to open a restaurant, “Barcelona Brasserie,” next month.
At last week’s annual meeting, he blamed Joseph F. Prevratil, among other directors, for turning on him. Gumbiner traces troubles with Prevratil back two years, when Gumbiner donated $2 million to the Queen Mary foundation. Gumbiner says he resigned later that year as the foundation’s chairman, disappointed with Prevratil’s management of the tourist attraction.
Prevratil, denying Gumbiner’s account, said he’s tired of Gumbiner impugning him. Prevratil expressed the hope that Gumbiner can find satisfaction in his retirement, new wife and considerable wealth, saying, “I only wish the best for him.”
*
But Gumbiner’s campaign against the company isn’t just personal, it’s philosophical. While stock analysts have applauded the company’s restructuring, Gumbiner insists that the company structure he set up ensured better care for patients.
He’s trying to keep alive his vision of health care delivery by promoting a 408-page tome, “FHP: The Evolution of a Managed Care Health Maintenance Organization; 1955-1992.”
Published last year, it traces his life through his interviews with Sally Smith Hughes, a UC Berkeley historian. Sometimes fascinating, often repetitive, it is a colorful take on modern medicine from an industry innovator in managed care.
The book recounts how Gumbiner, raised in Gary, Ind., reluctantly followed his father into medicine. His father paid his college room and board on the condition that Gumbiner would go to medical school, he says.
Though fond of him, Gumbiner says: “He was a typical middle-class conservative doctor. We have plenty of them around today--doctors with very little imagination.”
Gumbiner, who found treating patients “boring,” gravitated to the business aspects of medicine. Moving to Southern California in 1949, he first worked as a pediatric resident for the former Orange County Hospital in Santa Ana.
Given to pointing out others’ management errors, he got himself fired twice, first as a contagious disease officer for the city of Long Beach and later as a salaried doctor for Ross-Loos, a medical group that pioneered in the area of prepaid medicine.
He opened a solo practice in Lakewood in 1952, started taking management courses a few years later and eventually developed a group practice through which he experimented with prepaid medicine. In 1961, he converted his practice to a nonprofit corporation that became FHP.
Among other innovations, he developed a pilot project for a prepaid Medicaid program in California in 1969 and, 13 years later, got a federal contract to do the same for Medicare recipients.
The company grew according to his personal pursuits, expanding into Utah, where he liked to ski, and Guam, where he went scuba-diving.
*
Now, he’s considering adding a chapter on his ouster. He’s already drafted up his recollections and figures they’d make a good case study for business students.
If that weren’t enough, he’s directing a center he developed on the island of Yap to promote the ethnic arts of Micronesia. He’s working, too, on plans to add a gym, tennis court and guest room to his 6,000-square-foot home overlooking Alamitos Bay.
Gumbiner does claim one common privilege of retirement, however. He no longer sets his alarm.
