“In the plan will be the request to have the old board turn the keys over to the new Children’s board on Jan. 8,” Escobar said. “And at that point they’re out of bankruptcy, they’re post-bankruptcy. The Herbers partners people go away, the Jackson-Walker people go away, and they essentially stop – all the money leaving the estate and going to them will stop.” Veronica Escobar KVIA November 29th.
The County Commissioners and UMC do not like the consulting firm (specifically Mark Herbers) or the lawyers representing the El Paso Children’s Hospital. They hate them so much, in fact, they have wasted untold tax dollars having their own lawyers dispute practically every filing that they have made for reimbursement. There are some things that Veronica Escobar ISN’T telling you:
- There are 2 sets of lawyers involved on the County side – One for UMC and one for the County Commissioners. The fees that the lawyers for Children’s can charge are capped and come out of El Paso Children’s coffers. The fees that are being paid to BOTH sets of lawyers are coming out of YOUR pocket and are not capped. Do you know how much money you have spent? Of course you don’t, the County and UMC have not seen fit to tell you. Note: After publishing this one of our readers pointed out that UMC also has their own internal legal council as well. So, there are three sets of lawyers being paid. The only lawyers EPCH has are the law firm they have hired (i.e. they have no internal legal council).
- The fees that are being charged by Mark Herber are likewise capped. As El Paso Children’s entered bankruptcy, all on-going fees had to be reviewed and approved by the Judge. The amount that Mark Herbers and team are charging the Children’s Hospital was vetted before a judge who felt the fees was reasonable and approved them.
- In January, when Mark Herbers leaves, another CONSULTING firm will be put in place until a permanent CEO is found, this one chosen by UMC and the County Commissioners. To date, no one has stated who the actual person taking over will be or HOW MUCH THIS NEW FIRM WILL CHARGE. In fact, at that point, El Paso Children’s Hospital will be out of bankruptcy so their bills will no longer need to be approved by a judge and will no longer be visible to any of the tax payers. The intimation from the County Commissioners is that they will be lower, but we’ll never know.
- When Jim Valenti ends his contract next May he’ll walk away with almost $3 million in tax payer dollars. Jim, who is equally as culpable as the El Paso Children’s Board for this whole debacle. The Children’s Board, all volunteers, walks away with nothing. Valenti, who we have shown approved contracts where UMC was collecting money to pay for the bond but was not using that money to pay down the bond, walks away with a hefty retirement.
- There are many other lawyers involved in this case. The creditors have not one but two law firms representing them. The Judge allowed this with the understanding that neither law firm could charge for the same thing (i.e. both law firms can’t claim the same work and each get paid for it). Are the County Commissioners going through these lawyer’s payment claims line-by-line to ensure that there is no double dipping?
- Finally, who is going through all of the documents, line-by-line, submitted by the El Paso Children’s Hospital? Is it the County Commissioners or are they using YOUR money to pay lawyers to go verify every item? Are they paying $100 to save a dime?
Oversight in what the consultants are charging is valuable. Being good guardians of our tax dollars is what the County Commissioners were elected to do. However, it is not clear that they are doing that. They yell about the amount of money El Paso Children’s is spending without actually telling you how much of YOUR MONEY they are likewise spending. Will they be as diligent with the charges when it is their own consulting firm working for El Paso Children’s Hospital?
“It’s very similar to the joint plan that’s always been on the table,” she (Veronica Escobar) said of a settlement that would make Children’s a subsidiary of UMC and delays repayment of its debt to taxpayers for at least five years.
We found this quote from Veronica Escobar in recent El Paso Times article very interesting. The implication is that the bankruptcy was unnecessary and that the consultants and lawyers hired by El Paso Children’s Hospital pushed the board into declaring bankruptcy so that they could leech more money out of EPCH and El Paso. So, we decided to compare the term sheet that was published earlier this year and the plan that we currently have to see how “very similar” the 2 are (you can see the term sheet from March here and the plan that was agreed to by both parties in October here):
- Separate Entity:
- From the March plan: “For a minimum of four years, EPCH would remain a separate corporate entity and maintain a separate board, CEO, license, medical staff, and provider number.” (emphasis added)
- From the October plan: “After the Effective Date, the Reorganized Debtor shall continue to maintain its corporate existence. “
- Note there is no longer a timeline associated with how long Children’s would remain a separate entity.
- The Board:
- From the March plan: “The EPCH Board would be composed of five individuals (“EPCH Board Members”). One of the EPCH Board Members shall at all times be a licensed physician who is a member of the EPCH medical staff and who is not employed directly or indirectly by UMC or Texas Tech. The UMC CEO and UMC CFO would be ex-officio members of the EPCH Board without vote.”
- From the October Plan: “The Board shall consist of seven (7) members (“Board Members”), one of whom shall at all times be a pediatric physician licensed by the State of Texas who is a member of the Medical Staff of the Hospital and who has been nominated by the Medical Executive Committee of the Hospital (“Physician Board Member”). “
- Note that the number of board members had increased and that the physician is a pediatric physician and the limitation that they cannot be from either UMC or Texas Tech has been removed. Also, the Medical Executive Committee (i.e. the physicians) get to choose who that physician should be. Additionally, the UMC CEO and CFO are no longer ex-officio members of the Children’s Board.
- EPCH CEO:
- From the March plan: “The EPCH Chief Executive Officer (“CEO”) would be jointly selected by the EPCH Board and the UMC Board. The EPCH CEO would report to the EPCH Board. The EPCH CEO shall have a dotted line reporting relationship to the UMC CEO, which means a duty to seek input from and consultation with the CEO of UMC.”
- From the October Plan: “The Board shall appoint a Chief Executive Officer (“CEO”), who is qualified by training and experience to be the administrator of the Hospital. The CEO shall not be under contract with or employed by the El Paso Hospital District or University Medical Center. The CEO shall serve at the pleasure of the Board of Directors and shall be reviewed at least annually by the Board. The CEO shall be held accountable for the management of the Hospital and affiliates, in all activities within the limits prescribed by law and the policies adopted by and instructions of the Board. “
- Note that the CEO is now selected solely by the EPCH board and does NOT have a dotted line to the UMC CEO
- Outstanding Debt:
- From the March Plan: “The parties will agree, as a matter of compromise, that, as of 12/31/14, the sum of $49.3 million remains due and owing as an obligation of EPCH to UMC…”
- From the October Plan: “Allowed Secured Claim of UMC in the amount of $15 million secured by a perfected lien on the UMC Collateral. Transactions not secured by the UMC Collateral which Claim shall be Allowed as a general, unsecured claim in the amount of $33 million.”
- Note the difference in the amount of outstanding debt EPCH has in the October plan vs the March one. We’ve already addressed secured vs non secured debt here. Essentially the amount owed went from $49.3 million to $15 million – that’s a HUGE difference.
- From the March Plan: “The parties agree that (i) UMC services to EPCH shall be furnished at UMC’s actual costs, and (ii) UMC shall rescind the notice to EPCH of termination of services, dated February 24, 2015.”
- From the October Plan: There is no mention of how services will be provided.
- Note: We’ve done several articles on the services that were being provided by UMC to EPCH and the costs that were associated with them. It would appear that, as those services are not explicitly stated in the new plan, these services will be renegotiated and possibly outsourced.
- From the March Plan: There is no mention of reducing rent.
- From the October Plan: “the Base Rent (as defined in the Lease) shall be reduced to $500,000 per month.”
- Note the huge difference in the rent.
It would appear that the two plans are similar in that they are both plans between EPCH and UMC that addressed the same items but in vastly different ways. In the first plan, UMC took over the El Paso Children’s Hospital, its board and CEO for at least 4 years. After which, it would be able to completely absorb it. The amount due to UMC was reduced, but nothing was done to reduce the rent, an expense that was so large, there was no way EPCH would be able to climb out from under it. Services were to be provided to EPCH at cost, but there was no mechanism in the plan to ensure that what UMC stated was cost were their actual costs. We’ve heard multiple times that UMC was providing services to EPCH with just a “5% over charge”, however we have proven that was certainly not the case on most of the contracts we have looked at.
One final note, interesting that the 4 years for independence was in the original plan. Anyone who has looked at the pro forma that was recently filed with the court will see that El Paso Children’s Hospital only has a few years left before it becomes profitable. However, under that first plan, UMC would have completely taken control of the hospital and would be in a prime position to assume total control over it (and it’s money).
“What do they expect that is any better than 50 cents on the dollar?” County Judge Escobar asked. In May of this year – apparently they expected and received the ability to maintain the El Paso Children’s Hospital as a separate entity.
We don’t think that Andy Krafsur needs anymore attention, but we found this article interesting in that, instead of objecting to the plan like he promised a few weeks ago, he has just written a letter to the judge. That leads us to believe that he did not have the legal standing to actually object to the plan and all of this is now just sour grapes.
Former lawyer writes letter to federal judge against UMC and EPCH
Is anyone else concerned that the UMC board will be appointing members to the new Children’s Board? The UMC board isn’t following its own by-laws or being responsible with our money, how do we know that they won’t do the same thing over at Children’s? Case in point: Mr. William Hanson – Chair & Ms. Laura Ponce -Vice Chair ” made it clear that neither of you respects Commissioners Court” according to the letter sent by Veronica Escobar asking for their resignation (http://extras.mnginteractive.com/…/20141205_115040_Letter%2…). However, Board Member Miguel Fernandez was arrested for a DWI just last month and NO ONE has said anything about it (http://www.elpasotimes.com/…/umc-board-member-arr…/72431186/). Isn’t this in flagrant violation of the UMC bylaws? Specifically section 4.3 “Absolute disqualifiers shall include the following: 4.3.4 conviction for a crime of moral turpitude or official misconduct” and in section 6.5.2 “A Board member shall resign should any of the disqualifiers listed in Section 4.3 arise after appointment of the Member but during the Member’s term or if the Member violates Section 3.1.2 3 of these Bylaws.” (http://www.umcelpaso.org/webshell/umcep.nsf/BOARDBYLAWS.pdf…). So, if you disrespect the Commissioners Court, Judge Escobar will ask you to step down. Violate the by-laws and nothing happens to you.
Note: This was originally published on our Facebook page on 10/16/15.
It would appear that UMC controlled almost every aspect of the El Paso Children’s Hospital. Services were provided (at inflated prices), the loading dock was controlled by UMC, much of the ancillary staff worked for UMC and the charitable foundation for the El Paso Children’s Hospital falls under the UMC umbrella. You read that correctly – The El Paso Children’s Hospital Foundation is managed by the same board (EPCH Foundation Board) as the UMC Foundation (UMC Foundation Board) and has the same employees (UMC Foundation Employees, EPCH Foundation Employees). Their logos are eerily similar:
Also, it would appear that little is done to separate the Foundations, even in their youtube channel: https://www.youtube.com/watch?v=IZTDvclT_Ng
While we are sure that the staff and board are working diligently for both hospitals, how much of their work can be focused on any one hospital when they are sharing the exact same resources? If there is a grant or a function that would benefit both hospitals, how are those handled and who gets priority? Is there any part of the El Paso Children’s Hospital that UMC didn’t have its hands in? Hopefully the bank accounts are separate…
A Very Happy Thanksgiving from ELP Tax Guardians.
The El Paso Times is reporting that the Mayor, Oscar Leeser, is now getting involved and “is calling for a full report on the city’s attempt to fire its financial advisers and hire a new firm”. You can read the entire story here.
We understand that there is a deal between UMC and El Paso Children’s Hospital and that it will be confirmed next month. What we don’t understand is, why is El Paso Children’s Hospital still paying rent?? Yes, we’ve heard the rhetoric that it is for depreciation, but doesn’t the additional $150,000 that El Paso Children’s is paying cover that (we wrote about that here)? Also, if UMC is going to continue to DEMAND rent from the El Paso Children’s Hospital, why isn’t that money being used to pay down the $120 million bond? UMC has the ability to actually save the tax payers some money in interest by paying down the bond faster.
Clearly the County Commissioners believe the rent is required, they were intimately involved in the negotiations between UMC and El Paso Children’s Hospital. However, why are they not advocating for using that rent to pay down the bond and, thereby, saving the tax payers money in interest costs? Using the rent money to pay down the bond faster is one way in which they could ensure that the El Paso Children’s Hospital is not a burden on the El Paso Tax Payers.
Larry Romero is having a hard time of it. He’s paved streets and put in speed bumps that were not approved. He’s had a brief (24 hour) recall. Then, this past Sunday, The El Paso Times accused him of “lobbying for a former business partner, without disclosing the relationship” and then asked for his resignation (http://www.elpasotimes.com/story/opinion/editorials/2015/11/22/editorial-awful-mess-el-paso-city-hall/76181140/). The Times is claiming that he tried to change the financial adviser from First Southwest of Dallas to Estrada Hinojosa and Co., a firm Romero has ties to. Maybe he had the tax payer’s best interests at heart, but the way he went about doing it and his lack of denial in his response to the El Paso Times article would hint otherwise:
“It’s unfortunate that the El Paso Times has jumped into the political campaigning business,” Romero said in an email to KVIA. “El Paso deserves better. Voters know that I take my job seriously and my commitment is to them and my district,” Romero stated. “I look forward to having this conversation with the community. The Times has crossed the line. Enough is enough. Thank you.” (read the article here).
Now, The El Paso Times are not the only ones asking for his resignation. In an open letter published here, Jim Tolbert lists out Romero’s many sins and ALSO calls for his resignation. Is Romero playing fast and loose with his power and tax payer funds? Only time will tell.
You can view the KVIA report here.
Veronica Escobar, really likes using the word never, particularly when it comes to talking about the rent for the Children’s Hospital. Below are some tweets she’s recently sent out. She claims that the Children’s hospital NEVER paid rent. However, the audited tax reports that we found had the following statement in them: “… all monthly rental payments are current as of February 1, 2013.” (http://elpasochildrens.org/…/06/2012-EPCH-990-Tax-Return.pdfpg.17 of the Auditors report). That means that, at least for the first year, EPCH was actually making rental payments. So, if Veronica is claiming that rental payments were NEVER made but the Auditor’s report claims otherwise, WHERE DID THE MONEY GO?
Update: This was originally published on our Facebook page on 10/3/15.