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Coast Hospital: The Backstory

Failing to disclose expenditure of public funds for legal services appears to be nothing new for some members of the Mendocino Coast Health Care District Board of Directors. Here’s the crucial backstory:

In December 2019 California’s Fair Political Practices Commission (FPPC) received a sworn complaint against two members of the Mendocino Coast Health Care District (MCHCD) Board of Directors and its interim Chief Executive Officer. About two weeks later the FPPC wrote to the complainant, stating that the commission would be investigating the allegation(s). At that time the FPPC had made no determination on the complaint. This April 8th I wrote to the FPPC to inquire about the status of the case. On Monday, April 11th, an FPPC official responded that the case is still open.

The complaint has to do with the process leading up to the MCHCD Board of Directors vote to approve the affiliation lease agreement with Adventist Health in November 2019. In the spring of that year a Request for Proposal (RFP) went out for potential suitors in the affiliation process. In April 2019 the MCHCD Board asked its law firm, Best Best & Krieger (BB&K), about potential conflicts of interest in the affiliation process. In an April 25, 2019 document a BB&K attorney set out to solve that problem. Over multiple pages, the attorney presented possible reasons for a conflict of interest issue(s) for MCHCD Directors Jessica Grinberg (then vice chair of the board of directors) and Karen Arnold (then chair). The conclusion offered up by BB&K: “It is possible that at least one board member, Director Grinberg, has a potential conflict of interest if the FPPC considers payments made to her by Adventist [Health] a source of income. Since there is no guidance on this issue, the only way to seek a definitive opinion is from the FPPC.”

The equivocation from the law firm was based on the rather unique situation that, yes, Grinberg’s orthotics and prosthetics business did receive funds from Adventist Health (AH), but that money essentially only passed through AH in a brief holding pattern from Medicare to Grinberg. Arnold worked for Mendocino Coast Clinics, a federally funded organization. The BB&K letter also came down squarely in the middle of indecisiveness in Arnold’s case. “In addition, in the absence of any knowledge of how the Adventist proposal might impact Director Arnold’s employer’s Clinic, we cannot opine at this juncture that there is an existing conflict for Director Arnold. When a proposal in response to the RFP is received, it may be clear that there is a conflict, or it may not be and FPPC guidance may be appropriate.”

The BB&K conclusion in April 2019: “Given the uncertainty in both cases, it is recommended that management direct district counsel to seek FPPC guidance on behalf of the District so that in the event a proposal from Adventist is forthcoming the District has clear guidance on how to proceed.”

Indeed, Adventist Health turned out to have the only realistic affiliation proposal. In May, the BB&K attorney, Michael Maurer, sought FPPC guidance. Asking the basic question of whether or not Grinberg or Arnold could take part in the MCHCD Board’s decision-making on an affiliation agreement with Adventist Health. On June 26, 2019, the FPPC ruled that neither could participate in the affiliation work of the district’s board. Though Grinberg had no competition in the business of providing orthotics and prosthetics on the coast or at her Willits office, the FPPC stuck to a strict theoretical interpretation of regulations and denied her participation in the affiliation process, including taking part in a final board vote on affiliation. The FPPC ruled that Ms. Arnold’s employer also had a theoretical potential for financial gain or loss with the potential affiliation, thus, she too was denied participation in the affiliation process in a similar manner as Grinberg.

MCHCD Interim Chief Executive Officer (CEO) Wayne Allen issued a statement within a matter of days, which declared in part, “Director Grinberg’s ruling will be appealed as there are several issues of fact that may have been misinterpreted.” It does not appear that an appeal was registered with the FPPC.

What happened next is a bit murky, but what is clear is that in some manner Arnold and Grinberg procured the services of attorney Steve Churchwell, who had previously served as general counsel to the FPPC, to act on their behalf. At an early November MCHCD Board meeting, Karen Arnold announced that she had received advice that she could participate in affiliation matters. No clear and detailed statement was offered on the record from Churchwell. Similarly, by the time the MCHCD Board voted on the proposed affiliation with Adventist Health on November 22, 2019, Jessica Grinberg took a seat with the other four board members with even less said than two weeks earlier by Arnold. Grinberg then took part in the vote on affiliation. Interestingly enough, there doesn’t appear to be any documented evidence that states the reasons Churchwell gave for Arnold and Grinberg’s return to the MCHCD Board to vote on affiliation.

This is where the December 2019 complaint to the FPPC comes into play. The complainant presents the confusion inherent at the time. “Rather than providing additional information and seeking a re-determination from the FPPC, either the Healthcare District or Directors Arnold or Grinberg sought advice of legal counsel [seemingly Churchwell] who apparently advised them that he disagreed with the FPPC’s earlier determination that one or both of them had conflicts of interest. (It is unclear exactly what happened, this is based on oral statements by Chair Arnold and Interim CEO, Wayne Allen, at the November 2019 board meetings.)” 

The complainant goes on to another allegation: “Based on the public statements of Chair Karen Arnold, Interim CEO Wayne Allen, and Board member Amy McColley at the November 22, 2019 special meeting, it appears that Mendocino Coast Healthcare District funds may have been used for the personal legal expenses of Chair Arnold and/or Vice Chair Grinberg concerning their potential conflicts of interest, which could be an improper gift of public funds. Moreover, it appears as if Interim CEO Wayne Allen may have been involved in making the decision that Chair Arnold or Vice Chair Grinberg could reverse course and begin participating in the affiliation decision by potentially coordinating working around the District’s legal counsel, Best Best & Krieger, and seeking alternative legal opinions that were not consistent with the FPPC determination that conflicts existed barring the participating of Directors Arnold and Grinberg. This should be investigated to determine if anything improper occurred or if Interim CEO Allen was involved in facilitating or encouraging either Chair Arnold or Vice Chair Grinberg to stop recusing themselves and begin participating in board action concerning affiliation.”

There are so many inconsistencies afoot here. Not in the questions raised by the complainant. First, sources familiar with the events in 2019 have confirmed that the attorney, Churchwell, used by Arnold and Grinberg to justify their participation in the affiliation vote, was paid with MCHCD funds. If District taxpayer money was used then the District (its residents and taxpayers) should have been apprised in a clear open session announcement that a specific amount was spent for Churchwell’s services. It appears that did not occur.

While being paid by MCHCD taxpayer funds, Churchwell did not represent the other board members’ interests or the District’s interest. He only represented Grinberg’s and Arnold’s interest.

Whatever Churchwell’s advice was to Arnold or to Grinberg, it does not appear to be memorialized in any document available to the public who paid for his services. Thus, whomever it may have been making the decision to pay Churchwell for the advice given to Arnold or to Grinberg has some explaining to do to the other MCHCD Board members and to the public. The educated guesses point to Arnold and Grinberg or a possible combination thereof (that may have included the interim CEO) for making this decision, but as stated before the specific decision-making on hiring Churchwell remains murky. That murkiness combined with public funds should have been a red flag for those involved at the time. 

In one sense the problem was recognized soon thereafter. The minutes for the December 11, 2019 MCHCD Board meeting reflect this statement from board member John Redding: “When the issue of conflict of interest [regarding Grinberg and Arnold] with respect to affiliation first arose, it was deemed that BB&K, our legal counsel, was insufficient and that the final arbiter should be the FPPC. The FPPC’s guidance, in fact, was followed for several months. I just want to be clear. It appears that now legal advice is indeed sufficient to rule on a matter of conflict of interest and not the FPPC, because the FPPC was not consulted this time. So I just want to know what is our policy, what is our process, what is our standard, and if legal advice is sufficient, and not the FPPC, then I would like to see a policy where Board members should be given a copy of that letter so we can judge the contents for ourselves and deliberate on that.” 

The quote is from the minutes of the meeting, not Redding’s exact words. However, it means that the advice given by the attorney Arnold and Grinberg procured for themselves at district expense was never shared with the district’s other elected representatives on the board let alone the public. In plain terms, it appears that Arnold and Grinberg used their positions as chair and vice chair to authorize expenditure of district funds for an attorney who did not represent the district or even the other board members. It seems they hired this attorney to represent their own interests. Though the money was seemingly paid to the attorney, there does not appear to be any record that the full board ever approved the expense.

* Readers should be aware that current chair Norman deVall and secretary Sara Spring were not MCHCD Board members at the time of the events described herein.

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