By Ashly McGlone
CASTRO VALLEY -- Eden Township Healthcare District's plan to give up to $20 million to troubled San Leandro Hospital may conflict with state conflict-of-interest laws aimed at preventing what is known as "self-dealing" by public officials, some experts say.
Three out of five board members voted late last month in favor of raising the money for the hospital, ceding to the requests of other public officials and community members who said the hospital's doors would close without Eden's support.
Unbeknown to the audience gathered in the crowded board room June 19, two of those votes were cast by physicians who say they are on the medical staff at the hospital. Another board member, gastroenterologist and internal medicine practitioner Dr. Vin Sawhney, abstained from the vote, citing a conflict of interest because he had worked at the hospital for 30 years.
Sawhney's financial interest and the votes by the other two doctors might need further review to ensure the grant-giving district can ethically and legally support the hospital as planned.
"If this donation makes it more likely that he (the board member) will make more money, continue to make the money he is making, or avoid losing money, that's enough under (Government Code) 1090," said veteran municipal attorney Michael Colantuono, named 2010 Public Lawyer of the Year by the California State Bar and current member of the state bar's Board of Trustees. "1090 prohibits making contracts but also prohibits any step along the way to making a contract."
Board members Dr. Ronald Hull, a podiatrist, and Dr. William West, a semiretired orthopedic surgeon who assists other surgeons, said they, unlike Sawhney, do not receive monetary compensation from the hospital's owner, nonprofit Sutter Health. Rather, they said they are paid by their patients and insurers and are free to vote.
Courts have affirmed the illegality of "self-dealing" by a public official, or taking action to benefit his own interests. To prevent it, an official is prohibited from voting on a contract that he may profit from. Government Code 1090 also prohibits the official's governing board from entering the contract without him. According to the state attorney general's office, donations and grants are generally considered contracts. Contracts that violate that section of law are void, and willful violations are punishable by fines, disqualification from holding public office and even imprisonment.
While district officials maintain the board's actions and plans do not violate the letter or the spirit of the state's conflict-of-interest laws, the district's contract attorney said further review might be appropriate at a later date. The board directed its staff to raise the money but did not specify how.
"There was no contract or donation before the board and there are currently no terms of such in the making," attorney Colin Coffey with the firm Archer Norris wrote in an email. "If a contract -- including donation transaction -- ensues at some point, then a 1090 analysis would be appropriate."
The board has a meeting scheduled July 17 but no agenda has been posted.
Coffey said the district could avoid the issue by simply redirecting the $17 million in damages it owes Sutter Health for a legal battle the district lost last year over ownership of San Leandro Hospital. Sutter has agreed to waive the award if the money is given to the money-losing hospital, which Sutter plans to donate to public health authority Alameda Health System in the coming months.
For that to be legal, the parties would need the court's blessing, Colantuono said.
But Judy Nadler, senior fellow in government ethics at the Markkula Center for Applied Ethics at Santa Clara University, said the board's early actions are important. "When you are in a public position, it is more than just following the law.
"I find it troubling where people were part of it until the final vote and then they abstain," she said. "Sometimes the most important decision is the one that says, 'Let's get started,' not the one that says, 'It's a deal.'"
Dev Mahadevan, chief executive officer of Eden Township, said he sees no reason why the district cannot proceed with its pledged support for San Leandro Hospital, as long as the district has the money.
"The conflict of interest is not an issue that is going to be an impediment as I see it," he said. "Anything to do with Sutter and San Leandro (Hospital), Dr. Sawhney will abstain. ... The other two will continue to vote."
In an email, West said, "My vote is based entirely on my status as a citizen in the larger community who may well need the services of their emergency room and general hospital facilities as a patient at any time."
Sawhney, who was present during the discussion, said in an interview, "I have been very actively involved in this struggle, but I could not vote for it because I practice at San Leandro Hospital. I have followed whatever legal advice was given to me by our district attorney all along."
Hull said questions about the vote waste the district's money. "I am a member of the San Leandro Hospital medical staff and have no patients or income derived from maintaining that status," he said. "It is not a conflict unless there is a vote that impacts them (board members) directly."
The district is no stranger to conflict-of-interest laws.
Sawhney resigned from his position on Eden's board last February when his office lease in a building owned by Eden Township was up for renewal. He was re-elected in November after his lease was settled, he said.
In its bid to keep ownership of San Leandro Hospital, Eden Township argued that the health care district had conflicts of interests that should void contracts the district made in 2008 that gave Sutter the option to purchase the facility. An appeals court in the end ruled in favor of Sutter.
As a result of the dispute, Mahadevan said Eden is more aware than most agencies about conflicts of interest.
"We have sort of bent over backward worrying about conflicts of interest," said Mahadevan, in his fifth year as Eden's CEO. "I think that every agency is wrought with conflicts of interests. ... This whole lawsuit was around conflicts of interest so we became acutely aware of that."
Eden's board Chairwoman Carole Rogers said, "It's our intent to follow the law no matter what it is, and if we have to adjust we will do that."
Nadler said avoiding conflicts is increasingly important in the changing health care world.
"Health care policy is much more important probably than it ever has been," she said, "and it deserves to be made in a transparent way by people who have no real or apparent conflicts of interest."
Ashly McGlone covers San Leandro, San Lorenzo, San Ramon and the Washington Township Health Care District. Contact her at 510-293-2463. Follow her at Twitter.com/ashlyreports.