Board: Insufficient evidence that Tahoe hospital CEO broke law (updated)
August 26, 2014
The Tahoe Forest Hospital District board of directors will take no further action regarding an alleged conflict of interest with CEO Bob Schapper.
The board's 4-1 decision Thursday afternoon after meeting for roughly five hours in closed session caps a multi-month internal investigation.
The decision was based on a conclusion from an independent investigator that found insufficient evidence that Schapper violated California's conflict of interest code 1090.
Greg Moser, a partner with San Diego-based law firm Procopio, Cory, Hargreaves & Savitch LLP, a firm hired by the board, conducted the probe.
"The CEO had no role in influencing the decision to contract with the firm (Medical Practice Solutions Inc., a company operated by Schapper's wife, Marsha), to direct the work, and toward that end, any decisions to renew that contract were brought back on an annual basis, and the board has always approved those contracts," said Steven Gross, general counsel for TFHD.
Board chair John Mohun voted against Thursday's motion. He was not available for immediate comment.
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When asked Friday for a statement from Bob Schapper on the board's ruling, Paige Nebeker-Thomason, TFHD director of marketing and communications, said he will not be making any statements.
"We are pleased to know that after a full and complete independent review of our conflict of interest policy and the facts and circumstances surrounding the engagement of Marsha over the years, the facts show the CEO had no role in hiring or influencing compensation for Marsha," Crystal Betts, chief financial officer for Tahoe Forest Health System, said in a statement. "We're very committed to continuing to improve transparency of our actions."
Medical Practice Solutions contracted with the hospital in February 2003 and was paid $915,000 over the course of more than seven years for its services, according to previous reports.
California Secretary of State documents show Bob Schapper was listed as the company's chief financial officer in 2003 and 2013.
Code 1090 states: "Members of the legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members."
In a previous statement to the Sun, Schapper addressed his connection with MPS by saying: "As has been disclosed many times over the years, I have been a participant in name only in Medical Practice Solutions. I am not an active participant in the corporation."
In October 2010, Marsha Schapper was hired as a full-time district employee, serving as executive director of multi-specialty clinics until May 14, 2014, when her position was eliminated for consolidation purposes.
"It's important to note that during her tenure as an employee … Mr. Schapper had absolutely no role in the decision to hire her, or to set her compensation or determine eligibility for amounts of any bonuses," Gross said. "She was constantly under the direction of the CFO, and then later the CFO and the COO of the organization, and it's really based on those sets of facts that the board has determined the action it's taken today."
The investigation's findings were supported by Randy Riddle, whose focus is ethics laws, including conflict of interest matters.
Riddle, who previously told the Sun his legal opinion was Schapper broke no laws, was hired in July by Schapper's personal attorney.
The hospital board reportedly began conducting the internal investigation in May.
"I want to thank you all for your patience, not just today, but over the last three, four months as this issue percolated through the community," Karen Sessler, a TFHD director, said at Thursday's meeting. "… It was very important for the board to take its time to work through this important issues, to not rush into it, to get expert, outside counsel and investigators involved."
On Tuesday, Glenn Jennings, Nevada County deputy district attorney who is assigned to the Truckee office, said: "We have no information yet concerning these allegations."
A spokesperson for the state attorney general's office said it has no comment at this point.
The district has paid approximately $47,000 through July 2014 for Moser and the law firm's services, Gross said.
"I'm glad we're at the end," TFHD director Roger Kahn said in a follow-up interview. "We're happy to finally put it behind us and will continue to run the hospital in the best possible way for our community."