October 25, 2012
Over the past six months, as a political debate over Salinas Valley Memorial Healthcare System's finances and compensation packages has played out, District Attorney investigators have been looking into possible criminal activity by hospital officials.
District Attorney Dean Flippo announced Thursday he's declining to file criminal charges against retired CEO Sam Downing and board member Harry Wardwell.
The DA launched the investigation after State Auditor Elaine Howle released her office's detailed findings on financial operations at SVMH. The audit had been requested by Assemblyman Luis Alejo, D-Watsonville.
At issue was a $50,000 Downing had invested in 1st Capital Bank stock about a year before the SVMH board approved a $1 million investment into the same bank in 2008. According to state statue, DA investigators found, as long as Downing owned less than 3 percent of the bank's stock, and derived less than 5 percent of his annual income from the investment, his stock there was OK.
Investigators also looked into a lease agreement between SVMH and Rabobank. Wardwell is regional president of the bank, and abstained from voting on a contract in 2008. State auditors suggested Wardwell should've disclosed his financial interest in the contract, but the DA reports abstaining was enough to keep him from committing a crime.
However, the Rabobank contract may be void because "it was illegal for the board members to approve a contract in which one of their members—even one who abstained from voting—had a financial interest," according to a statement released by the DA.
During the investigation, another allegation emerged against board chair Jim Gattis, for allegedly approving contracts with businesses that are his tenants in his real estate job. "The investigation revealed the complaint was meritless," the DA reported.
The California Fair Political Practices Commission has an open investigation into the allegations against Gattis.