Sunday, June 14, 2015

Singing River execs go before grand jury

The Sun-Herald reported last week:

District Attorney Tony Lawrence called former Singing River Health System's chief financial officer, Mike Crews, to testify before a grand jury Friday morning at the same time attorneys were fighting in court over the hospital's finances and a failed pension plan that affects hundreds of Jackson Countians.

Crews was CFO during the seven years SRHS was carrying what eventually became $88 million in uncollected debt and calling it revenue.

An attorney for the retirees said he believes the grand jury investigation is not related to the failed pension plan. Lawrence cannot comment because grand jury proceedings are secret.

The District's Attorney's Office and the FBI have been investigating SRHS and have said the findings would go before a grand jury to determine if a crime occurred....Rest of article.
Kingfish note: This is getting more interesting.  Forget theft or embezzlement.  If SRHS was reporting debt as revenue and thus filing false financial statements, would that be similar to what took place at Worldcom?

7 comments:

Anonymous said...

Yes, KF. That's very similar to worldcom.

Worldcom capitalized things they should've expensed, to make their balance sheet look better.

This would be an entirely different issue than the pension mess.

Makes me wonder if they were trying to make the hospital more attractive for a potential buyer?

Definitely interesting.

Anonymous said...

Chris Anderson must be on the Jackson County Grand Jury's short list.You have to wonder if this type of accounting was being utilized to enhance pay and bonus given to any top exec at the SRHS? Many questions to be answered.

Anonymous said...

"This cycle has repeated itself for the last few years. The auditors recommend that the supervisors audit Singing River and other “component units,” the supervisors send a letter saying they will do the audits on Singing River et al.., the audits are never completed, the auditor makes the same notes the next year. - From the srhswatch.org blog. Some great information that lays out how the Jackson County Board of Supervisors failed over several years to take the necessary action even though they agreed to in writing. Letters to the third party auditor have been posted. Now they the are trying to find a solution for their own failings. Looks like an additional 5 mils in property taxes will do it!!!!



Anonymous said...

Bingo, KF.

Anonymous said...

If this is the case, then their accounts receivable days on hand should be growing year over year. The uncollected nature of the debt comes from either failing to adjust receivables for Medicare/Medicaid procedures, HMO/PPO contractual adjustments, or residual patient balances. These are things that should have been brought out in the audit, though I would think. To the extent the hospital has any working capital lines of credit with a financial institution secured by the accounts receivable, the failure to provide an accurate borrowing base certificate would also represent bank fraud.....which opens the specter of wire fraud and money laundering. This is where the teeth of the law get rather sharp.

Anonymous said...

>>>Makes me wonder if they were trying to make the hospital more attractive for a potential buyer?<<<

For this to be the plan you'd need to find a dumber buyer with more money. Anyone in the hospital management world who has been paying attention realizes the same issues face many if not most similarly sized hospitals located in red states with similar patient bases.

I don't yet know exactly what was done with the actual books and internal documents, but I'd be really surprised if this (refers only to the accounting failure to write off bad debt as uncollectible) was done effectively enough that a competent person would not find it when taking even a cursory look. Or that those in the know at SRHS thought they'd fool anyone smarter than the JaxCo Supervisors.

Potential buyers would do some due diligence. The pension reporting on the annual audits prove that either no competent person read the audits for years, or that the competent person(s) didn't speak up. One or the other is true. A competent person reading the annual audits would find major red flags (more than one) in well under a hour. If you find one cockroach or mouse in your house then you know you better be checking for an infestation. It works the same for financial documents.


Actually, the root cause of the collectibles being off by nearly $90 million could be as simple as a few people not wanting to be the bearer of bad news about a relatively small accounting adjustment that needed to be made to properly account for uncollectible aging accounts needing to be written off. Maybe the first time it should have been done the amount was only a few million dollars. Maybe about 2006 or 2007 or 2008. (no specific knowledge of this)

However, whenever something like this is done management needs to make explanations in writing and perhaps answer some questions. Such as "Will something like this be necessary again?" "Is there a problem with the collections process?" "Why weren't we told sooner- like before there was a problem?" "Who is to blame? The newspaper or some blogger might publicize this. We need a sacrificial goat or two." (Placing a bet that the AR problem began to be hidden and purposefully not recognized in a previous election year. Because in an election year heads might need to roll. Think about the normal audit cycle and when the auditors typically report to management.)


It is possible that the initial bad news was not delivered and the problem got worse as time went on. At some point failure to do the right thing can turn into covering up the failure to do the right thing. Just like leaving a few rats to breed. Soon you can have a big problem. If you don't change the situation where you provide services and can't collect, then the bad debt and loss of revenue continues to accumulate.

Of course, knowledge within an organization that financial games are being played can lead to a corrosive culture of corruption taking root.

Anonymous said...

Judge Hilburn: SRHS- you OWE!

http://www.sunherald.com/2015/08/20/6374673_judge-srhs-must-repay-pension.html

Jackson County taxes going up, voters probably fixing to throw 2 more incumbent supervisors out.

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