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Southcentral Foundation sues tribal health partner, charging ‘power grab’ tied to pay raises

  • Author: Alex DeMarban
  • Updated: December 2, 2017
  • Published January 24, 2017

A regional tribal health group is suing its health care partner, the Alaska Native Tribal Health Consortium, accusing it of an illegal power grab that led to "lucrative" pay for top executives and bigger compensation for board directors after a $153 million federal settlement.

The lawsuit, brought by Southcentral Foundation in U.S. District Court last week, exposed an internal conflict between the two organizations that manage and own the Alaska Native Medical Center in Anchorage, providing health care to Alaska Natives statewide.

The conflict is rooted in Southcentral's seat on the ANTHC board, a 15-member body primarily consisting of officials with regional tribal health organizations from around Alaska.

Southcentral Foundation provides health care to Alaska Natives and Native Americans in much of the state's Southcentral region.

The battle has been brewing since the summer of 2014 when the federal government acknowledged it had not paid certain costs as part of its agreements with ANTHC for years, leading to the large settlement.

Southcentral's complaint in federal court focuses in part on actions by the ANTHC board president and chair since 2008, Andy Teuber, but it does not name him.

The complaint also does not specifically say how much pay was increased for ANTHC officials or its board members. But according to tax documents filed by the nonprofit ANTHC, Teuber's annual "reportable" pay jumped significantly between Sept. 30, 2014, and the same period a year later, from $122,398 to $626,104.

As of Tuesday afternoon, ANTHC had not filed a response in court to the complaint. And Teuber said Tuesday he was not ready to publicly comment.

"I've not seen the lawsuit or the complaint you're referring to," he said. "It's going to be certainly interesting for us to review it."

Michelle Weston, ANTHC public relations director, said the complaint stems from a "misunderstanding" tied to different interpretations of federal law.

Weston called Southcentral's assertions about improper actions "completely false."

"We intend to reach out to Southcentral Foundation to see if we can resolve our differences," outside of court, she said.

According to the complaint, Southcentral asserts Teuber notified the ANTHC board of directors in November 2014 that they would consider amending the consortium's bylaws at their next meeting, without explaining the proposed changes.

The board adopted the changes "with little or no discussion" in early December 2014, creating a five-member executive committee consisting of Teuber and three other ANTHC officers. The complaint says the changes adopted by the board "greatly increased" Teuber's power and authority.

The complaint alleges Teuber refused to answer questions from Ileen Sylvester, Southcentral's vice president of executive and tribal services and its representative for the meeting in late 2014.

It says the new committee enjoyed nearly the same power as the full ANTHC board, including authority over compensation, according to the lawsuit.

Southcentral claims in the suit that the executive committee operated in violation of federal law, including making decisions that weren't ratified by the full board. The full board wasn't even notified of all actions, the lawsuit charged.

"The bylaw amendments effectively delegated the decision-making authority of the 15-member ANTHC board to the five ANTHC directors on the executive committee, who could then govern ANTHC without the knowledge or input of the other 10 members of the board of directors," the complaint said.

"This put the entire ANTHC board at great risk," the lawsuit said. "Under applicable law, all ANTHC directors are legally responsible for any acts by the executive committee, despite lack of meeting notice or lack of knowledge about any acts taken by that committee."

But ANTHC's bylaws authorized the creation of an executive committee, Weston said. The committee's decisions on compensation and other matters were appropriate and were approved by ANTHC's full 15-member board, she said.

"The executive committee has run all decision-making back to the full board for approval, so the assertion made in the complaint about impropriety is completely false," she asserted.

Southcentral also complained that at the December meeting, Teuber proposed a plan to retroactively increase compensation for the board members dating back to 1999. ANTHC directors were apparently not told ANTHC's incorporating rules did not permit compensation for board members between 1999 and 2011, according to the lawsuit.

"The details of the retroactive compensation were discussed by the ANTHC board of directors only in executive session," the lawsuit says.

"The implicit message to ANTHC directors was that if they adopted the bylaw amendments proposed by the chair and president, they would be rewarded later with retroactive compensation," says the complaint, filed by attorneys with Dorsey and Whitney in Anchorage and Munger, Tolles and Olson in Los Angeles.

In mid-December, two weeks after its formation, the executive committee "approved lucrative employment agreements for certain senior ANTHC executives," the lawsuit said. Without providing notice to the 10 other directors on the ANTHC board, the committee "greatly increased" Teuber's compensation.

Katherine Gottlieb, president and CEO of Southcentral and its designated director on the ANTHC board, said in a prepared statement on Tuesday her organization "did not take lightly the decision to seek assistance from a federal judge on this issue."

Gottlieb said she is confident with the federal court's help, the foundation can "quickly resolve" the agreement with its "valued partner in tribal health."

Several additional members of the ANTHC board declined to comment or did not respond to phone messages.

ANTHC and the board have taken steps to illegally restrict the sharing of information, according to the complaint. Gottlieb and Sylvester have been told by the ANTHC general counsel they could not share confidential ANTHC information with Southcentral, another violation of state and federal law, the suit alleged.

That confidential information included Teuber's compensation and the retroactive board pay, the lawsuit said.

Gottlieb and Sylvester refused to sign confidentiality agreements, keeping them from seeing information they were legally entitled to receive, the lawsuit said.

The consortium was created under federal law in 1997 to enter into a compact and funding agreement with the U.S. Department of Health and Human Services, part of a tribal self-governance relationship with the agency.

Weston said the ANTHC board had long been "grossly underpaid."

Based on advice from external consultants, Weston said the board has switched to a market-based compensation organization-wide, a change from the lower, noncompetitive pay based on the federal Indian Health Service system.

The compensation increase has come as the hospital's $529 million operation has become significantly more specialized in surgery, oncology, cardiology and other areas, increasing the need to attract top professionals, she said.

"We've made a lot of improvements in being able to provide the services ourselves, which we were never able to do before," she said.

Before the complaint was filed, throughout 2015 and 2016, Gottlieb and Sylvester sought to amend ANTHC's bylaws to address their concerns about the illegal executive committee and the disclosure limits, the lawsuit states.

"All efforts to correct these governance issues failed," the lawsuit alleges.

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