N.J. lawmakers seek to strengthen law requiring attorney general to oversee transfer of non-profit hospitals

September 23, 2011 - Jarrett Renshaw - Star Ledger

Two key Democratic lawmakers are planning to strengthen a law that requires the New Jersey Attorney General’s Office to oversee the transfer of non-profit hospitals.

The move comes after the proposed sale of the Hoboken University Medical Center escaped the stringent review by successfully arguing that its status as a city-run hospital exempts it from the Community Healthcare Assets Protection Act, or CHOPA.

Under the law, the attorney general’s reviews all aspects of the sale of non-profit hospital, including whether the seller is getting fair market value, ensuring conflicts of interest are disclosed, the bidding process is fair and a host of items designed to protect the public. A superior court judge must also give their final opinion on the sale.

One of the major criticisms of the Hoboken sale has been the lack of transparency. Among other items, the public has yet to see the applications of the other bidders beside the successful one — the ownership group of the Bayonne Medical Center. Council members were just provided the financial statements of the hospital Wednesday.

In March, former attorney general Zulima Farber, who now works with Lowenstein Sandler and is representing the city-backed hospital authority, wrote a letter to state Attorney General Paula Dow arguing that the law doesn’t apply to the hospital sale, records show.

The hospital is city-run, and not a non-profit, Farber argued. That means it is already open to public scrutiny through additional state oversight and things like the Open Public Records Act, Farber said.

On April 13, Dow responded and said she agrees. The letter stated that the office did not conduct an independent investigation and relied on the accuracy of Farber’s statements.

“This is a loophole, and the intent was clearly to ensure sales like these fall under the law,” said State Sen. Loretta Weinberg (D-Bergen), chair of the Senate Health and Senior Services Committee. “This deal has been conducted in secret, and that is one of the reasons there is so much controversy.

State Sen. Joe Vitale (D-Middlesex), vice-chair of the committee, is joining Weinberg in seeking changes.

CHOPA was passed before 2006, when the state legislature enacted a law specifically to allow Hoboken establish a hospital authority and purchase the hospital.

The events leading up to the bankruptcy and the sale have come under scrutiny in recent weeks as the hospital’s former attorney — Donald Scarinci, of Scarinci & Hollenbeck — accused the city of forcing the hospital into bankruptcy.

"I was the first hand witness to a pattern of conduct by the Hoboken Municipal Hospital Authority board members to intimidate, threaten, control, abuse and attempt to force the CEO of (the hospital) and members of the board to take actions adverse to its charter and otherwise violate the laws of the state of New Jersey," Scarinci said in a court document. 

EdMecka Note: Read the  Scarinci Court Document - PDF

Scarinci said the goal was to ensure that the ownership group of the Bayonne Medical Center buys the hospital.

Weinberg has asked the U.S. Attorney’s Office and the state Attorney General’s Office to investigate Scarinci’s allegations before the state approves a transfer of the hospital’s license.

City and authority officials deny the accusations.

Gov. Chris Christie Thursday said he would pledge $5 million in state funds to jump start bankruptcy negotiations key to the sale of Hoboken University Medical Center to the ownership group.

Christie’s announcement came less than a day after the talks nearly collapsed and Hoboken City Council shot down a proposal to issue $5 million in bonds to help entice reluctant creditors to settle with the hospital. Minutes after that vote, Hoboken Mayor Dawn Zimmer said hospital would surely close.

Even with the promise of cash, creditors and the hospital have failed to reach any agreement, and they are expected to continue today. Christie said unions are to blame, but labor leaders said the governor is trying to set them up as the scapegoat if the hospital closes.

The creditors are owed $34 million, and the hospital initially offered $5 million to settle, along with protection for the city and the authority from future lawsuits. The state money would double the amount.

Christie said the state needed to intervene because if the hospital closes, 1,300 jobs would be lost and the city would be saddled with unbearable payments on $52 million in bonds that it guaranteed when it bought the hospital in 2007.

Christie, during a news conference, said he did not want the deal to die because of "political paralysis," adding that "if it dies for other reasons, then it dies for other reasons."

Since taking control of the Bayonne Medical Center in 2008, the ownership group of Vivek Garipalli, James Lawler and Jeffrey Mandler made numerous political contributions including $100,100 to Democratic lawmakers and the party’s state committee, records show.

The group also contributed $25,000 to Reform Jersey Now, a political action committee with close ties to Christie.

The parents of Vivek Garipalli, who reside in Colts Neck, also made maximum contributions to Assemblyman Ruben Ramos (D-Hudson) weeks before the lawmaker sponsored a budget resolution for the $11 million earmark for the hospital sale. Ramos has since contributed the money to charity.

The father, Laxmipathi Garipalli, was charged by then-U.S. Attorney Christie in 2008 for embezzling money through a no-show job at the University of Medicine and Dentistry of New Jersey. He pleaded guilty in February 2008 and is still cooperating with investigators.

Lawler is the former chief financial officer of UMDNJ’s University Hospital in Newark and one of the whistle blowers who helped Christie prosecute corruption at the hospital.

Hoboken City Councilwoman Beth Mason, one of four members who blocked the bond, blasted Christie Thursday.

"The governor wants to support a back room deal to sell the hospital to one of his biggest campaign contributors for pennies on the dollar," she said.