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Did Sarasota Memorial Hospital officials funnel taxpayer money to a PAC? Board member raises red flags

While most say the move was legal, ethical questions persist

Ryan McKinnon
Sarasota Herald-Tribune
Doctors Gardens is a 1950s-era building, now vacant, on the Sarasota Memorial Hospital campus that has been slated for demolition for several years.

The Doctors Gardens Building on the campus of Sarasota Memorial Hospital near U.S. 41 doesn’t get much use these days.

The “D” in Doctors has fallen off the wall, and the 1950s-era brick structure looks like a low-rent motel nestled among state-of-the art medical facilities.

But the unassuming structure is at the center of a dispute that has erupted on the normally placid public hospital board, over one board member’s allegations that hospital executives improperly steered taxpayer money into the office building’s condominium association in order to fund a political action committee.

Former banker Tramm Hudson, seen here in a 2013 photo, is now a member of the Sarasota Memorial Hospital governing board.

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The board member, Tramm Hudson, a banker and former Republican Party of Sarasota chairman, has complained that the transactions are unethical at best and even potentially illegal, assertions that hospital officials strenuously deny. He complained that his colleagues on the hospital board have been “complicit” in seeking to “cover up” the transactions involving a PAC that, in the past, helped hospital board members get reelected and donated to a variety of Republican causes.

The money trail is circuitous, but hospital officials serving on the office condominium association’s board assessed SMH nearly $300,000 for capital improvements that were never made, and then made a $50,000 “charitable” contribution to the PAC that was later returned.

The condominium association subsequently voted to fold and give all of its nearly $300,000 in remaining assets to the PAC, a move put on hold after Hudson raised a fuss about it several months ago. Hudson complains that the hospital board was in the dark about the whole arrangement until he received a tip that alerted him to it last spring and he began asking questions.

“I may not be an attorney, but I know that it is wrong to use taxpayer money to fund political campaigns,” Hudson said. “It is just wrong to take hospital assets to further political campaigns or to curry favor with politicians.”

Hudson’s allegations are magnified by the timing of the transactions with hospital officials approving donation of hundreds of thousands of dollars of the condo association’s assets – originally paid by Sarasota Memorial Hospital – to a PAC just as more than 600 hospital employees were returning from COVID-19-induced furloughs.

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But hospital leaders dispute that the money is public, given that it was coming through the condo association. They argue that the actions Hudson has questioned have been evaluated by four attorneys, including two who are independent, the hospital’s auditors, the board’s general counsel, the health system’s chief legal officer, and the health system’s corporate compliance officer, and found to be legal, proper and above board. Hospital officials have questioned Hudson’s motives in raising the issues, saying he’s improperly taken slanted opinions to the press rather than pursuing formal complaints with state agencies.

David Verinder, the hospital CEO, responding in writing to issues raised by Hudson, called his concerns “puzzling and baseless.”

“It’s hard for me to imagine anything I have ever done, in my 15 years of service to this organization and this community, or in my life for that matter, that could inspire ‘fear,’” Verinder stated, responding to a comment by Hudson about concerns over how the PAC might be used.

SMH President/CEO David Verinder, seen here during the hospital’s gala in January 2020, inquired with attorneys in 2019 about whether a condominium association controlled by hospital executives could function as an unlimited donor to a political committee that helps fund the campaigns of hospital board incumbents.

Verinder has the broad support of the elected nine-member board, except for Hudson. In December the board voted 8-1 to grant Verinder an eight-year contract extension, intended to set the CEO up with a 10-year deal worth more than $12 million. The proposed contract is on the board’s agenda for a public meeting on Tuesday.

Hudson’s was the lone objection to the proposed contract for Verinder at a meeting last December, and his fellow board members have grown weary of his complaints.

“A board doesn’t manage by rumor and insinuation; we manage by facts,” board member Britt Riner said. “The facts are this: Many laws regulate public hospitals, condo associations, and PACs, and the hospital was in full compliance with the law.”

Sarasota Memorial Hospital board member Britt Riner said attorneys for the hospital system have reviewed payments from the hospital to a condo association to a PAC and that there is nothing amiss.

“It was discussed and discussed and discussed. There were no real concerns,” board member Sharon Wetzler DePeters said. “... We felt that it was settled.”

Yet questions remain.

Sarasota attorney Morgan Bentley is chairman for the Save Our Community Hospital PAC, and if he accepts donations from an entity purposely hiding its origin, he could face legal sanctions. Bentley returned the first $50,000 PAC donation after Hudson spoke to him about it.

In an early February interview, Bentley said he did not know that hospital officials on the condo board had voted to dissolve the condo board and give all remaining funds to the PAC.

If that is the case, he initially said, he would return the money. Receiving a large sum of money from a recently folded condo association would raise suspicions that the association had collected fees that it did not need in order to make a political donation.

“If I got a post-termination condo check, I would return it,” Bentley said. “That would be a red flag in the sense that they have to jump through some pretty specific hoops to do that. That raises this idea that maybe all this was a conduit transaction.”

However, in a followup email, Bentley backed down from that assertion and said he would need to review such a transaction.

“Whether it would be a legal contribution or not would depend on that review,” Bentley wrote. “It is not per se illegal.”

Sarasota attorney Morgan Bentley, seen here moderating a City Commission race debate in 2017, is overseeing the Save Our Community Hospital PAC and said it is not unusual for public money to end up funding political campaigns.

Condo association control

The decisions that steered nearly $300,000 to the PAC were made over the course of a handful of brief condominium association meetings.

The 30 offices in the Doctors Gardens Building had been independently owned by a variety of medical practices over the years, and the Doctors Gardens Association is the governing body that determines the use of the building and collects fees to pay for its upkeep.

The hospital began buying up the building’s units in 1992, and tearing down the facility to make room for new construction has been part of SMH’s long-term strategic plan for years.

As of December 2019, the building was nearly vacant. The building’s condominium association by that point was controlled solely by senior-level hospital officials, because SMH owned 29 of 30 units and determined who sat on the board.

The five-member DGA board included hospital Chief Financial Officer Bill Woeltjen, associate chief legal officer David Evans, and three other hospital officials.

Despite the longstanding plans to tear the building down, on Dec. 20, 2019, the Doctors Gardens Association approved a revised annual budget that added $275,000 for capital improvements to the building's roof, exterior stairs and walkway railings.

That same day, the hospital leaders, sitting on the condominium association panel, amended the organization’s bylaws to allow it to donate funds to charitable organizations and nonprofits.

Earlier that year, Verinder had told Hudson that he was looking into an arrangement to make the condo association a “possible unrestricted donor” to the PAC, according to a memo later issued by hospital management.

The PAC had originally been founded in 2014 to support hospital board candidates who would not vote to privatize the hospital, in the aftermath of then-Gov. Rick Scott’s push for privatization. Because the threat of privatization has subsided, the PAC has since funded incumbent hospital board members and prominent Republican causes.

The condo association billed the hospital for $265,833 for its share of the improvements to the facility, and on Jan. 10, 2020, the hospital paid the amount in full.

On Jan. 20, the DGA board approved a $50,000 donation to the Save Our Community Hospital political committee, which Bentley then registered as a state committee on Jan. 24, 2020, switching it over from its previous status as a county-level PAC, just a month after the condo association amended its bylaws.

On May 28, 2020, the DGA board met again. In the intervening months, COVID-19 had led the state to temporarily suspend elective surgeries, and the ensuing loss of revenue prompted the hospital in April and May to furlough more than 600 staff members.

The condo association had not used the money on the planned improvements to the Doctors Gardens building, and now the hospital management wanted to accelerate the plan to tear the building down.

At the May meeting, the association approved a plan to dissolve the condo association, pay off any remaining obligations and donate all remaining funds to the PAC. At that point, the association had $292,951 in its checking account.

CFO Woeltjen, who is also the chairman of DGA Board, said in December that the condo board’s assets remain in the bank until the dissolution is enacted, at which point all funds would go to the PAC.

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Vehicle or unrestricted donor?

In six months, the condo association had amended its bylaws to allow for contributions to nonprofits, reversed course between fixing the building up to tearing it down, collected $265,833 from the hospital and passed a resolution donating all of its money into a PAC that Bentley had just registered with the state.

Hospital board member Darryl Henry said the money movement was typical backroom political dealing. Nevertheless he said he doesn’t believe the hospital board has authority to object since the condo association is a separate legal entity.

Sarasota Memorial Hospital board member Darryl Henry, seen here in a 2014 archive photo, said it is not the role of the board to question actions by the condo association. He said the transactions looked like a typical backroom deal. “It’s how the game of politics is played,” he said.

“This happens all the time. It’s how the game of politics is played. If you can find a way through the back door and some loopholes to get it done, so be it,” Henry said. “That’s the way life is. That’s the way the game is played.”

Objecting would be pointless, he said.

“If I have learned nothing else from having been on this board, it’s don’t plan on winning your point because it’s a good point,” Henry said. “If the clique votes the other way, you’re going to lose.”

Hospital officials acknowledged that they have gone to extensive lengths to steer condo association money into the PAC.

In a July 2020 memo responding to Hudson’s concerns about the arrangement, hospital officials pushed back on the language Hudson used to describe the PAC funding, but affirmed his basic premise.

Hudson alleged that Verinder first floated the idea of using the condo association as a “vehicle” to fund the PAC during a lunch at Michael’s On East in fall 2019.

But according to the hospital memo, Verinder “did not tell Mr. Hudson that Doctors Gardens would be used as a ‘vehicle’ to fund the PAC.

“Rather, Doctors Gardens was identified as a possible unrestricted donor to the PAC,” the memo said.

In response to questions, Verinder wrote in an email that SMH internal auditor Mark Thornton, chief legal officer Carol Ann Kalish and external auditors from KPMG all raised no objection.

“The overall conclusion was that there were no findings of inappropriate activities,” Verinder stated.

Woeltjen said the money moving from the hospital to the condo association to the PAC was coincidental, even as all the pieces necessary to do so fell into place in the manner of weeks.

“Your question assumes that we were setting this up to do this this way,” Woeltjen said in an interview with the Herald-Tribune about the transactions. “It’s really more that the condo association ended up having the cash and ultimately not needing it for the capital improvements.”

In December 2019, it made sense to budget for improvements to the Doctors Gardens building, Woeltjen said. Hospital officials were not ready to begin demolition, but the condo association needed funds to maintain the roof and keep the stairs safe. That explains the $275,000 amendment to the budget, Woeltjen said.

One month later, the condo association gave the $50,000 to the hospital political committee.

Woeltjen explained that contribution by saying that condo association’s “operating cash balance was sufficient.”

Plus, he said, conditions had shifted rapidly at SMH. In January and February, before the COVID-19 pandemic, the hospital was busier than ever, with patients and visitation spiking, and he said hospital management suddenly realized it would need the land where the building stood for more parking.

Because the building was going to be demolished, the money earmarked for capital improvements was no longer needed, and, because of the amended bylaws, the condo association could donate the money instead of giving it back to the hospital.

“The roof held, the railings held, the stairways held, and so we ended up with cash we didn’t think we would be ending up with and we thought Save Our Community Hospital was a good organization to donate the cash to,” Woeltjen said.

Despite plans for its demolition, the condo association for the Doctors Gardens building requested money for improvements in a December 2019 budget amendment. At the time, teardown was not imminent, and the money was intended to insure the building remained safe.

Nevertheless Bentley, the attorney managing the PAC, returned the condo association’s $50,000 donation in June 2020. He had held onto the contribution for five months and returned the money four days after Hudson confronted him about it.

Despite having gone through the steps of amending its bylaws to allow for contributions to nonprofits, the condo association needed to specify that it could make contributions to political committees, not just nonprofits, Bentley said in a letter dated June 24.

Bentley told the association that the donation was legal, but he said the PAC could not accept it because the condo association’s bylaws didn’t specifically allow it to donate funds to political committees.

Questions of election law

While Hudson may be the lone objector on the SMH board, several elections law and campaign donation experts backed up his concerns in interviews with the Herald-Tribune.

Developer and longtime political player Pat Neal,  seen here in 2016, said there are “no loopholes” to justify the hospital’s PAC activity.

The notion that the condo association happened to end up with hundreds of thousands of dollars in its coffers immediately after changing its bylaws to allow for charitable donations is not plausible, said Mark Herron, a Tallahassee-based election law attorney.

Herron said using a condo association controlled by hospital executives to give money to a PAC dedicated to political advocacy on behalf of the hospital would appear to be an attempt to circumvent elections law.

“There is a provision in elections code that says a person may not make any contribution through or in the name of another, directly or indirectly,” Herron said. “To me that is a classic giving-in-the-name-of-another scenario.”

Dennis Eisinger, a South Florida real estate attorney and adjunct professor at the University of Florida’s School of Law, said simply changing a condo association’s bylaws doesn’t open up the door to giving to PACs.

Without commenting on this specific case, Eisinger said Florida’s condominium association laws, in general, limit spending to common expenses specific to the management of the building.

Those restrictions mean that, just because a majority of a condo board may align politically, they can’t levy fees on unit owners and donate that money to PACs supporting for example, Planned Parenthood or the National Rifle Association.

“In my opinion, they would not be able to amend their bylaws to say, ‘From now on we can give to the Republican Party,’ because that is not something that is in the interest of the owners,” Eisinger said. “You can amend your documents, but in my opinion it would not be enforceable.”

Pat Neal, a prominent Southwest Florida developer and former state representative and senator from the Sarasota-Manatee region who has been involved in local politics for decades, said he was skeptical of the transactions.

“There are no loopholes which might justify what happened,” Neal said.

Gabriel Hament, an area Democratic political consultant, said the association should return the money to the hospital immediately.

“It really looks like you have taxpayer dollars that have found their way into a political committee, which is inappropriate,” Hament said, referring to the money that is slated to go toward the PAC once the condo association folds.

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PAC history

The beneficiary of all of the transactions, Save Our Community Hospital, was established as a PAC nearly seven years ago in a different political environment for the hospital. Sarasota Memorial, a consistently highly rated facility that is undergoing rapid expansion, has been at the forefront of the region’s battle against COVID over the past year.

When Sen. Rick Scott, seen here during a 2018 campaign event, was Florida’s governor, Sarasota Memorial Hospital officials feared his preference for private hospitals could spell trouble for public hospitals.

But in 2014, then-Gov. Scott’s distaste for public hospitals was well known and had hospital officials on the defensive. In 2011, Scott created a commission that required public hospitals, including SMH, to vote on whether they should remain public or privatize.

In 2013, the SMH board voted to remain public, but fears of forced privatization of public hospitals continued.

In the run-up to the 2014 hospital board elections, SMH advocates worried that private hospitals would pour money into the campaigns of candidates who would favor taking the hospital private, so Bentley and PAC expert Eric Robinson started the “Save Our Community Hospital” PAC.

That year the PAC raised money from business leaders, hospital vendors and community organizations and spent roughly $82,282 on helping the five incumbent board members win reelection.

Although concerns about a privatization push faded, the PAC remained active, raising roughly $40,000 and donating to several Republican candidates or their PACs over the next four years before folding in 2018.

In 2020, Bentley’s firm filed paperwork with the state  transforming the county PAC into a state PAC.

Hospital officials say there are clear lines drawn between the hospital leadership, the PAC and the condo association and that the PAC operates independently of hospital leadership.

“The PAC ran an issue-based marketing campaign that supported a slate of candidates, and that included the entire slate of Hospital Board incumbents, based on their beliefs that SMH should stay public and independent and their pledge not to sell or redirect assets to a for-profit hospital chain, like HCA,” Verinder said, referring to the for-profit health care giant. “At no time has the SMH executive team made decisions for the PAC on how its funds should be distributed.”

Robinson, a former Sarasota County School Board member, is one of the state’s most prominent accountants for political committees. He is no longer the Save Our Community Hospital PAC treasurer; when Bentley filed paperwork with the state in 2020, he listed Sarasota attorney Brian Goodrich as the treasurer.

Robinson said Verinder’s claim of not directing how PAC money is spent makes no sense. He said every PAC for which he has served as treasurer received directions on how to spend contributions.

“I have never seen a PAC where somebody has donated money and said, ‘Eric, go spend it however you want,’” Robinson said. “‘Here is money, now go spend it however,’ said nobody ever.

“If what the hospital is saying is true and they are going around giving hundreds of thousands of dollars to people and saying spend it how you want, is that any better?” he said.

Public money?

Hospital officials, at times, say the money going to the PAC is not really taxpayers’ money – Sarasota Memorial derives a portion of its revenue from local property taxes – because it is coming from the condominium board, even though it originated in payments from the hospital as the owner of the Doctors Garden units. Nevertheless, hospital leaders argue that even if it is public money, sending it to the PAC would be legal.

Bentley said it is “crazy talk” that public agencies are not able to give taxpayer money to political causes.

“It’s not just done regularly, it’s done all the time,” he said.

Bentley’s argument hangs on laws that allow government agencies to pay for informational campaigns that steer away from advocating for a specific candidate.

“The Doctors Gardens Association’s funds are most likely not public funds,” Bentley wrote in his memo defending the practice. “... Even if the Association’s funds are ‘public funds,’ those funds are permitted to be spent in the political arena subject to qualifications described above.”

Billboards describing all the projects achieved through a county sales tax referendum, or a mailer from the Sarasota County School District describing how teacher’s salaries went up because of a voter-approved property tax, for example, fall into the category of an informational campaign.

Government bodies can also hire lobbyists to fight for their cause in Tallahassee, and public agencies can be dues-paying members in statewide organizations that donate money to PACs, like the Florida Hospital Association.

But paying for lobbyists, public information campaigns and membership fees is “100% different” from putting money in a PAC, said Herron, the Tallahassee-based election lawyer.

Verinder’s own description of the PAC supporting an “issue-based marketing campaign that supported a slate of candidates” states that the money is going to help incumbent board members get reelected.

Bentley said that using public money to fund a PAC that endorses a slate of board incumbents is legal, but getting close to the line. He said it would be much tougher to defend a PAC funded by public money endorsing a specific candidate.

‘Quit barking’

Following his continuing questions about the transactions during the past year, the board elected to replace Hudson as chairman of the hospital’s audit committee.

Hudson had been chair of the committee for two years, but in December, the board approved a new slate of committee chairmanships that replaced him with SMH board member Sarah Lodge. According to meeting minutes, Hudson told the board “he feels it is an effort to silence his efforts.”

At the same meeting, in an 8-1 vote with Hudson the lone “no,” the board moved to secure Verinder’s future at the helm of the hospital, with an eight-year contract extension. His base salary starts at $1.125 million, and each year he can earn up to 30% more in performance pay, with the contract details subject to a final vote.

While hospital officials promise to review the legality of the transactions, the current board has had enough of the conversation.

Darryl Henry, the SMH board member who said it’s just “how the game of politics is played,” has urged Hudson to “quit barking at it.”

But Hudson first began asking questions about the money trail last spring, and he isn’t likely to drop it any time soon.

“My fellow board members abdicated their responsibilities to the people who elected them,” he said. “By doing so they became complicit with management in covering up the misuse of public money for political purposes.”

Verinder, in a written response to questions from the Herald-Tribune, said he is “disappointed” by the allegation of any impropriety, and he noted that Hudson has been outvoted repeatedly in his attempts to review the PAC contributions.

“Politics are part of the DNA of any large organization. If we have community members who come together to form a PAC that benefits (the hospital) ... I welcome their involvement,” Verinder said. “I’m sorry that Mr. Hudson has a separate agenda.”