News Column

RMC refutes former trustee's allegations

February 7, 2014

By Gene Zaleski, The Times and Democrat, Orangeburg, S.C.



Feb. 07--Regional Medical Center officials say a former board member's allegations of hospital cover-ups and deception are unfounded.

"RMC's financial advisor frequently attends regular or special meetings of the Finance Committee and Board of Trustees to discuss investment options," according to a prepared statement released by the hospital. "There is no doubt that hospital financial information can be complex, however, adequate information is provided to board members to make informed decisions."

Danny Covington, former RMC trustee and Finance Committee chairman, submitted his letter of resignation to Orangeburg County Council on Jan. 21, claiming the hospital invested unwisely and contrary to state law.

Covington also claimed hospital management had provided false statements to the council and to other board members and also withheld pertinent information. He says such information is important for both bodies to make educated decisions on hospital matters.

Covington was appointed to an at-large seat on the RMC Board in January 2007. His current term expires in December 2017.

"We do wish Mr. Covington well in his future endeavors," RMC President Tom Dandridge said. "He put in several years of hard work for the board, and that is greatly appreciated."

One of Covington's many claims is that the hospital administration did not remove about $47 million of equities in its Strategic Investment Group pension fund after being told by council to remove the funds in 2007.

Instead, the hospital removed the money in March 2009 following a Charleston case that held that governmental entities could not invest their pension funds in equities.

"The allegation concerning investment in equities goes back to 2009," the RMC statement says. "The RMC Board and Orangeburg County Council met and discussed this matter at that time."

Hospital officials say the pension fund was invested in equities "0like other pension funds that we are aware of" and had been invested in equities since 1992 and, it is believed, since its inception."

"The investments were authorized by the hospital board in May of 2006," the RMC release states. It goes on to note that after the city of Charleston case, the board voted to move the pension funds from equities.

"The amount of the loss as a result of removing the funds from equities is dependent upon the date you measure the value of the fund," according to RMC.

Covington claimed the hospital lost $18 million in the fund due to improper investment -- not the $6.6 million reported by RMC officials.

Hospital officials say Covington was wrong about that since the $6.6 million loss was calculated using the difference based on the initial investment of the funds and the balance as of January 2009.

"Mr. Covington's calculation of the $18 million that was lost was incorrect due to several factors," the statement says.

Covington assumed the annual contributions in 2008 and 2009 that were reported on the annual financials were deposited in the investment account, the statement says.

"These were contributions made to pay the pensioners and not deposits to the fund," the release reads. "That amount was $5.3 million for those two years and would not affect what he (Covington) calls a 'cash lost' calculation."

RMC officials also say any gains and losses in the fund are unrealized.

"There is not an actual gain or loss until the investments are liquidated," the statement reads.

RMC officials noted that when the hospital moved into fixed-income investments per state law, the pension account did lose value.

Covington also claimed the hospital lost at least $50 million because of unsound fiscal reasoning over the past six years.

"Over the years, RMC has engaged a financial advisor," the hospital statement reads. "The board turns to the financial advisor for guidance on investment issues. The majority of board members have agreed with this guidance. It is unclear where Mr. Covington got this number."

RMC officials say Covington's other allegation that the hospital's balance sheet currently shows a $5.7 million loss is not quite accurate, either.

"This is actually the change in cash and cash equivalents," the statement reads. "The change in total equity of the hospital for the month was a reduction of $174,299." This is about $625,758 below budget.

All this information and other financial reports -- including revenues and expenses, cash flows and the combined balance sheet -- are public information the board has full access to, hospital officials say.

The statement continues, "The Finance Committee of the Board of Trustees meets at least monthly. The Finance Committee reports to the board monthly and provides a summary of information discussed and recommendations requiring board action."

Covington has said his resignation was prompted by an RMC board retreat where he and other board members were told by a hospital consultant that board members "should speak with one voice" and that a spokesman for the board should be designated.

Hospital officials say the board members were encouraged to express their thoughts during a meeting, but they add, "Once a vote is taken, the outcome is spoken with one voice."

"RMC's present board bylaws stipulate that the chairman of the board serves "as the board's primary representative to both internal and external groups and serves as the board's contact with the media," according to the RMC statement.

The bylaws also state that RMC's chief executive officer "shall act as a duly authorized representative in all matters in which the board has not formally designated some other person for that specific purpose."

Contact the writer: gzaleski@timesanddemocrat.com or 803-533-5551.

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