Missing the Mission | Another Example of ADD by a Nonprofit Board?
The headline says that a bankruptcy trustee of Saint Vincent’s Catholic Medical Centers of New York is suing the law firm that handled the nonprofit’s Chapter 11 matters for legal malpractice. The story behind the headline is that, yet again, another nonprofit board may have been asleep at the switch.
According to the New York Law Journal, in the lawsuit, filed against Chicago’s McDermott, Will & Emery last week in Manhattan Supreme Court, trustee Richard Gray
alleges McDermott Will put off a much-needed Chapter 11 filing to facilitate self-dealing by two other members of the hospital group’s restructuring team. As a result of the delay, the trustee claims, Saint Vincent’s incurred greater operating losses, paid more professional fees and took longer to emerge from bankruptcy after it finally did file.
The suit charges the firms handling Saint Vincent’s restructuring with planning to merge, a move whose financial benefits for those parties would have been much lower had the hospital gone into bankruptcy.
The suit claims McDermott Will decided to help facilitate this deal by concealing it from the board of Saint Vincent’s as well as by delaying the bankruptcy filing as long as possible.
"Had the McDermott Defendants timely informed the Board of the [Speltz & Weis/Huron] Transaction and advised the Board of the adverse ramifications … the Board could have replaced the Speltz and Weis parties and/or Huron in a timely manner and taken other appropriate steps to protect itself from the subsequent damages it suffered by heading into bankruptcy with conflicted and non-disinterested parties at its helm," the complaint states.
Granted, board members can’t be mind readers, and if the parties being accused here really did conspire to hide the truth, shame on them. That said, the board has a fiduciary responsibility to ask questions and get answers, especially during such sensitive situations as bankruptcy and restructuring. Saint Vincent’s board may have been burned by outside professional consultants it believed it had reason to trust; its betrayed confidence is a lesson to all boards to double- and triple-check, even if you think you’re in the clear.
Tags: Saint Vincent’s Catholic Medical Centers, McDermott, Will & Emery, Huron Consulting, Speltz & Weis, nonprofit
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3 opinions for Missing the Mission | Another Example of ADD by a Nonprofit Board?
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[…] Missing the Mission | Another Example of ADD by a Nonprofit Board?The headline says that a bankruptcy trustee of Saint Vincent’s Catholic Medical Centers of New York is suing the law firm that handled the nonprofit’s Chapter 11 matters for legal malpractice. The story behind the headline is that, … […]
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