Former Sage Hospital employees accuse CEO of skimming millions
By Cindy Yurth
WINDOW ROCK, Sept. 26, 2013
(Times photo - Donovan Quintero)
The whistleblowers say Razaghi contracted with his own company to provide employees for the hospital, charging huge markups, and paid himself a bonus of $1.84 million last year -- three times his annual salary and 52 percent of the hospital's profit -- while the hospital's employees have not received a raise in three years.
In addition, they say, he charged a $1 million malpractice settlement to the hospital while the doctor being sued was an employee of his own company, and then got Sage to pay his personal legal fees when his brother, a partner in the company, sued him after Razaghi tried to dissolve the company.
"As we speak," said Farid Kiyarash, a pharmacist and the hospital's former chief operating officer, "millions of dollars have been diverted to the CEO of Sage."
Kiyarash, along with former medical director Meron Andemichael, dentist DezBaa Damon-Mallette, physician Caleb Lauber and former finance director Charity Yessilth, all say they became suspicious of various financial dealings at the hospital, and when they started asking questions, they were either demoted or edged out of the decision-making process. Eventually, all five resigned, feeling they could no longer be part of the hospital.
Before she resigned, Yessilth brought home copies of documents the whistleblowers were planning on presenting to the Health and Human Services Committee meeting Wednesday, but the meeting was cancelled when the Law and Order Committee, with whom they were meeting jointly, failed to show up. The former Sage employees met privately with some members of the committee.
Employees of Razaghi's company, Razaghi Health Care, who work at Sage also showed up for the meeting but were not allowed in. They declined to comment.
An email to Razaghi Health Care requesting an interview with Razaghi was not returned by press time.
Razaghi was CEO of Morgan and Associates, a health care management company brought in in 2007 to salvage Sage, which at that time had posted a $1.8 million loss and was in danger of losing its license.
Razaghi successfully negotiated an agreement with the Indian Health Service under Public Law 93-638 -- which basically allows an Indian hospital to operate independently but receive federal funding. According to the hospital's IRS forms 990 -- the document the IRS requires of non-profit organizations to prove that they shouldn't have to pay taxes -- Sage's revenue went from about $21 million in fiscal 2007 to nearly $25 million in fiscal 2008 under Razaghi's leadership.
According to a press release from Sage at the time, Razaghi also "began working with medical staff to implement efficiencies in the clinical areas."
Translated into English, Andemichael said, it meant cutting valuable services.
"We used to have an operating room, we used to have a gynecologist, we used to have baby delivery, a podiatrist, a cardiologist É Where are they now?" Andemichael asked. "Ahmad Razaghi made the hospital turn a profit by getting rid of all the departments that were having trouble."
No sooner was Sage on a more even financial keel than Razaghi and his brother, Kory Razaghi, established a company called Attentus Provider Group, or APG. The company recruited personnel for the hospital, charging what the whistleblowers say were markups sometimes over 60 percent.
"For instance," Kiyarashi said, "they would hire a doctor at ninety dollars and hour, and charge the hospital a hundred and fifty," pocketing the difference.
In 2008 -- the first year Sage was out of the woods financially -- it paid APG $1.8 million for "professional staffing," its 990 states.
Also in the Form 990 is a question: "Does the organization have a written conflict of interest policy?" Sage's preparer had answered "Yes." Apparently it did not include the hospital doing business with a company owned by its CEO.
Conflicts of interest aside, it could be argued that a small rural hospital like Sage needed a middleman like APG to recruit staff. But, the whistleblowers say, Razaghi then started recruiting staff who already worked at the hospital to join Razaghi Health Care.
"There was no benefit to the doctors," Andemichael said, "but when your boss says, "You really should join my company,' a lot of people did it."
Then, three years ago, one of the doctors working for Razaghi got slapped with a malpractice suit. At a .638 hospital, the IHS is obligated to put up a legal defense for the hospital's employees. But the doctor in question was not an employee of Sage; he was an employee of Razaghi. Somehow, Razaghi convinced the hospital's board of directors to foot the bill for a $1 million settlement with the victim's family.
Razaghi then tried to dissolve APG, but Kory Razaghi resisted. Kory ended up suing his brother É who billed his legal defense to Sage, according to Yessilth.
"The invoice crossed my desk and I said, "Why should we pay this?'" Yessilth recalled. "I don't see Sage's name anywhere on this."
Razaghi told her the board of directors had approved it and she had no choice but to sign.
(The board, according to all five whistleblowers, is treated very well by Razaghi. Each member receives a $500 stipend to attend meetings, which are often held in Las Vegas, Nev., where Razaghi has a lavish office suite, and sometimes places like Palm Springs, Calif. and even, once, Hawaii. Yessilth said it wasn't uncommon for a single board meeting to cost the hospital $25,000.) After taking the matter all the way to the Nevada Supreme Court, which ruled in favor of Kory, the Razaghis ended up dissolving APG anyway and Ahmad Razaghi set up Razaghi Health Care.
But the last straw for Yessilth was this year when an invoice for $1.84 million came across her desk, payable to Razaghi.
"I thought, "What happened? There must be a mistake,'" she recalled. She called Razaghi (most interaction with the hospital's CEO is done by phone calls to Las Vegas; Yessilth estimates he's actually in Ganado maybe 10 percent of the time), and was told the amount was his "bonus."
"What? That can't be right!" responded Yessilth, recalling that the hospital had only posted a profit of $3 million. Legally, all revenues made by non-profits must be plowed back into the organization, and Yessilth wondered if the huge bonus was even legal. Again, Razaghi told her the board had approved it and she would have to sign the check.
Yessilth said the outsize bonus next caught the eye of Sage's internal auditor.
"He said, "No way I'm signing this audit,'" she recalled. Her boss, she says, fired him on the spot and found an auditor who would.
That's when Yessilth was replaced as finance director and decided to resign -- but not before making copies of every document she thought might be interesting to the IRS.
Meanwhile, Lauber had resigned after he couldn't find any trace of a $300,000 diabetes prevention grant the hospital was supposed to have received, and Andemichael and Kiyarash resigned after Razaghi tried to talk them into joining Razaghi Health Care as officers, telling the men, "You have no idea how much money you're going to make," according to Kiyarash.
The men had both signed letters of intent to join Razaghi, when they started thinking about it, Kiyarash recalled.
"I thought, "I'm a doctor. I don't need to become a crook to make money,'" he said. Kiyarash and Andemichael both told Razaghi no, after which, they say, they were demoted and edged out of all the hospital's financial dealings.
DezBaa Damon-Mallette, a dentist at the hospital who filled the leadership void at the dental clinic after Andemichael left, became suspicious when she wasn't allowed access to some of the clinic's records, and after picking Andemichael's brain, decided Sage was no longer an institution she wanted to be a part of.
For the three Navajos among the whistleblowers -- Yessilth, Lauber and Damon-Mallette -- leaving Sage was a tough decision even after they became convinced their boss was robbing the Navajo people.
"When I was going to dental school," recalled Damon-Mallette, "I always knew I would come back and help my people. But I don't feel I can be a part of something where the funds aren't going to medical care, they're just going into someone's pocket somewhere in Las Vegas."
The whistleblowers say they will take their information to the Navajo Nation Council, the IRS and the U.S. Attorney for Arizona until they find someone who can help them oust Razaghi.
Meanwhile, Razaghi has signed a seven-year contract with Sage. He recently received the Department of Health and Human Services' National Council of Chief Executive Officers Managerial Excellence Award from the United States Surgeon General.