Former CEO defends contract, even though he paid back $860K

HOLYOKE, Mass. (WWLP) – The former CEO of Holyoke Medical Center is defending his contract, even though he paid the hospital back close to $900-thousand. The 22News I-Team dug deeper into these payments and how this all came about.

A small board of directors, H-C Management Services, Inc., was responsible for approving the CEO’s contract including pay raises, according to one of its current board members.

A 22News I-Team investigation discovered former Holyoke Medical Center CEO Hank Porten repaid the hospital more than $860,000 in August in what the hospital is calling excessive benefits. The I-Team spoke with Porten’s attorney who says the over payment wasn’t a mistake; it was spelled out in his contract.

New Hospital CEO Spiros Hatiras agrees, but says the issue was with the H-C Management Services Board of Directors approving the contract in the first place.  H-C Management falls under Holyoke Medical Center and is a three member board that would approve the CEO’s contract.

Hatiras was going to contest some payments to the IRS. Porten, who led Holyoke Medical Center for more than 25 years, decided to avoid a costly court case and paid the money back, according to his attorney.

Both the hospital and Porten’s attorney say this issue is done, but one board member told 22News he’s going to continue to follow the money.

(Do you think this issue is dead now?) “Absolutely not, absolutely not, this issue is not dead,” said Anthony Soto, a new member of the H-C Management Board of Directors and former Holyoke Medical Center board member.

In H-C Management’s 990 Tax Form submitted in August, it shows Porten earned $922,037 last fiscal year. The money in question is from 2011 – 2014. Porten was paid $395,336 as a supplemental pension, $127,781 in cost of living increases, $175,737 in vacation time and $151,356 as a consultant. All that money was repaid.

“I had a lot of questions when I saw this type of compensation being paid out, ridiculous amount of monies being paid out.  You’re talking about dealing with public funds, and the public needs to understand and the public needs to feel confident in whoever is utilizing or spending their money that it’s spent wisely,” said Soto.

Porten’s attorney did not want to release copies of his contract or an opinion from the Mercer Firm, an external consultant, on if his compensation was reasonable. His attorney says the Mercer report agrees that Porten was paid fairly. Although, Hatiras told 22News the Mercer Report on Porten’s pay was flawed as they compared Holyoke Medical Center to much larger systems.

Hatiras says the compensation was a mistake on the H-C Management Board’s part and not an accounting issue with the hospital.  He also called their three-year consulting contract with Porten, overly cautious.

Hatiras also says that the board didn’t receive any work from Porten when he was a consultant from October 2013 – March 2014
(when his contract was terminated), although Porten’s attorney said he made several attempts to contact Mr. Hatiras, but he messages weren’t returned.  Hatiras responded by saying that Porten was to report to the Board of Director, not to the CEO.

After a highly successful tenure of 25 years as CEO and President of Holyoke Medical Center, H-C Management Services, Inc. and Valley Health Systems, Hank Porten announced in late 2010 that he would be retiring in 2011 shortly after turning 65 years old.  The organization’s Board, however, requested that he remain employed as CEO and President for an additional 2 years, and as a part time Senior Advisor for 3 years after that.  Accordingly, an arm’s length employment agreement was negotiated by Mr. Porten’s counsel and the organization’s counsel and Board member, and it was approved by the organization’s Board.  Before approving the employment agreement, however, the organization’s Board retained Mercer, a nationally recognized executive compensation consulting company, to determine the reasonableness of Mr. Porten’s negotiated compensation under the IRS’ Intermediate Sanctions regulations for not for profit organizations.  Mercer wrote an opinion stating that Mr. Porten’s compensation was reasonable.

Press Statement by Hank Porten’s Attorney Sharen Litwin, of Kotin, Crabtree & Strong, LLP:

In October 2013, Mr. Porten stepped down as CEO and President and a new CEO and President was hired.  Despite Mr. Porten’s multiple attempts to perform his Senior Advisor duties, the organization’s leadership decided that it had no need for Mr. Porten’s services as Senior Advisor.  Beginning in March 2014, the organization’s leadership attempted to discontinue the contractual relationship and for the first time questioned the reasonableness of Mr. Porten’s negotiated compensation that it had previously approved.  It said it would self-report his compensation to the IRS as being unreasonable.  Although Mr. Porten strongly defends the reasonableness of his compensation based on Mercer’s opinion, he agreed to a correction of his compensation in order to avoid costly and burdensome litigation, and take a very conservative approach to the IRS regulations regarding not for profit organizations.

Statement from Holyoke Medical Center CEO Spiros Hatiras:

The Valley Health Systems (VHS) Board of Directors has completed a thorough review and correction of the former CEO’s past compensation and part-time employment contract.

While the compensation for the previous CEO reflected his many years of service, accomplishments in leadership and willingness to stay on past his originally proposed retirement date, the review did identify some items requiring correction.  Those issues included accounting of vacation time; supplemental life insurance bonus payments; and cost of living increases. The part time employment contract originally anticipated that services would be required to support the transition to new leadership; ultimately, only a limited amount of the former CEO’s time was required.

The former CEO has repaid VHS the entire excess benefit amount and, by mutual agreement, has terminated the part-time employment contract. The correction and change has been reported to the IRS on form 990 with a copy to the Attorney General’s office as required by law.

To further protect the institution and ensure future fiduciary responsibility, the current VHS board and hospital leadership have made the proper internal changes for greater oversight, transparency and accountability, both at the organizational and board level.

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