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Thursday, June 13, 2024 | Back issues
Courthouse News Service Courthouse News Service

Health Care Group Scorches Its Execs

TUCSON (CN) - A nonprofit behavioral health care group claims two executives paid themselves exorbitant salaries and wasted millions of dollars of taxpayer money that should have gone to impoverished sufferers of mental illness.

Southeastern Arizona Behavioral Health Services, one of three members of the Community Partnership of Southern Arizona (CPSA), sued the partnership's CEO Neal Cash and CFO Charles Andrade in Pima County Court, alleging breach of contract, bad faith and breach of fiduciary duty.

"Just in fiscal years 2007, 2008 and 2009, defendants gave away $1,711,585 of corporate assets to subcontractors (extra-contractual compensation), and other entities for uses other than CPSA's express purpose of managing behavioral health services in Cochise, Graham, Greenlee, Santa Cruz and Pima Counties," the complaint states. (Parentheses in complaint.)

During that time, Cash made more than $1.3 million in salary and benefits, and Andrade made more than $1.2 million, according to the complaint.

The executives allegedly spent nearly $800,000 on travel, $614,000 on "convention expenses," $204,000 on lobbyists and $408,000 on lawyers.

"Cash and Andrade's use of corporate funds to 'pay themselves' grossly excessive compensation, give away corporate assets and commission of egregious corporate waste is reprehensible enough to impose punitive damages because: CPSA is funded almost exclusively with taxpayer-financed public funding; defendants hold CPSA out as a 'guardian of public expenditures' for behavioral health; and defendants' misconduct directly impacts the quality and quantity of services available to the indigent population suffering from mental illness, in Tucson and Southeastern Arizona," the complaint states.

As a "regional behavioral health authority" (RBHA), the partnership contracts with the state to provide mental health services in several counties. Three health care providers, including the plaintiff, organized the nonprofit corporation in 1995 for that purpose.

But in recent years Cash and Andrade have expanded the partnership's activities far beyond its original purpose, including organizing several for-profit real estate holding companies, according to the complaint. The plaintiffs also claim that the executives violated federal law by lying on the partnership's tax returns.

"The defendants have actively participated and even executed CPSA's tax returns characterizing its revenue as originating from 'grants and charitable contributions,'" the complaint states. "In truth and in fact, CPSA's revenue comes form its activities as a RBHA in the form of 'program service revenue.'"

The plaintiffs say the partnership's board of directors promised last October to set up an ad hoc special committee to investigate the allegations, but so far nothing has been done.

"As of the date of this complaint, the ad hoc special committee has not provided documentation of its origin, a list of its members, what instructions it had from the board, the basis or terms of its engagement of counsel, results of any investigation, or response to this pre-suit demand," the complaint states.

The plaintiffs seek an order terminating Cash and Andrade without compensation, and punitive damages "in the amount of all compensation they have received and all the funds they have squandered."

They are represented by Russell Kolsrud with Clark Hill, of Scottsdale.

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