Judge Upholds Charges Against Hospital Officials Accused of Diverting Millions

Oct. 8, 2008 — V.I. Superior Court Judge Michael C. Dunstan found probable cause Wednesday to uphold all charges against former Schneider Regional Medical Center officials Rodney Miller Sr., Amos Carty Jr. and June A. Adams, including embezzlement, conspiracy, grand larceny and perjury.
The three were arrested Tuesday based on warrants issued by Dunstan at the beginning of the month. The hospital's former chief financial officer, Peter Najawicz, was also arrested Tuesday, but was absent from Wednesday's advice-of-rights hearing because he is off island, according to government attorney Denise George-Counts. Najawicz will instead be advised next Tuesday, she said after the hearing.
At the time of their arrest, bail was set at $250,000 each for Miller, Carty and Najawicz and at $50,000 for Adams. Miller, Carty and Najawicz appeared in Superior Court Tuesday for a closed-door bail hearing, which Dunstan said was not open to the public because the charges against them were "still under seal." (See "Four Ex-Schneider Hospital Officials Charged with Embezzlement.")
All four have already posted bail, Dunstan said during Wednesday's hearing. The judge held off acting on a request from Adams' attorney, Leonard Francis, to have his client's bail committed as an unsecured bond. At this point, several family members have already posted their property to secure Adams' bail, he said. The judge asked Francis to put his request in writing, which would most likely be dealt with next Thursday when the group appears for arraignment before V.I. Superior Court Judge Brenda J. Hollar.
The charges against the group stem from a recent joint local and federal audit that revealed the hospital executives received hefty compensation packages approved by Schneider Regional board members. At the end of his five years at the helm of the hospital, Miller had allegedly racked up close to $3.8 million in salary and associated perks, while Carty and Najawicz were receiving thousands more than the $80,000 salaries included in their NOPAs — documents that show, among other things, what government employees were paid.
In addition to approving the packages, the report said, board members deliberately withheld documents and other information from investigators while the audit was going on. Members of the territory's Hospitals and Health Facilities governing board of directors recently voted to fire Carty and Najawicz, while Gov. John deJongh Jr. asked Adams and four other board members to resign. (See "Hospitals Board Fires Carty and Najawicz.")
Carty has been charged with obtaining money by false pretenses, embezzlement or falsification of government accounts, embezzlement by fiduciaries, conversion of government property, embezzlement by public and private officers, grand larceny, conspiracy and fraudulent claims upon the government. He came on board as the hospital's general counsel in October 1999, and also started serving as its chief operating officer in 2002. Carty took over as chief executive officer when Miller resigned in 2007.
In his capacity as legal counsel and chief operating officer, Carty's NOPA reflected a salary of $80,000. Seven months after Miller was hired, however, he began receiving disbursements and a series of payments from the hospital's bank accounts for his own personal use, according to an affidavit filed Oct. 1 by Nicholas Peru, a special agent with the V.I. Inspector General's Office. The payments were allegedly authorized by Miller and disbursed by Najawicz.
An agreement hammered out between Miller and Carty in December 2002 bumped Carty's salary up to $120,000, the affidavit says. Revisions made by Miller in February 2003 took Carty's salary up to about $127,799. Meanwhile, the Department of Finance was still issuing Carty's paychecks based on the $80,000 salary reflected in his NOPA, according to Peru. Carty also allegedly received a $10,000 bonus in May 2005, and in November of the same year he received another increase from Miller, bumping his total compensation package up to $189,600 with an annual incentive bonus of $28,440, the affidavit says.
"Between December 2002 and November 2007, Carty received in excess of $600,000 from the hospital's operating accounts … for stipends, bonuses and other perks awarded to him by Miller and disbursed by Najawicz," Peru wrote in his report.
Najawicz has been formally charged with obtaining money by false pretenses, embezzlement by fiduciaries, conversion of government property, embezzlement by public and private officers, grand larceny, conspiracy and fraudulent claims upon the government.
Almost as soon as he was began working at Schneider Regional in April 2004, Najawicz began approving and facilitating "the disbursement of a series of substantial payments" from the hospital's bank accounts for his own personal use, Peru wrote in his affidavit. A stipend — or additional compensation — agreement ironed out between Miller and Najawicz gave the hospital's former CFO an additional $20,000 annually (made payable in biweekly installments), plus $18,900 for relocation expenses, $2,700 to attend a seminar and a $400-a-month car allowance, which Najawicz transferred to his own personal account from the hospital's operating account at Banco Popular, according to the affidavit.
The incentive bonuses, stipends and salary raises from Miller continued, along with insurance benefits all "paid by Najawicz to himself" via electronic fund transfers from the hospital's bank account, Peru wrote. All the while, the Department of Finance continued to pay Najawicz based on the $80,000 salary included in his NOPA, the affidavit said.
By July 2008, Najawicz had allegedly diverted $500,000 from the hospital's bank accounts.
Miller has been charged with obtaining money by false pretenses, embezzlement by fiduciaries, conversion of government property, embezzlement by public and private officers, grand larceny, conspiracy and fraudulent claims upon the government.
When Miller was brought on to take charge of the hospital in April 2002, his contract included a $150,000 base salary, plus $10,000 in relocation expenses and a $20,000 housing allowance, according to the affidavit. An addendum to the contract attached about five months later by hospital governing board members allowed Miller to collect 10 percent of his salary as a bonus, which would be subject to an annual performance review by the board.
However, payment vouchers obtained during the course of the joint investigation showed no board review or approval, including one check signed by Adams — the hospital board's chairwoman — in May 2004, Peru wrote. He also said that Miller collected a housing allowance in excess of what was stipulated to in his contract. At one point, Adams also signed off on a $45,000 advance to Miller so he could buy a condo at Mahogany Run, Peru said. The amount on the payment voucher, however, is $45,500, according to the affidavit.
Miller's May 2005 contract was valued at $265,000, which included $150,000 from his NOPA salary, a $66,250 signing bonus, an annual cost-of-living allowance of $13,250, an annual incentive bonus up to $79,500, an annual housing allowance of $40,000, and a $53,000 retention bonus. A clause worked into the contract says Miller does not have to repay any advances made to him under his previous contract, such as the $45,000 housing advance, Peru wrote.
Adams, who later said she "perused" the document and did not know the clause had been included, signed the contract. Instead, she relied on the advice of the hospital's general counsel, Carty, who had prepared the document, Peru wrote. The final contract was not submitted for review or approval to the board, whose members later said that they had not seen the d
ocument but rather "trusted and relied upon Carty as legal counsel to prepare the document."
More money was also transferred in Miller's accounts based on a June 2005 employment agreement that both Carty and Najawicz later said they were not able to find, Peru wrote. A photocopy of a letter dated Aug. 8, 2008, was eventually turned over by hospital representatives, who claimed that the document was the June 2005 agreement, he said.
"The letter is addressed to Miller and is signed by June Adams," Peru said. "Further investigation revealed that Mr. Miller mailed the original of the June 21, 2005, letter to Carty on Aug. 8, 2008."
Miller allegedly collected nearly $410,000 on the June 2005 contract, which "did not exist," according to the affidavit.
Another employment contract executed in May 2007 bumped Miller's salary to $450,000. Adams was the only person to the see the contract, and there was no record of it ever being approved by the board, according to Peru. After Miller resigned, Adams also allowed him to receive lump-sum payments, or money that Miller said was owed to him from his 2005 and 2007 employment contracts. Miller received $966,456 in lump-sum payments for the May 2005 contract, along with $901,419 from the 2007 contract, Peru wrote.
In an attempt to "fleece" more money from the hospital, Carty, Miller and Najawicz set up an account at Scotia Bank, into which the stipends, bonuses and insurance benefits were deposited, according to the affidavit. To open the account, the three executives would have needed a corporate resolution from the hospital's board — a document that was ultimately signed by Adams and former board member Francis Jackson.
Adams said she never signed the document, but rather that her signature had been scanned onto the paper without her "consent or approval." Handwriting samples taken later in the investigation by a U.S. Secret Service Agent showed that Adams' signatures were "original" and that she had lied under oath to investigators when she said she hadn't signed the document.
She has been charged with fraudulent claims upon the government, embezzlement of public accounts, embezzlement by fiduciaries, embezzlement by public and private officers, conversion of government property, conspiracy and perjury.
From Aug. 1, 2005, to July 9, 2008, Miller, Carty and Najawicz diverted close to $5.47 million from the hospital's bank accounts for their own personal use, Peru said.
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