After matching the defense point for point over the past few weeks, prosecutors scored major points Thursday as a former Schneider Regional Medical Center board member testified that he had "never seen" some of the benefits included in Rodney Miller Sr.’s 2005 employment contract with the hospital.
Miller, along with former hospital executives Amos Carty Jr. and Peter Najawicz are on trial for a range of corruption and embezzlement charges stemming from a 2008 joint local and federal audit that showed financial mismanagement at the hospital.
Prosecutors contend that the trio had conspired to award one another lavish pay packages and perks above and beyond their official government salaries, without the consent of the hospital’s governing board.
At the heart of several charges are two 2005 employment agreements, once that lists Miller’s official salary as $150,000 and another that gives a base salary of $265,000 along with a host of other perks that pushed the value of his compensation package even higher. Included in the perks was the establishment of a Rabbi Trust, or retirement fund for highly paid employees, that was discussed Wednesday by witness Julito Francis, a former financial manager at Popular Securities.
Francis said that he provided Miller with a list of recommendations to take to the board for negotiation, but ultimately said the account — along with another 403(b) fund — was never set up at Banco Popular.
Payments into the Rabbi Trust were to be deferred from Miller’s paycheck, allowing him not to be taxed on his total compensation at the end of the year, Francis said.
Under cross-examination Wednesday from Miller defense attorney Alan Teague, Francis read aloud from a benefits schedule attached to Miller’s $265,000 contract that said the board would deposit annual payments of $125,000 into the Miller’s Rabbi Trust and would continue to fund a portion of that amount for a certain number of years if Miller chose not to keep working at the hospital.
Francis said that either account would have to be established by a resolution from the hospital board.
But taking the stand Thursday, former hospital board member Sam Topp said that authorization was never granted. There were discussions between the board and Miller about setting up some sort of retirement fund or deferred compensation package, but that was one of the issues that was "never resolved," Topp said.
Government attorney Denise George-Counts provided Topp with the same benefits schedule Francis received Wednesday, but Topp said he never knew anything about a Rabbi Trust, or annual $125,000 contributions.
"It was not something that the board had approved," Topp said. "There was no resolution of anything like this."
Instead, Topp said that what the board had agreed on was giving Miller a raise in his salary from $150,000 to $265,000, along with the possibility of perks, benefits and other incentives that could raise the value close to $400,000.
The board was never provided with any details of a retirement plan — even though Carty had said he would research it — and dealt with the issue by setting a ceiling that Miller could operate under so he could set aside money on his own, Topp said.
Carty, according to Topp, was the liaison between the board. Its compensation committee set up to evaluate Miller’s package, and Miller, and was also responsible for drafting the contract. When asked by George-Counts Thursday why he never asked to see a copy of the contract after it was put together, Topp said, "I don’t know really what might have been the reason — it just didn’t resurface."
"We were confident that we had communicated what we wanted to do, and that it would be done," he said, adding that the board also had "complete trust and confidence" in Carty, who was the board’s legal counsel and subsequently the hospital’s chief operating officer.
Topp said he was not aware of what the contract actually contained until the 2008 audit report was released and the "controversy" surrounding the case started to bubble.
"I was realizing that there was more going on in this case, that I was never remotely aware of," he said. Topp said he then began combing his files for anything related to the hospital and eventually unearthed an unopened brown envelope provided by the board’s then attorney in response to a request for information from one of the local newspapers. A copy of Miller’s contract was included in the file.
Along with the section on the Rabbi Trust, there was also a clause that waived the repayment of any advances made to Miller when he first came on board at the hospital. The waiver has also been an issue for prosecutors, who have contended that Carty inserted it without the board’s knowledge. The advance of more than $47,000 came from Miller’s housing allowance, but prosecutors have argued that it was more than he was entitled to receive.
"I began thinking back and questioning what could explain what I was reading versus what I had experienced," Topp said. "And I became concerned that there were inconsistencies."
While on the stand, Topp also said there were inconsistencies in an affidavit he was asked by Carty to provide in response to the audit. At the time, Topp said he still hadn’t seen the final version of Miller’s contract and was anxious to defend (to the community) the board’s decision to raise Miller’s salary, as allegations of criminal activity began to surface.
Topp said he communicated, under Carty’s direction, with an off-island attorney, who took his statement and then emailed it to Topp to sign. But when George-Counts asked him to read through a copy on the stand, Topp said there were several sections included that were "not accurate," including comments about the Rabbi Trust, the $125,000 contributions and conversations with Francis about setting up the account that Topp said never happened.
When asked by George-Counts why those sections were included, Topp said he either did not read the affidavit when it was sent back to him, or "those sections were not in there when I signed it."
Topp did say the sections relating to Miller’s $265,000 salary — which was in excess of what was recorded on his NOPA — were accurate, and that the board had made the decision to raise Miller’s salary because they were "impressed" with how he had turned the hospital around and wanted to pay him what other heads of similar sized hospitals were making.
It did come to a point, however, when the hospital’s board realized that it might be able to pay Miller a competitive enough salary, and had begun to accept the need to find a successor, particularly when Miller divulged that he was considering a $500,000 offer from another hospital, Topp said.
Miller’s 2007 contract — based on documents that have been entered into evidence during the trial — lists a base salary of $310,000. Topp said Thursday that he recalled discussing the contract but didn’t recall if the board came to a final decision. Still, up until that point, a Rabbi Trust had not been approved by the board, he added.
When it came time for Miller to leave the hospital, however, Topp said he and other board members were told that nothing had ever been set up or funded for Miller’s retirement, and that there was a general agreement among that group that Miller should be "paid what he was due."
Prosecutors have also questioned the legitimacy of several electronic transfers made to Miller, Carty and Najawicz from a Scotia Bank account that prosecutors have contended was the former executives’ own "private slush fund," which was used to siphon off large sums of money from the hospital. One of the amounts listed in bank documents entered into evidence during the trial was a $966,456 payment to Miller, which Topp said Thursday he knew nothing about.
"I had no specific knowledge of any transfers," Topp said. "I just knew that something was due to him [Miller] based on Mr. Carty’s representations."
Asked by George-Counts what would justify the payment if Miller’s two-year contract was valued, at the most, at $400,000, Topp said, "I have no knowledge of anything that would justify or explain that figure."
Topp said later that the board did start to broach the subject of the Rabbi Trust again after Miller left the hospital and Carty, who took over his post, began his own negotiations for employment. Topp, who was then the hospital’s public relations officer, said Carty had asked him to distribute to the board information regarding the establishment of such a trust for himself.
Also testifying Thursday was V.I. Inspector General Steven van Beverhoudt, who discussed the findings of the joint audit report and how it was put together.
The defense is expected to cross-examine Topp when the trial picks up again Friday morning.
