Rose: BGH misappropriated funds

SANDPOINT — Pend Oreille Hospital District Trustee Daniel Rose is accusing the board of misappropriating $16.8 million in taxpayer money to improperly fund operations at Bonner General Health, a privately-owned hospital.

“Bonner General Hospital Inc. is a private corporation that is receiving an illegal subsidy from the government,” said Sean Smith, a Priest River attorney who is representing Rose.

Smith said the $16.8 million encompasses improper transfers dating back to 1996. Smith is still investigating transfers dating back to 1969, when the hospital district was formed.

“Probably over the lifetime of 50 years, it’s probably in the 20- to 30-million (dollar) range,” Smith said on Thursday.

Bonner General Health officials, including CEO Sheryl Rickard, did not respond to requests for comment on Thursday.

The allegations come three months after the Idaho Office of Attorney General put the board of trustees on notice that the district’s payments to Bonner General Hospital Inc. violated the Idaho Constitution.

“In summary, the district’s funding of Bonner Hospital, in our view, fails to comply with Idaho’s applicable constitutional and statutory provisions,” Deputy Attorney General Brett DeLange said in the Oct. 16, 2018, letter to board chairman Dr. Thomas Lawrence.

The taxing district recognized in 1983 that it lacked the means to construct or operate a public hospital and entered into a cooperative agreement with BGH Inc. to operate the privately owned hospital. Each year, the district and the corporation develop an operating budget for the facility.

The district’s annual payments represented approximately 30 percent — or roughly $1.2 million — of the hospital’s $4 million budget in 2016 and 2017, according to the AG’s office.

Hospital districts in Idaho have a statutory duty to acquire, construct and maintain public hospitals or medical clinics.

“At this time, we have no evidence demonstrating that the district ever had an interest in a ‘public hospital’ or ‘medical clinic,’” DeLange said in the letter.

The AG’s office contends that the district is using property tax revenue to sustain operations at the private hospital, which is contrary to the constitution. Moreover, the donations to the hospital cannot be “ancillary” activities under the constitution because the district doesn’t own the hospital and its primary function is to fund the facility.

Rose’s counsel alleges the district has engaged in “systemic” violations of the state’s open meeting and public records laws to carry out its misconduct.

Smith said six of the district’s board of trustees hold seats on Bonner General Hospital’s corporate board, which meets behind closed doors as soon as the hospital district’s board meeting concludes. Rose is barred from attending those meetings.

“Those six trustees who change meetings continue to conduct district business at the hospital board’s meeting and he’s not privy to those conversations,” said Smith.

Public subsidization of a private medical facility is both a statewide and nationwide problem, according to Smith. The issue has already been raised in Elmore and Valley counties.

Officials in Elmore County utilized bureaucratic contortions to paper over the problem without actually solving it, Smith said.

“They didn’t correct what was going on or get the money back. They just pretended it wasn’t a subsidy by dressing it up a little bit,” he said.

Smith said his client has been ostracized by the board and refused information he needs to fulfill his duty as an elected official.

Smith said the alleged violations of the open meeting and public records laws have been brought to the attention the AG’s office, in addition to the Bonner County prosecutor and sheriff’s offices.

“What they’re going to do is their prerogative at this point,” said Smith.

Keith Kinnaird can be reached by email at kkinnaird@bonnercountydailybee.com and follow him on Twitter @KeithDailyBee.