Miami Beach health center says fired CEO stole $7 million

Miami Beach’s community health center will undergo a series of changes, especially among top administrators, in the wake of what the agency calls a $7 million misappropriation of taxpayer dollars.

08/03/2012 5:00 AM

08/03/2012 10:04 PM

Calling the actions of their former administrator an “outrageous betrayal of trust,” authorities with the Miami Beach Community Health Center are investigating what they call the theft of almost $7 million in taxpayer money by the center’s longtime chief executive.

Members of the health center’s board of directors fired Chief Executive Officer Kathryn Abbate, saying she diverted the nearly $7 million in money intended to provide healthcare for the needy to her personal use beginning in 2008.Abbate’s chief compliance officer, Diego Martinez, resigned when the board determined he cashed thousands of dollars in checks for Abbate.

Chief Financial Officer Stanley DeHart was fired and the clinic’s human resources director, Angie Aguila, resigned after board members concluded the two had “facilitated” Abbate’s embezzlement.

Board members discovered the enormous loss in May, after a routine audit required by federal funders turned up irregularities, said Mark Rabinowitz, an obstetrician and gynecologist who is the center’s chief medical officer. Abbate had written a check for $5,000 to herself, and cashed it, labeling the expenditure a “community development” expense, said Rabinowitz, who has been tapped by the board to reorganize the clinic in the scandal’s wake.

When asked by Rabinowitz to explain the check, Abbate had no answer, the doctor said, and the agency retained forensic auditors and healthcare lawyers to disentangle Abbate’s dealings.

“Everybody here believed she was a real do-gooder, me included,” said Rabinowitz. “This has been very hard to deal with.”

The center immediately began a more detailed audit, and alerted the U.S. Department of Health & Human Services, which provides close to $4 million in grants to the center every year. Later, the FBI contacted the center. Citing U.S. Justice Department policy, Alicia Valle, a spokeswoman for U.S. Attorney Wifredo Ferrer, declined to comment.

The health center also contacted The Miami Herald, disclosing the details of Abbate’s alleged scheme. Rabinowitz said administrators and board members wanted employees, patients and community supporters to know the health center was doing all it could to hold Abbate accountable, and to make the necessary reforms to prevent other improprieties.

Abbate did not return calls from a Miami Herald reporter.

Carlos Fleites, a lawyer for Martinez, said Martinez had resigned from the health center before Abbate's alleged wrongdoing was discovered, and was not forced to resign by board members.

“He resigned of his own volition,” Fleites said. “He has not been charged, or even implicated, in this at all.”

DeHart, who lives in Coral Springs, said he was aware of many of Abbate’s activities, but declined to alert the board of directors. “The board of directors was very close to her, and I really thought they would not believe me,” DeHart said. “They held her in very high esteem.”

DeHart and members of his staff “discussed whistle-blowing,” he said, but they all agreed taking such an action was more likely to result in their firing than Abbate’s. “I felt at the time, and I still feel, that I had no proof that the board of directors would accept.”

And, DeHart added, blame for the scandal should include outside auditors, who failed to raise any objections when Abbate wrote dozens of checks to herself for “community development” — a department that regularly generated an enormous amount of “abnormal activity.” DeHart said he told auditors he suspected something was amiss in the community development department.

“The external auditors had to have known about this,” DeHart said, “because I laid it out to them in plain view. I did not hide anything.”

Employees of the health clinic were told about the firings and resignations at about 2 p.m. Friday in an email in which Rabinowitz called Abbate’s actions “reprehensible.” He said she was terminated “based on substantial and overwhelming evidence that Ms. Abbate abused her position and broke a sacred trust by misappropriating MBCHC funds over the past four years.”

“It is profoundly shocking and disappointing that something like this could occur,” Rabinowitz wrote. “People in this community trust us to have their best interests at heart,” he said, adding the executives “shattered that trust.”

Headquartered on Biscayne Boulevard in North Miami, the Miami Beach Community Health Center is one of the oldest and most well-respected public health clinics in Florida. It opened more than three decades ago, and now includes four locations, three on the Beach, including two sites that care for people with mental illness. The center employs more than 280 people, with a monthly payroll of around $1.2 million.

The health center’s annual budget is about $36 million — about one-third of which comes from private insurance, Medicaid, the state and federal health insurance for needy people, Medicare, the federal insurer for elders, and private payments.

Matthew Freedus, a Washington-based healthcare attorney who is helping the center sort out the mess, said investigators have found no evidence so far that doctors or administrators at the center engaged in any improper billings to private or government insurers.

Abbate, a licensed practical nurse since 1976, became the health center’s chief operating officer in July 1998, and was elevated to executive director four years later.

In an interview with The Herald’s editorial board in 2007, Abbate said her background as a nurse propelled her into the world of healthcare for the needy. “People know if you care, especially people in dire situations with no money who are extremely ill,” she said. “I really have a passion for it because I’ve been poor.”

When the health center’s authorities were alerted to financial irregularities in May, Rabinowitz said, they discovered Abbate was receiving $41,500 in salary twice each month; she had told the center’s human resources director the payments — lump sums of accrued vacation time — had been approved by a board member. Abbate also had been writing checks for $2,000 to $5,000 to herself regularly, and had convinced other clinic administrators, including DeHart, to cash checks written to them, Rabinowitz said. Investigators are looking into whether all of those proceeds went to Abbate or if the other employees received a share.

“My comment was: She couldn’t live long enough to accumulate that much vacation time,” Rabinowitz said of the more than $80,000 Abbate received each month in so-called vacation benefits.

The last month in which Abbate was paid, April, the health center’s payroll averaged $736,000 every two weeks, Rabinowitz said. As of last week, following Abbate’s departure, the payroll declined to $626,000.

“One of the sad things about this, regrettably, is that if the gatekeeper in this case, the chief financial officer, had done his job, a large portion of this would have been discovered a long time ago,” said Bill Dillon, a Tallahassee-based healthcare lawyer who is advising the center.

Abbate had left a small trail of bread crumbs the last few years, but because the health center’s senior executives failed to blow the whistle on her thefts, Rabinowitz said, board members remained unaware until last spring. Under federal law, at least half of the board members of federally subsidized health centers such as Miami Beach’s must be consumers of the clinic, and some of the clinic’s board members were simply ill-equipped to detect what the center calls a sophisticated financial crime. Typically, not-for-profit boards include lawyers, business people and other professionals who are familiar with audits and other financial documents.

One crumb was contained in an October 2010 Miami Herald business story that, relying on federal tax documents, reported Abbate’s compensation package as $824,000 in 2008. In the article, Abbate said the compensation package was inflated by cashed-out sick time, vacation time and a retirement account. Rabinowitz and a health center spokeswoman, Alia Faraj-Johnson, said that board members they spoke to had not seen the newspaper story until just recently, and acknowledged its content would have raised significant red flags.

“That would have tripped everybody’s light,” Rabinowitz said.

And there were other hints: The Miami Beach Community Health Center’s federal tax report for 2010 indicates Abbate’s base salary was $261,165 — but includes an additional $956,584 in “bonus and incentive” dollars that pushed her total compensation to more than $1.2 million. The center’s IRS disclosure for the prior year reported Abbate’s base salary as $970,532, and total compensation of $987,902. In 2008, Abbate’s total reported compensation was $824,686, records show.

Yet board members never agreed to pay Abbate more than $300,000, Rabinowitz said.

In hindsight, the doctor added, board members should have read the health center’s federal tax reports carefully. “I think they were supposed to read the [reports],” Rabinowitz said. “But I don’t think they knew that.” Board members, he said, had faith that the agency’s financial administrators were exercising proper oversight.

Said Faraj-Johnson, a former spokeswoman for former Florida Gov. Jeb Bush who’s now a partner at Ron Sachs Communications: “That’s why the chief financial officer is no longer there. That’s why the chief compliance officer is no longer there.”

Administrators of the center acknowledged that Abbate’s alleged wrongdoing exposed a stunning lack of financial oversight, and Rabinowitz said the agency is taking steps to prevent another such lapse: Board members will attend a “boot camp” to hone their skills, a new director will be brought in to oversee the agency, and a number of new policies are being put in place to improve accounting practices.

In addition, the center has recruited former Attorney General and Department of Children & Families Secretary Bob Butterworth as an “advisor,” “to ensure this kind of betrayal of trust can never happen again,” said spokesman Ron Sachs.

“Clearly, major lapses occurred in a system of checks and balances designed to prevent such inappropriate action,” Rabinowitz wrote in his email to staff.

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