There is a concept of conflict of interest when making decisions. Unless you have been involved in making business decisions, most individuals do not have to worry about conflicts of interest. The more money we have oversight over the greater our responsibility to conflict of interest is. In its simplest terms, conflict of interest becomes an issue when an individual makes a financial decision that enriches them at the cost of the entity they should be serving.
The issue of conflict of interest is difficult to articulate to the normal individual because the concept is governed by different standards, from the simplest form of fraud to an overly complicated legal definition. Today I am going to focus on conflicts of interest when it comes to taxpayer monies, your money. Because its implications are legally complex I am going to give you examples in an attempt to explain what I find to be an issue that no one has addressed when it comes to the El Paso Children’s Hospital.
Let me start off with attempting to define conflict of interest in relation to the children’s hospital. Please note that I am defining the concept as a non-attorney, from the point of view of a layperson not involved in the legal profession. As you know there were many public officials, some elected and others unelected that were recently sentenced for their part in the numerous cases of public corruption in the city, dubbed Poisoned Pawns.
One of those individuals is Anthony Cobos. Cobos plead guilty to public corruption. In its simplest terms (legalese complicates with legal explanations), Cobos pleaded guilty to enriching himself at the cost of spending taxpayer monies. In its simplest form, Cobos admitted to the court to making County decisions based on making money for himself.
In other words, Anthony Cobos was elected to represent your interests as the County Judge. Under the doctrine of conflict of interest, he was expected to make decisions of spending taxpayer monies based on what is best for the taxpayer, not his wallet. It is immaterial if the decision Cobos, as an example, reached was good for the taxpayer, or not, because it is a conflict of interest to make a decision that in benefiting the decision maker.
Unfortunately, conflict of interest gets more complicated because a conflicted person does not even have to be making money to be in conflict with their responsibility to the entity he is making decisions for. For example, in one of the public corruption cases, the one involving Gilbert Sanchez, it was demonstrated in court that the digitizing contract was never awarded and thus the County never spent your money. Sanchez never had the opportunity to enrich himself but it was enough for the jury that he conspired to enrich himself by his actions.
As you can see, it gets complicated the more legalese I bring into this but I hope you understand the gist of what conflict of interest is. Unfortunately, I am still going to complicate it even more. It is not my intention but the concept needs to be fully understood in order to see where I am going with this.
In the legal profession, the issue of conflict of interest gets even more complicated by the standards of the legal profession. Anyone that has watched legal dramas on television has seen the idea that attorneys may not represent two individuals where the interests of one may jeopardize the interests of the other. For example, oversimplified, an attorney may not represent John, the thief while representing Jose, his accomplice, if the attorney intends to prove one thief is innocent because the other stole the merchandise.
An attorney cannot pretend to serve the interest of one thief while planning to use him to vindicate the other. You have all heard of judges and attorneys recusing or being forced to recuse themselves because of “conflict” with one or more parties before the court.
As you can see, not only does an attorney have a better understanding of conflicts of interest, because of their understanding of the law, but also because they must consider it each time they are contracted by a new client. I believe it is fair to argue that an attorney fully understands the concept of conflict of interest.
I must also take a moment to point out that conflict of interest is not necessarily a bad thing as someone can be “conflicted” even if their motives are pure at heart. It is important to keep this in mind. However, the conflict still exists and depending on the circumstances it can be nothing more than morally wrong and even illegal.
Now let us take a quick moment to look at what we know to be factually correct about the El Paso Children’s Hospital.
In August 2007, El Paso voters approved a $120 million in taxpayer-backed bonds to build the El Paso Children’s Hospital. The business model that resulted from the 2007 voter bonds was based on the notion that the taxpayers were to fund building “a new tower” at Thomason Hospital, now UMC, dedicated to the children’s hospital. From the onset, the children’s hospital was supposed to be a separate entity from UMC, one that is a private company. It was designed to operate and be managed as a separate entity.
This is where everything is muddied. Some have argued that the El Paso Children’s Hospital was supposed to pay for services it received from UMC. It has been argued that they were supposed to pay rent as well to UMC for the use of the children’s tower at UMC.
All of these things are being argued in bankruptcy court. As you know, El Paso Children’s Hospital filed for bankruptcy last month.
What is not contested is that the El Paso Children’s Hospital is using a taxpayer-funded building. The voters gave the children’s hospital permission to use the tower as a result of the 2007 vote. This is what I want to focus on today.
We can all agree that University Medical Center (UMC), formally the El Paso County Hospital District Board is a public entity subject to the scrutiny of the taxpayers of the County. I believe we can also agree that the UMC Board of Managers serve to protect the interests of the taxpayers.
Members of UMC’s board have a fiduciary responsibility to act on the best interests of the taxpayers of the community, over their personal interests. Fiduciary responsibility includes making decisions that are not in conflict with UMC.
Sam J. Legate is an attorney, and by many accounts a successful one.
Legate was on the Board of Managers of the El Paso County Hospital District (UMC) from 2000 through 2007. He was vice-chair from 2003 through 2007. As you know, the El Paso County Hospital District is the University Medical Center (UMC).
As a board member, Sam Legate has a responsibility to you, the taxpayer.
On May 13, 2007, the UMC board recommended that County Commissioners allow local taxpayers the opportunity to vote on approving $120.2 million in taxpayer-funded bonds to build the children’s tower at UMC. Sam Legate was the Chair of UMC’s Finance Committee that approved going forth on the business model that is the basis of children’s financial model.
As a matter of fact, in UMC’s press release of March 13, 2007 announcing the decision, Sam Legate is quoted as stating “The plan has stood up to serious financial scrutiny.” The plan he was referring to was the one where El Paso Children’s Hospital “does not require any additional dollars from the taxpayers for operational expenses.” The plan was based on utilizing “financing available only through” UMC, according to UMC Board Chair Rosemary Castillo. She was quoted in the same press release.
Yes, that is the same Rosemary Castillo that is today’s El Paso Children’s Hospital chairperson, after taking over the helm from Sam Legate in December 2014. I hope you can start to see how the dots connect.
However, let’s get back to Sam Legate.
Also in 2007, there was some controversy about UMC board appointments between Anthony Cobos and Veronica Escobar. I told you there were dots to connect. The controversy revolved around Escobar wanting to extend Rosemary Castillo’s appointment to UMC. Castillo had termed out and Veronica Escobar wanted to change the bylaws to increase the terms board members could serve.
Veronica Escobar was opposed by Anthony Cobos and Escobar lost the vote three to two.
As a result, both Rosemary Castillo and Sam Legate were termed out.
Before they were termed out, the UMC board hired a new CEO for UMC, Jim Valenti. According to a guest column Sam Legate penned on the El Paso Times on April 20, 2014, Jim Valenti was hired, in part, because Valenti had committed to “building a separately licensed children’s hospital.” Legate was a board member when Valenti was hired.
The voters approved the bonds for the El Paso Children’s Hospital in 2007. Immediately after, Sam Legate joined the El Paso Children’s Hospital Board, as a founding director and in 2008 became the children’s chairperson until December 2014 when Rosemary Castillo took over the chairmanship. Sometime around May 19, 2015, it is unclear exactly when, Sam Legate resigned from the board of the El Paso Children’s Hospital. This was within days of the children’s hospital filing for bankruptcy.
I believe that I have already established that Sam Legate was very knowledgeable about the financing model for the El Paso Children’s Hospital that entailed its relationship with UMC. He was on the finance committee that argued that it “stood up to financial scrutiny.”
Sam Legate went from voting and advocating on behalf of the El Paso Children’s Hospital while representing the interests of UMC, and by extension, you the taxpayers, to immediately representing the interests of children’s hospital, a private entity. The same private entity that received taxpayer monies Legate approved at UMC.
In its simplest terms, Sam Legate lobbied a public entity, UMC to ask the voters to approve $120 million to build a tower for the private entity he went on to represent.
Today, the El Paso Children’s Hospital is bankruptcy with many elected official feigning ignorance of the financial arrangements between UMC, a public entity, and children’s, a private entity all of it involving your tax dollars.
The question everyone is too afraid to ask is what did Sam Legate know? More importantly, was Sam Legate conflicted when he advocated for the children’s hospital and when he voted to have voters approve funding it.
There is a lot finger pointing about who owes what, what were the agreements made and how much is really owed. One entity, El Paso Children’s Hospital is not subject to open records requests and therefore we cannot ask these questions of them.
Sam Legate suddenly resigned as soon as children’s filed for bankruptcy but not before stating that he “was out of town at the last board meeting” of children’s. He stated this on May 20, 2015. According to the court documents filed by children’s in the bankruptcy, the El Paso Children’s Board approved filing for bankruptcy in February 11, 2015.
Sam Legate was a board member at the time, yet the insinuation, through his public comment, is that he did not participate in the board decision filing for bankruptcy. We cannot know for certain if the “last meeting” he was referring to was the February meeting, almost three months earlier, or if there was another last meeting before his resignation. We cannot know this because children’s is a private entity not subject to open records requests.
What we do know is that from the moment the taxpayer was asked to approve money for children’s, Sam Legate was advocating and voting to use taxpayer monies to fund it. As soon as the money was approved, Sam Legate became a board member of the same organization that was using money he approved and advocated for. Presumably, he clearly understood the intricacies of the legal agreements between the two entities and the responsibilities each had. As a board member, he had to have understood that children’s was in financial distress from the onset.
Through all of the legal maneuverings, there is one question that demands an answer; was Sam Legate in conflict when he was serving two masters – first UMC and then the El Paso Children’s Hospital? More importantly when did he know children’s would be unable by unable to fulfill its obligations and did he have a fiduciary responsibility to let you know.
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