Limousine tours, Waterford Crystal, 14-piece orchestras and millions paid to consultants are not examples of wise spending for a nonprofit company, said Attorney General Mike Hatch during a visit to Albert Lea Tuesday.

Wednesday, September 26, 2001

Limousine tours, Waterford Crystal, 14-piece orchestras and millions paid to consultants are not examples of wise spending for a nonprofit company, said Attorney General Mike Hatch during a visit to Albert Lea Tuesday.

&uot;The excesses were pretty deplorable,&uot; Hatch said of Allina Health Systems, which recently agreed to a $16 million settlement and compliance agreement.

Hatch, toting a box full of heavy binders that outline Allina’s wasteful spending over thousands of pages, said the company is an example of a nonprofit company that lost its grip on its mission.

&uot;Nonprofits have a special responsibility to demonstrate wise spending habits. We, as taxpayers, are paying for their status,&uot; he said. &uot;They gain that status in the first place because they have a charitable mission.&uot;

The investigation by the Attorney General’s office examined records and receipts dating back a decade in the course of uncovering some troubling trends. Hatch said the company paid millions to consultants and researchers on all manner of issues, including how to prepare for the investigation itself. Executives also spent far too much money on lavish gifts, parties and retreats, he said.

&uot;I think the company’s executives were only interested in the status quo so they could continue to spend money the way they were accustomed – and that doesn’t sound like a nonprofit company,&uot; Hatch said.

Concerned that other health care companies may be stuck in a company culture similar to Allina, Hatch said he’s prepared to begin similar investigations in the coming months.

&uot;That’s one point I’m trying to make as I travel around the state: This case involved just one company, but we have reason to believe other huge insurers and HMOs have similar problems,&uot; he said.

It’s ultimately a consumer issue, Hatch said. Health care costs will probably continue to rise as the baby boomer generation ages, he said. Keeping administrative costs down &uot;is one way we can keep those costs in check,&uot; he said.

Hatch would also like to see state and federal regulators work harder to insure that large nonprofit companies like Allina don’t push the boundaries of their charitable status.

&uot;People are outraged, and I think the regulators should take note of it. Our citizens do not want to see this kind of waste,&uot; he said.

Hatch said Allina has two new executives that have pledged to keep a watchful eye on the company’s spending and to change the company culture. They’ve identified more than $22 million in overhead to trim, Hatch said.

&uot;Hopefully, this will serve as a warning to other nonprofits, especially in the health care industry, to remember their mission, and to keep a close eye on expenditures,&uot; he said.

(These examples were Compiled by the AP)

Among Allina actions questioned in the Hatch report:

n Lavish trips for executives included a $590 private limousine tour of Napa Valley vineyards and a $1,295 hot air balloon ride complete with a champagne brunch

n Despite Allina’s own policies forbidding the practice, the company paid for golf clubs, and exclusive golf course memberships for officials.

n Executives were required to attend &uot;sleepover conferences&uot; and play ring toss in an effort to find their &uot;inner self.&uot;

n Consultants arranged mandatory cocktail parties at a Marriot hotel. Managers reported they were reprimanded if they failed to attend.

n A California consultant who described herself as an adviser and confidant to movie stars billed Allina more than $2 million for &uot;executive coaching.&uot; Hatch said he was unable to determine what she actually did, and she never had a written contract. Payments to her and other consultants totaled more than $56 million over three years.

n Asked about his work with Allina in a casual conversation, one consultant who earned more than $150,000 answered that he &uot;essentially baby sits the executives and tries to make them feel important.&uot;

n One senior vice president worked at the company only five months, but received severance payments for nine months.

n In at least 10 cases, Allina paid severance payments to executives who resigned their position and therefore the payments were not required.