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Shriners Close Galveston Hospital, Sued by UTMB

News Type: Event — Sun Apr 5, 2009 10:40 PM EDTus-news, nascar, shriners, ralph-semb, david-ragan, douglas-maxwell, east-west-shrine-football-game, galveston-burns-hospital, imperial-potentate, justin-timberlake-pga-shriners-open, shriners-sued-by-utmb, shriners-to-close-hosptialsSandy FrostAccording to national media, the Shriners aren't as well endowed as they used to be.

Headlines are announcing that the Shriners are closing their Galveston burns hospital after it was damaged by Hurricane IKE as well as possibly closing five other hospitals, including those in:

* Erie, Pennsylvania

* Spokane, Washington

* Greenville, South Carolina

* Springfield, Massachusetts

* Shreveport, Louisiana

The Galveston County Daily News has reported that:

"A huge financial loss within the Shriners endowment due to turmoil within the financial markets prompted the organization's CEO (Ralph Semb) to order the (Galveston) hospital to cease operations indefinitely even after promising the hospital would reopen after the storm."

Other headlines read:

"Shriners Prepare to Close Some of Their Children's Hospitals Because of Financial Problems"

This New York Times headline ran on Sunday, July 6, 2003 and reported that the Shriners' endowment lost $2 billion, or a quarter of its value, over the previous three years.

So, just what is an endowment?

From About.com:

"Definition: A fund that is made up of gifts and bequests that are subject to a requirement that the principal be maintained intact and invested to create a source of income for an organization. Donors may set up an endowment to fund a specific interest; and a non profit's governing body may set up an endowment. In any case, an endowment requires that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose."

According to a recent ModernHealthCare.com article:

"Semb (Ralph Semb, Chairman of the Shriners Board of Trustees and CEO) said Shriners hospitals have already been asked to cut $200 million from operations this year because of rising health care costs and the endowment's plunge to $5 billion from more than $8 billion…Repairs and renovation to the Galveston hospital following last September's Hurricane Ike were halted in January because of budget constraints."

Budget constraints?

In addition to insurance coverage, the Shriners have applied for FEMA disaster assistance for the IKE damaged hospital but those funds could be in jeopardy if the Galveston facility is closed.

FEMA assistance is granted to rebuild to pre-existing conditions and is designed to help nonprofits and non government agencies recover by helping pay for disaster related expenses such as debris removal and facility repair. For example, after insurance covers policy obligations, UTMB will most likely be eligible for tens of millions of FEMA dollars because it is planning to rebuild and reopen. This type of assistance is also available to the Shriners, however, FEMA will not pay to rebuild a hospital that is going to be abandoned.

At this point, one might ask questions like

"If things are so bad, why didn't the Shriners try and raise money during the recent national broadcasts of the Justin Timberlake Shriners Hospitals for Children PGA Golf Tournament and the East West football game as well as use the opportunities presented as NASCAR driver David Ragan announced the Shriners as his chosen charity?

"And just how much did those events raise?"

And just In case you don't know who the Shriners are, they're the red Fez wearing grandpa-types who have the secret handshakes and drive their goofy little cars around in parades. They are members of a 350,000 member fraternity of those who must first be Master Masons. They meet in nearly 200 North American temples to support and operate their network of 22 hospitals that provides free medical care to burned and crippled children,

It's been discovered that the Shriners also have a secret nonprofit sub-group, the Royal Order of Jesters, currently being investigated for links to prostitution, sex trafficking and the sexual exploitation of minors and international travel for those purposes after three Jesters were caught in a FBI human trafficking sting. All three, including a former NY state Supreme Court judge, his law clerk & former Erie County prosecutor and a retired police captain, have pleaded guilty to violating or conspiring to violate the Mann Act. You can read all about this and other ethical challenges in this list of findings.

Back to the headlines.

This ABC headline reads "UTMB files lawsuit against Shriner's Children's Hospital."

The University of Texas Medical Branch at Galveston and the Board of Regents for the University of Texas System filed for a restraining order and injunction against the Shriners on March 30 to stop them from closing their Galveston hospital because they allege that the Shriners failed to provide proper notice so the joint research projects could relocated.

This concept of research is very important because it is the first step for processes that commercialize new burn treatments in an industry worth billions. For example, the Shriners helped develop a product that is marketed as Integra Dermal Regenerative System. Integra did pretty well in 2008. According to this press release, "Total revenues in the full year of 2008 were $654.6 million, reflecting an increase of $104.1 million, or 19%, over the full year of 2007… Integra generated $27.1 million in operating cash flows in the fourth quarter and $72.6 million for the full year 2008, a 54% increase over full year 2007."

So, when Shriners announced that they will "suspend indefinitely" operations at the Galveston facility, it means a bit more than shuffling patients and figuring out how to continue patient care.

What follows is a time line from which you can draw your own conclusions, including that which was written by the current Imperial Potentate in his last message as he name drops and gushes about hanging out with celebrities and traveling the world instead of rallying the troops and putting out the call for the faithful to raise money in the face of closing their beloved hospitals.

And about the traveling?

As the Imperial Potentate flies around the world and as board members travel from all over the country to meet in Tampa and to places like Hawaii and wherever else to conduct business, who pays their expenses?

In an attempt to get the other side of the story, the following email was sent on March 23, 2009 and follow up calls were made to Marlena Laguna-Klein, Shriners VP of communications.

To date, there has been no response, including the disclosure of the Shriners' 2007 exempt organization tax return AKA the 990. According to the IRS, nonprofits have 30 days to supply the past three years of tax returns if so asked and face penalties for not doing so.

"Dear Marlena,

My name is Sandy Frost and I'm an on-line investigative journalist who specializes in investigating issues of nonprofit compliance. My work is here.

This is a request for the 2007 SHC 501c3 tax returns as they don't seem to be available on Guidestar.org.

Emailing them back to this address or posting them online meets IRS disclosure regulations.

I have a question about the 2006 SHC 501c3 tax return, please find attached.

On page 2, Section 2, Statement of Functional Expenses, Line 29 "Travel" lists $7,080,265. It's not clear how much of that was spent on board expenses, whether it's a board of directors or board of trustees.

I have the same question about Line 30, Conferences, conventions and meetings. How much of the $666,254 went toward board expenses?

I'm asking this because Part V-A, pages 32 - 33 indicates that officers, directors, trustees and key employees list $0 for expense account.

This would mean that those individuals serve voluntarily and pay their own way to Shriner functions, etc. Is this true?

For example, a Texas newspaper is reporting that there is a meeting of the joint boards with hospital officials to discuss the Galveston SHC situation. Do the board members attending this pay to fly to Tampa themselves, pay for hotel, meals, etc? Do the Galveston SHC officials pay their own way?

Thank you in advance for your cooperation,

Sandy Frost"

Here is a timeline that may paint a clearer picture of how the Shriners operate, including how closing the Galveston hospital led to the UTMB taking legal action against them for doing so.

June 3, 2005 - Announcement that Shriners will rebuild Honolulu hospital.

August 7, 2007 - Groundbreaking for a new $73 million, state-of-the-art Shriners Hospitals for Children in Honolulu, Hawaii.

November 12, 2007 - Announcement that this PGA event has been renamed "Justin Timberlake Shriners Hospitals for Children Open." Timberlake says he's excited to raise money for the kids. Ralph Semb is happiest about how Timberlake will bring "unprecedented amount of attention and interest to the Justin Timberlake Shriners Hospitals for Children Open" and does not mention fund raising.

January 4, 2008 - "Erie Shriners Hospital cuts staff" reports the Erie Times News. "Erie Shriners Hospital for Children can't recruit any full-time surgeons, so hospital administrators Thursday laid off the equivalent of 39 full-time employees. Thirty-five employees either retired or were laid off, while 35 others had their work hours reduced. The hospital now employs the equivalent of 108 full-time workers. The first layoffs in the Erie hospital's 80-year history."

January 4, 2008 - Cached article from Penn State Medical Center reports "Shriners has lost three full-time surgeons over the last two years, including chief of staff Jim Sanders, M.D., who left Dec. 14 to accept a job in Rochester, N.Y… A Shriners employee laid off Thursday said she couldn't talk to the Erie Times-News about her situation because her severance agreement includes a clause saying that she promises not to disparage the hospital."

June 14, 2008 - The Honolulu Star- Bulletin announces $73 million Honolulu Shriners Hospital ahead of schedule.

July 3, 2008 - Shriners announce ground breaking for new St. Louis hospital.

September 13, 2008 - Hurricane Ike damages and forces Galveston Shriners burns hospital to close.

October 16 – 19, 2008 - Justin Timberlake Shriners Hospitals Open broadcast on Golf channel. As Shriner leaders hang out with the rich and famous in Las Vegas, there is little or no mention of or attempt at fund raising to specifically rebuild Galveston or the dire financial situation that threatens hospitals.

October 21, 2008 - Press release about East West Game fails to mention Galveston emergency or need to raise money. First of eight East West game press releases that do not mention need to help Galveston SHC or fund raise to help keep other hospitals open.

November 11, 2008 - Shriners apply for FEMA disaster assistance.

December 15, 2008 - "Patients Represent Shriners Hospital at East West Shrine Football Game" promotes game with no mention of fund raising to help save Galveston or keep other hospitals open.

2008 – 2009 - Message from Imperial Potentate Douglas Maxwell discusses "Justin Timberlake/Shriners Hospitals for Children Las Vegas PGA Open." He drops names like Josh Duhamel of the "Vegas" TV Series, actor Greg Kinnear, professional pitcher Greg Maddux, Olympian Amanda Beard, and Ellen DeGeneres. The event got widespread publicity on "Entertainment Tonight" and in "Sports Illustrated" and he goes on to write about Planet Hollywood and how "Justin had a concert… 'Justin Timberlake and Friends'… to benefit our beloved Shriners hospitals. A few of the guest performers were the Jonas Brothers, Boyz to Men, Rhianna, and a special guest friend of Justin's, Lionel Ritchie, who was introduced as a Shriner. It was quite an event… Even Bill O'Riley, under his section on "Patriots and Pinheads", called Justin a patriot for supporting such a noble cause as Shriners Hospitals. All told, I've been informed that we have received more than $12 million dollars of publicity." There is no mention of the need to raise funds to save Galveston or address the dire situations that threatens other hospitals with closure.

January 16, 2009 - Shriners decide to "suspend operations indefinitely" at Galveston hospital.

January 20, 2009 - Galveston Mayor Lyda Ann Thomas makes first public announcement about the hospital's closure as she told the Houston-Galveston Area Council the hospital would not be open, saying she wanted the council to be aware of the anticipated further strain on the Harris County Hospital District.

January 21, 2009 - "Shriners delay new hospital construction" reports that Shriners Hospital for Children in St. Louis has delayed construction of a new $170 million hospital at the Washington University Medical Center campus as the international Shriners health system struggles with a budget shortfall. "It's the economy that's holding us back," said Ralph Semb. "We have to look at things we are spending money on that we don't necessarily have to. We can only afford to do so much."

January 22, 2009 - "Shriners isle hospital to close indefinitely" KHOU reports a nurse at the hospital said she took the announcement to mean she ought to look for a new job. The closure came as a surprise to the 325 employees who had been assured by hospital officials for more than four months that their jobs were secure. "Many employees streaming out of the meeting Thursday morning declined to comment or provide their names. They said they were told if they spoke to the media they would be immediately fired and would not receive further paychecks. Employees are to be paid through March 31. Hospital employee Robert Gaona removed The Daily News from the meeting because he said it was a private affair for employees only. Later, security guard Karl Piazza removed reporters from the hospital's sidewalk and then called the police."

January 22, 2009 - "Save Shriners Burns Hospital for Children, Galveston Texas" goes on-line.

January 25, 2009 - KBTX reports that Ralph Semb meets with Galveston SHC staff to announce "indefinite suspension." "Reconstruction at the Galveston hospital was halted this week because of the cost. Semb told The Associated Press this week that the hospital had significant damage. He says the group can't afford to repair it."

March 2, 2009 - Last update to Shriners MySpace shows all interest in celebrities and high profile events like East West Shrine Game, Justin Timberlake Shriner Golf Tournament , Justin Timberlake/John Elway Shriner ad, NASCAR driver David Ragan Shriner endorsement but never mentions dire financial situation or sounds the call to raise money to save Galveston or prevent widespread hospital closures.

March 19, 2009 - Announcement that Shriners Hospital Cornerstone Laying Cornerstone-laying ceremonies will be performed at the Shriners Hospital on Punahou Street. The ceremony will be held on March 19, 2009 starting at 3:00PM. The Grand Lodge of Hawaii will perform the ceremony led by MW Dennis Ing and with all the leaders of Masonry present. Imperial Shrine Potentate Doug Maxwell as well as Ill. Pete Larson of Aloha Temple and his divan will attend.

March 13, 2009 - Galveston Daily News reports: "UTMB Galveston's Blocker Burn Unit might be operating" said nursing supervisor. "We are back open," she said. "We can take anyone age 13 and up from zero to 99 percent (burned). UTMB Galveston cannot handle major pediatric burns for those younger than 13 since the Shriner Galveston hospital closed, Shriner Cincinnati is the best place for the youngest patients."

March 24, 2009 - Shriners' joint hospital and executive board voted down a motion to reopen the burns hospital in Galveston.

March 25, 2009 - Galveston County Daily News reports that hospital battle goes public as one Shriner promises to take this up with the 1163 delegates at their upcoming annual convention.

March 26, 2009 - "Shriners vow fight to keep Galveston hospital open" Houston Chronicle reports that "Local Shriners vowed Wednesday to take their case for reopening the storm-damaged Shriners Hospital for Children in Galveston to convention delegates after the national leadership again decided to keep it closed. National board members could not be reached for comment."

March 28, 2009 - Ralph Semb sends out this email to Shriner representatives, claiming Shriners have "no money."

Editor's Note: For those Shriners interested in discovering what the 2008 Florida Statutes have to say about corporate records, go here. Shriners interested in what the 2008 Florida Statues have to say about "Inspection of Records by Members," will discover that a member of a corporation is entitled to inspect and copy any of the records of the corporation such as the minutes of all meetings of its members and board of directors, a record of all actions taken by the members or board of directors without a meeting, a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation and accounting records.

March 29, 2009 - Springfield's Shriners Hospital In Danger Of Closing (video) News story reports Shriners Hospitals for Children has been losing a million dollars a day since 2001. "If we leave it the way it is then we will have to close 22 hospitals and that's not what we want to do," says Semb. If the decision is to close Springfield's hospital, it would affect more than 1,300 children with orthopedic problems annually.

On March 30, 2009 - The UTMB filed an application for a restraining order against the Shriners. A copy can be read here. The UTMB video announcement can be seen here.

March 30, 2009 - "Western Mass. supporters rallying around Shriners Hospital in Springfield" Masslive.com is reporting "SPRINGFIELD - Supporters of the Shriners Hospital for Children are vowing to rally around the Carew Street hospital and redouble fund-raising efforts amid news the facility is eyed for possible closure. A spokesman for the Shiners International Headquarters in Tampa, Fla., could not be reached for comment."

March 30, 2009 - "Shriners Hospital in Spokane may close" The Spokesman Review is reporting "Parents, former patients and the medical community reeled from Monday's news that the Shriners may close its children's hospital in Spokane. The hospital is regarded by many as a city jewel – a group of specialists who have healed and helped children for 85 years…Telephone messages left at Shriners headquarters in Tampa, Fla., were not returned."

April 1, 2009 - Greenville SC Shriners Hospital may have to close doors" Greenvilleonline.com reports that "The Greenville hospital has been a part of the community for more than 80 years, treated about 15,000 patients last year and employs 249 people… The hospital, which treats children with cerebral palsy, club foot, spinal abnormalities and other orthopedic conditions, made the list because it is underutilized, (Ralph) Semb said. However, Rodney Brown, chairman of the board of governors for the Greenville Shriners Hospital, said it is seeing more patients every year and always operates under its $18 million budget. "There is no logical reason to close our hospital," he said. "We're seeing 1,600 patients a month in the outpatient setting and do 70 to 80 surgeries a month."

April 2, 2009 - "Erie Shriners Hospital for Children might close" The Erie Times News reported "This is not the first time the Shriners have looked at closing the Erie facility, which opened in 1927. A 2002 consultant's report to the national board of trustees recommended closing Erie's and several other hospitals as a way to cut costs. The board didn't pursue it. In 2005, delegates narrowly rejected a proposal to move Canada's only Shriners Hospital from Montreal to London, Ontario -- only two hours from Erie. Local Shriners had feared the move would have meant closing the Erie hospital. Erie Shriners officials also laid off the equivalent of 39 full-time employees in January 2008. A shortage of surgeons forced the hospital to reduce the number of surgeries it performs."

The UTMB application for a temporary restraining order and injunction states:

• For decades, UTMB has operated a state of the art burn and research and treatment unit on 32,000 square feet of lab and office space in the Shriners hospital that is located on the UTMB campus.

• In 1989, the University of Texas entered into a lease with Shriners pursuant to which Shriners leases property within the UTMB campus.

• Currently, there are approximately sixty-four (64) doctors and scientists who are conducting research at the Burn Research Unit and laboratories.

• The parties recognized and agreed that the burn research unit and labs could not be easily moved or relocated, and that the Affiliation Agreement requires five (5) years notice of termination.

• If serious, unresolvable problems develop between the parties, either party shall have the right to terminate this Agreement upon not less than five (5) year's notice in writing to the other party.

• It is not clear that the decision to close Shriners in Galveston was properly made or authorized.

• As if closing Shriners was not bad enough, on March 12, 2009, Defendants told UTMB that it had exactly 19 days to remove its entire lab and burn research unit operations.

• On 2/25/09 Exec VP of Shriners Keith Gardner wrote a letter to UTMB and stated that Shriners were continuing to assess the remaining repairs to be completed at the hospital site in Galveston.

• Properly moving the entire UTMB operation out of the Shriner facility would cost between $500,000 and $750,000 and could take 8 to 10 weeks.

• Environmental clearances must be obtained to safely construct new facilities in a temporary space.

• Construction of new space is necessary to avoid the loss of research materials that require sensitive storage.

• Freezers and hoods that are critical to the burn institute must be carefully moved, and the new facility must have the appropriate electrical distributions and modifications.

• Recalibrating equipment and certifying hoods from the lab at Shriners in the new spaçe is yet another substantial task.

• There is no space on Galveston island to house the bum research unit as 15,000 square feet of space available on the UTMB campus However, the Burn Research Unit and Laboratories currently occupy 32,000 square feet.

• If UTMB is forced to move the burn research unit and labs in any manner other than specified in the transition plan, there is a substantial likelihood that critical research will be destroyed or impaired as some of the scientists are in the middle of research projects that will be irrevocably lost if the labs are shut down next week.

• Further, UTMB could and would likely lose multiple grants and endorsements for research to be conducted at the facility.

• UTMB has attempted to initiate discussions with the defendants to negotiate a temporary lease and to find other solutions to eviction and cause irreparable harm to UTMB. Shriners have ignored these requests, and have not returned any written correspondence or phone calls from UTMB on the subject.

• UTMB's only recourse is to seek an order restraining Shriners from essentially evicting UTMB from its hospital on March 3l. 2009.

• The conduct of Shriners constitutes a breach of contract.

• Plaintiffs request a show cause order from the Court requiring Defendants to show that the hospital was closed with proper authority.

• lt is essential that the court act immediately, prior to notice on defendants and a hearing on the matter because in the time it would take to formally serve Defendants and schedule a formal hearing, the date by which Defendants have demanded UTMB to remove itself will have passed.

According to a March 28, 2009 story story by KHOU.com:

"The medical branch's offer to lease research space in the Shriners building have been ignored, officials say. But Ralph Semb, president and CEO of Tampa, Fla.-based Shriners Hospitals for Children, said Friday he was taken off guard by the lawsuit. The national office, which operates 22 hospitals, had been in talks with medical branch officials and had offered an extension, Semb said. 'I don't understand where they're coming from,' Semb said. 'We talked to them about extending the time and haven't heard back.'"

The UTMB was scheduled to present their case in the Galveston County District court, 405th Judicial District, tomorrow, Monday, April 6 before The Honorable Wayne J. Mallia, Presiding but the hearing has been rescheduled to April 29th at 9:30 am.

All copies of material reprinted or duplicated from "by Sandy Frost" must include the following credit line: From http://sandyfrost.newsvine.com/ Copyright © 2009 by Sandy Frost. Used by permission.

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