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In the summer of 1967, police brutality, poverty, and despair led Newark’s Central Ward to erupt in racial violence. Six days of rioting left 23 people dead, 725 injured, and the neighborhood in ruins. In an attempt to right decades of discrimination, federal, state, and local officials negotiated a pact called the Newark Agreements. This unique contract paved the way for a major academic health center in the city’s Central Ward. It would offer quality health care to the impoverished, thousands of new jobs in the inner city, and hope for the future. In 1970 the dream came alive when the University of Medicine & Dentistry of New Jersey opened its doors. Its new structures gleamed amid a neighborhood of burned-out and boarded-up buildings. UMDNJ grew each year � it currently bills itself as the country’s largest health sciences school � and Newark’s Central Ward grew with it. The area, now called University Heights, features freshly painted homes and a new, thriving middle class. With five campuses on 185 acres, nearly 15,000 employees, and more than 5,500 students, UMDNJ is the center of a growing statewide health care system. And last year it claimed to lead the nation in the number of minorities receiving their first professional degrees in medicine. One shining star in this system, herself a symbol of its success, was general counsel Vivian Sanks King. As the university’s first female, African American vice president, she started with a hospital administration job, worked her way through law school, and, after other legal positions, became university GC and vice president of legal affairs in 1993. Then, last year, Sanks King found herself enmeshed in a federal investigation into Medicaid fraud. For more than three years, U.S. attorney Christopher Christie alleged, her legal department looked the other way while the university knowingly double-billed the federal government for at least $4.9 million in medical services to the poor. Confronted with the charge, the university admitted its wrongdoing and ousted Sanks King from her job. “The fact that she was forced out [of her job] is just a personal tragedy,” says Sanks King’s attorney, Paul Fishman, a partner at Friedman Kaplan Seiler & Adelman in New York. He calls his client “a wonderful woman, who is beloved both in the legal community and among her former colleagues at UMDNJ . . . with an outstanding reputation in the bar.” Fishman says he is convinced that she did nothing wrong and will be vindicated. As a result of the scandal, the university has added another “first” to its legacy � the first school in the nation to sign a deferred prosecution deal with the U.S. Department of Justice. Under the two-year deal signed by UMDNJ trustees in December, the university itself would not be indicted in the Medicaid scandal. But that wasn’t the end of things. Christie has convened a grand jury that could still indict individuals in the Medicaid fraud incident, as well as in other scandals now being investigated. Federal investigators who initially looked into the double-billing allegation have expanded their probe into other practices at the school. By July, federal monitor (and former U.S. attorney and federal judge) Herbert Stern said that he had identified $243 million in waste, fraud, and abuse at the university � including more than $35.5 million in additional Medicaid overbilling and $11.7 million in overcharges to a state charity fund for the poor. To many people, these are shocking developments, even by New Jersey corruption standards. The growing scandal has tossed the university into a financial crisis. Nearly a dozen administration or academic leaders have either quit or been ousted. The group that accredits the university has placed it on probation, its state funding has been cut, and its federal appropriations are in peril. Today UMDNJ symbolizes everything that can go wrong at an institution where key administrators cheat, and the lawyers fail to � or just cannot � stop them. Sanks King, who has not been charged with any crime, and who by all accounts has not enriched herself at public expense, declined to comment for this article. Meanwhile, she awaits the outcome of a grand jury investigation that has dragged on for months. Paul Fader, who was chief counsel to former New Jersey governor Richard Codey in 2005, represented the governor in the deferred prosecution negotiations, and was part of the group that approved Sanks King’s firing. (Fader is now a partner at Florio Perrucci Steinhardt & Fader in Rochelle Park.) He says he understands the tragic dimension of the situation, but the double-billing fiasco was “a prime example of where the general counsel is faced with a decision that the client doesn’t want to hear,” and gives in to the client’s pressure. Others come to Sanks King’s defense. Attorney Pamela Miller, for one, is a lawyer and vice president at a Fortune 50 health care company who has been close friends with Sanks King since law school. Miller describes her classmate as a serious, circumspect woman who often spoke on corporate governance at health care conferences. She calls Sanks King “a woman of absolute honesty and a lawyer of the highest integrity.” Miller, past president of the minority Garden State Bar Association, says Sanks King actually led an effort to try to fix the double-billing problem at the university. “Lawyers don’t juggle the finances in hospitals . . . and general counsel do not sign the Medicaid or Medicare cost reports [which contained the double billing],” Miller says angrily. “And the white male executives who did [that] have not been eviscerated or criminalized the way Vivian has been.” Sanks King “will be exonerated, and [Christie] is going to owe her an incredible public apology.” Yet it was the GC who was at the top of Christie’s list of problem employees. Christie went so far as to tell the university’s trustees last December that if they wanted to keep the university from being indicted, they had to replace her. He even wrote it into the deferred prosecution agreement. Though companies often shake up their legal departments when they find themselves in trouble with the government, it’s rare for a U.S. attorney to demand that kind of change. Lawrence Finder, a former U.S. prosecutor in Texas who has studied federal probes of corporations and deferred prosecution agreements, calls the U.S. attorney � ordered shakeup at UMDNJ “extraordinary.” Finder, a partner in the Houston office of Dallas’s Haynes & Boone, adds, “I have never heard of such an ultimatum. All I can say is that there must have been some really horrible facts.” Sanks King began her UMDNJ career modestly, first working in community relations at the school’s University Hospital. Then, juggling family and work, she went on to Seton Hall University School of Law, graduating in 1985, when she was around 40 years old. Sanks King became assistant counsel to the Newark Board of Education, then assistant dean of Seton Hall’s law school, before joining UMDNJ’s legal department. She quickly rose through the ranks and in 1993 was named vice president of legal affairs/general counsel. Both Seton Hall and Rutgers, where she earned her undergraduate degree, have honored her as an outstanding graduate. But in late 2005, her star imploded in the Medicaid scandal. The centerpiece of the prosecutor’s case is the assertion that Sanks King’s legal department knew for at least three years that the university-owned University Hospital and the doctors at its outpatient clinics were both billing Medicaid for the same medical services. Worse, the government says in its complaint, the legal department did nothing to halt the double billing, and it did not disclose the situation to Medicaid. There had been a long-running dispute between the doctors and the hospital over billing, but the complaint said that since at least 1990 the doctors have had a contract with the medical school permitting them � not the university � to charge Medicaid for their services. But in May 2001 the legal department learned that double billing had occurred for fiscal year 2000, according to the complaint (it remains unclear when the practice actually began). Sanks King hired the Warren law firm of Kalison McBride Jackson & Murphy to research the issue. James Robertson, a principal, director, and spokesman for the law firm, would not comment on the firm’s role “due to the ongoing investigation.” But the complaint states that between July and December, an unnamed attorney there wrote three drafts and a final opinion “that were received by attorneys in UMDNJ’s legal department.” The early drafts concluded that the doctors were legally entitled to bill for their services under their contract with the university, and the hospital was not. The Kalison McBride lawyer also recommended that UMDNJ “must disclose to the Medicaid fiscal agent” the overpayment received for fiscal year 2000, and that the university “should not submit the same physician costs for the [clinics] in FY 2001 or thereafter.” Then, the complaint states, the Kalison McBride attorney reiterated that the university “must disclose to the Medicaid fiscal agent the FY 2000 overpayment, hopefully in a way that would limit discussion to that cost report.” (Cost reports are forms that medical providers file with Medicaid in order to be paid.) But in the final legal opinion, the wording changed. Instead of calling for an end to the double-billing practice, the final Kalison McBride opinion advised that the university “may continue to seek reimbursement for physician costs documented and incurred in the [clinics],” according to the complaint. “With respect to disclosure to Medicaid,” the complaint says, “the [Kalison McBride] attorney stated that ‘[the university] can take the position that this reporting obligation does not apply to it because [it] was not overpaid for its costs in the clinics nor did it receive an inappropriate payment.’ “ No one at the Kalison McBride firm or the U.S. attorney’s office would comment on why the advice in the final opinion contradicted the earlier drafts. But a person present at the meeting where Christie briefed the trustees (and who requested anonymity) says that the U.S. attorney holds Sanks King responsible for the changes. (Christie declined to comment for this article.) However it happened, the result was that no one contacted Medicaid, and no one ordered University Hospital to stop double-billing the federal agency, according to the complaint. By late 2003 and early 2004, at least three university employees outside the legal department spotted and questioned the hospital’s billing practices. None of those people still work there. One was Adam Henick, then vice president for ambulatory care, who says the employees eventually wrote a memo to Sanks King about it, and she formed a task force to look into the problem. Henick, named to the task force, says that the group was drawn primarily from Sanks King’s legal department. A few months after the group started meeting, according to the criminal complaint, a UMDNJ attorney advised senior management that if the hospital was going to bill Medicaid for the services, then there must be “a [revised] contract between the physicians and the hospital, which, at a minimum, sets forth the physicians’ agreement to forgo billing for providing services for which they are, without such an agreement, entitled to bill.” Henick says the university stopped double-billing for 90 days, but then began again. By July 2004 it became apparent to Henick that Sanks King’s people “were stonewalling,” so he told the task force to take action, or he would. That’s when the task force kicked him off, he says. So, in the fall of 2004, “I reported [the double billing] to the Office of the Inspector General, then the state criminal investigative unit, and the [Federal Bureau of Investigation],” Henick recalls. He says he was fired two months later, but the proverbial cat was now out of the bag. In November 2004 the university notified Medicaid of the overpayments. (UMDNJ wouldn’t comment on Henick’s departure.) That admission gave U.S. attorney Christie a powerful reason to open a criminal investigation into the school, where rumors of political influence � peddling and other wrongdoing had swirled for years. Christie is no stranger to New Jersey politics, and his name is often mentioned as a possible future Republican candidate for governor. Cleaning up the school’s scandals could give Christie a major boost at the polls. Like Sanks King, Christie is a graduate of Seton Hall University law school. He began his legal career in 1987 at the firm of Dughi, Hewit & Palatucci in Cranford, and in 1994 was elected to the Morris County Board of Chosen Freeholders, which oversees the operation of the county’s government. He was named director of the board in 1997. Christie also has served as an officer of the Christie Family Foundation, a private family charity. Both he and his family have been strong financial supporters of the Republican party in New Jersey. In January 2002, President George Bush named Christie to the U.S. attorney post for New Jersey, although Christie was primarily a corporate lawyer with no criminal prosecution experience. Christie surrounded himself with strong criminal attorneys, though, and has carefully honed his image as a reformer. His office has prosecuted dozens of New Jersey public officials for corruption over the past four years. In June 2005 he made news when he signed a high-profile deferred prosecution agreement with Bristol-Myers Squibb Company, which admitted securities fraud. But then some legal observers cried foul when it was revealed that the agreement called for the drug company to endow a chair in business ethics at Christie’s alma mater, Seton Hall law school. Through much of 2005, Christie’s office investigated UMDNJ’s billing practices. At the end of the year, armed with the criminal complaint, Christie pressured the school’s board of trustees. He said he would prosecute the university as an entity � as the Justice Department did to the now-defunct Arthur Andersen accounting firm � unless the trustees acknowledged the fraud, replaced Sanks King, and cooperated with his investigators. The trustees had little choice, since any criminal prosecution would jeopardize the university’s funding and accreditation. Sanks King left her post quietly, without a fight. By this time, the trustees had hired their own former federal prosecutor, Walter Timpone, to deal with Christie and negotiate the deferred prosecution deal. Timpone, of the Morristown firm McElroy, Deutsch, Mulvaney & Carpenter, says the board has directed him not to comment. But an attorney who was newly named to the board of trustees questions whether UMDNJ had an aggressive enough legal advocate in the negotiations. Christie clearly held the strongest cards, and the same board member, who asked not to be identified, calls Christie’s terms “draconian.” The board member says that he never would have agreed to Christie’s terms if he had been there at the time. Christie’s tactics have come under scrutiny from others, too. Earlier this year, The New Jersey Law Journal, a sibling publication of Corporate Counsel, compared Christie’s ongoing oversight of the university with the Soviet Red Army’s liberation � and then continued occupation � of Eastern Europe. The university, the editorial said, “belongs to the people of New Jersey . . . [and] the ultimate decision as to how it should be run is theirs.” (The Law Journal’s editorials are written by an independent, outside editorial board.) For his part, Christie retorted with a letter to the editor attacking the “far-fetched analogy” to the Red Army. His letter called UMDNJ’s problems “inherent” and “intractable” because key personnel were “working in their self-interest to perpetuate fiscal and financial shenanigans.” Then he added: “The fox and the henhouse easily come to mind.” Under the terms of the deal, the university has to cooperate completely with a grand jury investigation. That may include “current and former UMDNJ trustees, officers, employees, agents, and attorneys.” The university also must waive its attorney-client privilege, pay back any misappropriated funds, and accept a federal monitor. If the university complies with the agreement for two years, the fraud charges against it will be dropped. In addition, the pact permits the monitor to recommend a new general counsel (at press time the job had not been filled) and calls for the establishment of a chief compliance officer who will answer to the school’s president and board of trustees � and not to the GC. For the monitor’s job, Christie named Herbert Stern, a former federal judge and ex � federal prosecutor who made a name for himself in the 1970s by fighting New Jersey political corruption. Usually a federal monitor is mutually agreed upon by both sides, but this agreement let Christie alone pick the person. Christie has described Stern as a “mentor.” Another link between the men is that one of Christie’s strongest political supporters is John Inglesino, who is both an attorney in Stern’s law firm (and now deeply involved in the UMDNJ investigations) and the deputy director of the Morris County Board of Chosen Freeholders, where Christie had previously served. Inglesino also has publicly urged Christie to run for governor. Stern has a long history of trying to clean up the state’s notorious corruption. As a federal prosecutor, Stern’s work was the subject of a 1973 book, Tiger in the Court, which told of his prosecuting eight mayors, two New Jersey secretaries of state, two state treasurers, one U.S. congressman, two political bosses, and 64 other public officials. President Richard Nixon appointed Stern a U.S. district court judge in 1973. Stern retired in 1987, and is currently a senior partner at Stern & Kilcullen, a general practice law firm in Roseland. Stern lost no time jumping into the university’s problems. The deferred prosecution agreement gave Stern broad power to probe other areas of the university’s financial and employment activities beyond the double-billing issue. In his first 28 weeks he opened 27 separate investigations. “My office’s motto is NOW, as in: Do it capital ‘N,’ capital ‘O,’ capital ‘W,’ ” Stern says over lunch. By July 20, six months into his tenure, Stern had filed his second major report, as well as several interim reports with Christie and the trustees. His findings have dropped one bombshell after another, citing more possible fraud and financial irregularities, lack of oversight on no-bid contracts and on vendor payments, and heavy political influence in hiring. Stern declines to discuss Sanks King’s role at the university because she left before he became monitor. As Stern continues his broad probe of the university, which under the agreement could take two years, he is focusing on creating a sound compliance program and finding the right people to run it. Among other things, the compliance program would stop the university from cheating Medicaid again. It would also be barred from doling out patronage jobs as well as millions of dollars in no-bid contracts. Stern is receiving considerable help in his efforts to reshape UMDNJ. Governor Jon Corzine, a Democrat who took office in January, has fortified the board of trustees by naming six new members with expertise in law, finance, and ethics. Among them is a new board chairman, Robert Del Tufo, a former federal prosecutor and New Jersey attorney general. Del Tufo, who is also of counsel at New York’s Skadden, Arps, Slate, Meagher & Flom, says that in the past the board “never asserted its authority or assumed the responsibility” to run the university. In July the board hired a chief ethics and compliance officer, attorney Michael Clarke, formerly the vice president for corporate compliance at Edison Schools, Inc., in New York. Clarke will build a new department of 28 people, including 17 new compliance officers and investigators. Trustees say they hope to hire a new university president and a new general counsel by December. Even with all these efforts, UMDNJ’s future will not be easy. It first must solve the crisis in academic leadership. The board is conducting a national search for a new president, and some members worry that the scandals may deter top candidates. Then there’s the problem of an incomplete audit. The university still doesn’t have a certified fiscal 2005 audit, which was delayed by the revelations of the financial irregularities. Added to those problems is the university’s deepening budget crisis. Its financial woes are compounded by the monitor’s new findings of fraud that must be repaid, by the price of the new compliance efforts, and by the costs of the monitor’s office. In August, Stern submitted a bill for $5.8 million to the state for his first six months’ work, including charges for an auditing firm, a forensic accountant, and $500 an hour for Stern’s legal work. What’s more, there is now talk of folding UMDNJ into the state-run Rutgers University. Even if UMDNJ survives this crisis, its reputation will be scarred for years to come. How did it all go so wrong, and could anyone have acted to save the university from this fate? The scandal’s trail suggests that any number of people might have � a more involved board of trustees, a stronger outside counsel, a more diligent president and chief financial officer. But Fader, the former chief counsel to the governor, believes that UMDNJ is an important lesson for the nation’s general counsel. Sanks King “was just unwilling to stand up to the business side” of the university, he says. “Turning a blind eye is never the right answer. As general counsel, she didn’t stand up for her profession.”

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