Health Midwest CEO’s testimony delayed

Attorney general's lawsuit seeks to block proposed $1.13 billion sale of company

Health Midwest CEO Richard W. Brown will give testimony Dec. 30 as part of the legal proceedings over the sale of Health Midwest, a Johnson County district judge ruled Tuesday.

The ruling by Judge Thomas E. Foster supported a motion by Brown’s legal counsel over the objection of the Kansas Attorney General’s Office, which had wanted to take a deposition from Brown today.

Brown, Health Midwest’s president and chief executive officer, was named as one of the defendants in a lawsuit filed by Kansas Atty. Gen. Carla Stovall last week over the proposed $1.13 billion sale of nonprofit Health Midwest to for-profit HCA Inc.

Stovall’s lawsuit, which was filed in response to a lawsuit by Health Midwest, asked the court to delay the sale, oust Health Midwest’s board of directors and appoint a receiver to take over the Kansas assets of Health Midwest, the area’s largest health system.

In addition, Stovall’s lawsuit contended that Health Midwest’s compensation of Brown was “excessive” and said a loan agreement between Brown and Health Midwest violated state law.

The case is scheduled for trial Jan. 9 in Johnson County District Court.

A motion filed Tuesday by Brown’s attorney, Thomas G. Kokoruda, stated that the legal counsel for Stovall had agreed to a Dec. 30 deposition of Brown but then set the date for today.

That was disputed by the attorney representing Stovall, Mark A. Lynch.

“We have not agreed to a Dec. 30 deposition,” Lynch told the court. “We agreed to Dec. 18.”

Lynch argued that taking the deposition Dec. 30 would not give Stovall’s office adequate time to prepare for the trial.

Foster scheduled a pretrial conference in the case for Friday morning.

In her lawsuit, Stovall alleged that Health Midwest engaged in a “civil conspiracy” by agreeing to provide Brown with a $7 million “golden parachute” if the sale to HCA closes.

Stovall said Brown’s compensation package was based on a 1999 employment contract and included three years of salary, a supplemental executive retirement plan, a leased automobile and forgiveness of a $125,000 loan made by a Health Midwest predecessor in 1985, which with interest is now valued at nearly $400,000.

Stovall said the loan agreement violated Kansas law. She asked the court to void the agreement and order Brown to repay the loan with interest.

Health Midwest contends that Brown’s compensation package was developed by “outside directors with advice from independent consultants who rendered fairness opinions” years previous to and “completely independently of the proposed sale to HCA.”

Meanwhile, a parallel legal case in Missouri on the sale of Health Midwest is scheduled for trial Feb. 3 in Cole County Circuit Court in Jefferson City.

Chuck Hatfield, assistant Missouri attorney general, said late Tuesday that Missouri Atty. Gen. Jay Nixon’s office had notified Health Midwest that it plans to take testimony from Brown, but that no specific date for the deposition has been set. It will likely be some time in January, Hatfield said.