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Borough sues former hospital CEO, six recalled board members (Updated)

The Borough of Wrangell has filed suit against former Wrangell Medical Center CEO Noel Selle-Rae and six of the recalled medical center board members. It is seeking the repayment of the more than $520,000 given to Selle-Rae as a severance package and legal fees. The complaint filed at the Wrangell Trial Court outlines the course of action allegedly taken by the Board to provide Selle-Rae with a severance package valued at over $1.2 million.

According to court documents, Selle-Rae’s contract signed in 2010 provided him with one year of severance pay if he was terminated without cause. He would only receive the payment if he first signed an agreement not to sue the medical center.

In March 2012, Wrangell residents petitioned to recall eight of the hospital board members. After the move for a recall became public information, on March 29, the board passed an amendment to Selle-Rae’s contract. In that amendment, he was guaranteed a severance package that included five years’ worth of severance pay and medical coverage. A provision of the contract said that the first payment was to be made on the 60th day after the date of termination, and Selle-Rae was still required to sign an agreement not to sue prior to receiving the payment.

According to Mayor Jeremy Maxand, the Borough Assembly was not aware of the change in contract. “The liaison to the hospital through city ordinance is given access to participate in hospital board meetings and to participate in executive sessions. Over the course of the last several months that liaison was denied access by the hospital board to those executive sessions, despite the fact that we had an ordinance that said he had the right to do so. And so, we didn’t have anyone in those meetings and we never saw those contracts until after it became public knowledge.”

Former medical board member Sylvia Ettefagh was the only defendant reached who provided extensive comments on the case. “The reason why the 2012 [contract] has come up is really because the city has never historically been involved in negotiating the contract or approving contracts for hospital CEOs. It’s only recently since the last mayoral election that the city’s been involved, or decided that it wants to be involved. This is a mix of players, not standard city business. All of the sudden rules that may have always been in the city ordinances but not part of precedent-setting behavior are being brought up.”

On June 20, one day after the board member recall election but before it was publicly certified, six of the recalled members and the one non-recalled member met in a public meeting.

After the board went out of executive session, Ettefagh made a motion to terminate the CEO without cause. According to court documents, Dorothy Hunt-Sweat, the only member who was not recalled, said the motion had not been discussed and should be left to the new board once they were elected. The other members proceeded to vote on the issue without further discussion. Rae’s termination passed 6-1. Hospital CFO Olinda White was appointed as acting CEO.

The complaint states that upon adjournment of the meeting, the six recalled board members directed White to immediately write a check for Selle-Rae for more than $520,000. It further states that when White protested writing the check, the board members told her that they were her bosses, and she had to comply. Ettefagh said she left immediately after the meeting and was not a part of these events.

The next day, White received a call from former hospital board president Mark Robinson directing her to cancel the check and make an immediate wire transfer of the same amount to Selle-Rae’s account. Robinson declined to comment for this story.

On June 26, the Borough tried to stop the payment and failed. On June 28, they requested that Selle-Rae return the money. He did not.

In the complaint, the Borough outlines why they think the board acted inappropriately and illegally. Part of the argument focuses on what happened on the night of the meeting, June 20. Selle-Rae’s contract said he was not to be paid the severance money until he signed an agreement not to sue and until the 60th day after his termination. He received the money immediately and without signing the agreement. The Borough argues that this action is in breach of his contract.

Additionally, the decision to terminate the CEO was made without public discussion or announcement, an alleged violation of the Open Meetings Act. The board also wrote the check and made the money transfer without going through proper board protocol. No motion was discussed or passed.

The complaint further alleges that the board members conspired to personally benefit Selle-Rae by activating his severance package and discussed this before the meeting. Ettefagh said that she mentioned her idea to terminate Selle-Rae to Jim Nelson, but they did not meet with other members or discuss the topic in-depth. “The comment was just in passing,” she said. “Remember, we’re in a small community and everybody talks to everybody.”

Other sections of the complaint outline the Borough’s position as to the legality of Selle-Rae’s amended contract. The Borough takes the position that the amendment to Selle-Rae’s contract that provided for the large severance package violates the Alaska State Constitution. The Constitution states that public funds, such as those used to run the hospital, can only be used for a public purpose. The large severance package uses public money for Selle-Rae’s personal benefit. Additionally, the complaint alleges that by providing money to Selle-Rae through an immediate wire transfer before the 60-day termination mark, the money then constituted an illegal private gift of public funds to Selle-Rae.

Mayor Maxand said the Borough is seeking legal action against Selle-Rae and the six recalled board members who voted for his termination in an effort to protect the community. “The City and Borough and Borough Assembly take very seriously our responsibility to protect public assets and the public interest. That court filing is one step in insuring that we are in fact doing that in regards to the hospital board’s actions and the administrator’s contract.”

Ettefagh, however, said that she made the motion to terminate Selle-Rae because she thought it would prevent costly lawsuits by Selle-Rae against the city in the future. “I made the motion and went that direction because after much consideration I believed that to be the best, cheapest long-term solution for the community.”

The city is asking for the money to be returned and for the defendants to pay for any legal fees. The recalled board members are being held liable for the money.

Former board member Lurine McGee said that the legal action was both “ridiculous” and “asinine.” She said she would not have acted as she did if she did not think it was right. She said she voted to amend Selle-Rae’s contract in March to allow for a large severance package because others in a comparable position to his had such clauses. McGee said she did not know about the 60-day payment clause. Linda Bjorge and Mark Robinson declined to comment. The remaining defendants, including Selle-Rae, could not be reached or did not respond to phone messages.

PDF of complaint filed against Selle-Rea, recalled board members

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