The notion is being created that the El Paso Children’s Hospital is a rogue organization. The fact is that it is, however that does not absolve Veronica Escobar of her responsibility to her constituency and her direct involvement in this fiasco.
To make it easier to digest I am going to show you how involved Veronica Escobar and incompetent she has been with the children’s hospital fiasco by enumerating each point.
1. Veronica Escobar has been a strong advocate for the failed financial model of the El Paso Children’s Hospital from day one.
On December 12, 2011, Veronica Escobar is quoted by David Crowder as stating the following about the El Paso Children’s Hospital:
“It’s going to create high-paying health-care jobs. It’s going to help the medical school produce our own pediatricians, specialists and subspecialists without whom our community would not have access to great health care. Now, our moms and dads have to go to Houston, San Antonio and other places for health care.
It’s going to be an important anchor for the Medical Center of the Americas. If we are going to be ambitious and continue with goals that we identified well over a decade ago, one of those goals was to be a medical center hub that could compete with Houston or any other fine medical center, then we have to have those great assets in place: the medical school, Children’s Hospital and UMC.
We’re going to look back and say the Children’s Hospital was one of the best things we ever built. I’m very excited about where we’re headed.” [El Paso Inc. “County Judge Veronica Escobar” December 12, 2011] [emphasis added]
In 2007, when the county commissioners voted to put the children’s hospital on the November ballot, Veronica Escobar was a member of commissioners’ court and a strong public advocate of the stand-alone children’s hospital.
There can be no doubt that Veronica Escobar has been intimately involved in this fiasco since day one.
2. Veronica Escobar has direct oversight over University Medical Center (UMC) and has the responsibility to protect the community’s monies.
On December 5, 2014, Veronica Escobar sent a letter to William Hanson and Laura Ponce demanding their immediate resignations from the Board of Managers of the El Paso County Hospital District. The hospital district directly manages policy direction, budgets and has direct supervision over the CEO, James Valenti. In her letter, Escobar wrote that Vince Perez had already asked Ponce to resign and that both of them, Escobar and Perez had publicly acknowledged that they would not nominate neither Hanson nor Ponce for reappointment to the board of managers.
Neither Hanson nor Ponce were nominated by either Escobar or Perez and both were replaced by new appointments after their terms were over.
Escobar was demanding their resignations because of the $300,000 in bonuses that the board had awarded Jim Valenti and his staff in late 2014, after UMC had laid off employees due to budget shortfalls.
In her own letter, Veronica Escobar agrees that she and the other county commissioners have direct supervision over the board of managers of UMC. They have the authority to hold them accountable. As the board of managers has direct control over the CEO of UMC, James Valenti then it becomes clear that the chain of command ends at the doorstep of Veronica Escobar.
3. The due diligence process and what it tells us about oversight and responsibility.
Due diligence is the process whereby two or more individuals or entities disclose to each other their internal financials in order to determine whether a purchase of an asset is feasible. The due diligence process is a comprehensive examination of everything related to the business or asset being acquired.
For example, when you purchase a house, the due diligence is normally conducted by the title company for you. After the title company examines the public records and the finances of the purchase they issue you title insurance guaranteeing you and the mortgage company that the asset, the house, is free of liens and problems that would make the house worthless in the near future.
During the due diligence process, all of the documents related to the entity is supposed to be made available to the buyer. If the seller, in this case the El Paso Children’s Hospital does not properly disclose all of the appropriate documents then it becomes subject to legal jeopardy on the form of fraud, perjury and even criminally liable if the fraud was perpetuated upon public monies as is the case EPCH.
Obviously, if EPHC was not disclosing all of the information required then it can be argued that holding Jim Valenti, and by extension Veronica Escobar accountable is unfair.
Therefore, let me simplify this with the example of a house purchase. There is always recourse and how someone responds is how you can tell how seriously they take their responsibility.
Let us assume that three months after you purchased your house the bank, that holds your mortgage, finds out that a lien had been placed on the house by a contractor. Let’s assume the house is worth $150,000 and you paid $125,000. Let us also assume that your current mortgage balance is $100,000. The bank is supposed to have an asset worth $150,000 on the balance of $100,000 you owe.
The bank is served notice that a lien of $75,000 had been placed on house and the lien holder wants to be paid. I am going to ignore the full title insurance and court legalese for the purposes of this example to get quickly to the point.
Now the bank is faced with the realization that the asset, the home, they hold over the $100,000 loan they gave you is only worth $75,000 leaving them with a $75,000 deficit, $25,000 less than you owe them. Naturally, the bank would immediately go to the loan officer who in turn would go to the title company that performed the due diligence and demand an explanation.
In other words, the supervisors would go down the command chain demanding, and more importantly, holding accountable the next person in the chain until they got to the culprit that allowed the fiasco to occur.
You as well would be demanding an explanation as to why not only do you still owe the bank $100,000 but now you also owe an additional $75,000 because someone did not do their job.
Now take this example and replace the bank with Veronica Escobar and her cohorts on the county commissioner’s court. Replace the house with the El Paso Children’s Hospital. Replace the title company with the board of managers of the University Medical Center. The homeowner is obviously you, the taxpayer.
Just like in the example of the house purchase, everyone from the top to the bottom goes down the chain looking for answers as to who is responsible.
Veronica Escobar sits at the top as the County Judge with responsibility over your tax monies. Under her are the county commissioners that kept telling you that an agreement was “90%” complete. Directly under them are the Board of Manager of UMC.
Do not fall for the lie that the county commissioners do not have direct control over UMC. As the letter, that Veronica Escobar sent to Hanson and Ponce prove and the fact that neither was reappointed shows, the county commissioners have material control over the board of managers of UMC.
Also, do not forget that Jim Valenti, CEO of UMC, shows up each year before the county commissioners and asks for permission to spend your money.
As much as Veronica Escobar wants to spin this, the facts just prove her wrong.
Let’s continue following the chain of command.
As I have clearly laid out, the county commissioners have direct oversight over the UMC board of managers. The UMC board is directly responsible for the actions and activities of Jim Valenti and for how UMC’s money, your money, is spent.
Jim Valenti, or one of his subordinates, was conducting the due diligence over the El Paso Children’s Hospital. This has been going on for months, since at least February and presumably as evidenced by the absence of any complaints of information being withheld Valenti had access to the majority, if not all, of the financial aspects of EPCH. As a matter of fact, up until the day before the bankruptcy filing, the public commentary being emanated from the officials closely involved in this fiasco was that a deal was almost ready. This even after two to three significant deadlines had been missed.
At no time did anyone involved with the due diligence process ever utter any reservations that EPHC was not being forthcoming.
Nevertheless, for the purposes of this discussion, let’s assume that the El Paso Children’s Hospital lied or materially withheld significant information from UMC during the due diligence process.
What now? How is Veronica Escobar responsible if her command chain was lied to?
Some will argue that they were lied to because Veronica Escobar and her county commissioner cohorts were “shocked” at the news.
If that is the case, then why has she not immediately summoned her UMC board and demanded answers from their subordinate, Jim Valenti?
If Jim Valenti, and his subordinates, were lied to then there is a clear case for malfeasance and fraud by the El Paso Children’s Hospital during the due diligence. Not only would this be a case for civil court, as well as grounds for bankruptcy fraud but also it would likely be a case for a criminal investigation of EPHC board members because taxpayer monies were involved.
Remember, even if the argument could be made that the El Paso Children’s Hospital is a non-profit operating with private funds (ignoring the building funds) they, in essence, used taxpayer monies to fund the due diligence process because UMC inured fees, Additionally, it has been agreed by both parties that EPHC owes UMC money.
Those are public funds.
What can Veronica Escobar do, will be the immediate retort?
Look at what happened to the board of trustees when the State of Texas stepped in to fix the serious problems at EPISD. They were dissolved and temporary managers were appointed and supervised by the state.
Veronica Escobar does not have the authority of the State of Texas but she does have access to certain governmental authorities that she can immediately muster to resolve the loss of taxpayer monies.
First she has the authority to have Jim Valenti come before the county commissioners and explain how it is possible that the due diligence process, that was allegedly “90%” complete, missed the signals that a bankruptcy was in the works.
Escobar has the authority, as not only the highest elected official involved in this fiasco, to file a criminal referral asking for law enforcement to initiate an investigation into possible perjury or fraud charges, but she also has a whole legal department that can look into all of the legal aspects of the issue at her disposal, because she is ultimately responsible to you for your money.
She has many tools at her disposal to demand answers and hold individuals accountable.
Yes, I know she and her supporters are going to argue that the legal process must run its course before they can get involved. The legal process is slow will be part of that argument.
Let’s go back to the home purchase example for a moment.
If it had been your house that was suddenly not worth as much as you thought it was what would be your first action? You would hire an attorney to demand answers. However, you would not even be given that opportunity because the bank would have already started using all of its options available to it to ensure that its loan would be guaranteed. You would have already received a demand letter from the bank telling you that you only have a few days to make up the shortfall in the value of the asset.
In essence, the bank has already taken steps to call your loan, in other words, make it immediately payable by you. You, in turn would be doing everything in your power to forestall losing your house.
Bringing it back to the El Paso Children’s Hospital fiasco, what has been Veronica Escobar’s response so far to this fiasco other than being “shocked?”
Nothing, other than to utter that it is “tragic.”
For all intents and purpose, if we are to believe her political rhetoric, the El Paso Children’s Hospital has perpetuated a fraud upon the taxpayers of El Paso by withholding the material fact that they were planning to file bankruptcy, after agreeing to a term sheet to be acquired indirectly by UMC.
Were they just using the due diligence process to buy time and avoid making payments before filing for bankruptcy protection? Did they lie to you, the taxpayer, and use your money to buy time before filing for bankruptcy?
As you can see, lying is the underlining factor in the discussion and it segues directly to Escobar’s responsibility.
Remember how everyone was telling the community that the due diligence was about 90% complete? This is according to Veronica Escobar who gave that statement to KVIA on May 11, 2015. [KVIA, “UMC, Children’s Hospital still working to finalize deal” Andrew Polk, May 11, 2105]
If the due diligence was, 90% complete how is it at all possible that no one noticed the pending bankruptcy filing outside of the governing board of EPCH. A bankruptcy filing is not something you type up overnight and walk over to the courthouse the next morning. It takes time and resources.
How is it that the due diligence did not notice the fact that El Paso Children’s Hospital was on the verge of filing bankruptcy?
Because someone is lying.
How incompetent can Jim Valenti’s team be that no one noticed the pending bankruptcy filing during the due diligence process?
Whether the El Paso Children’s Hospital lied or because Jim Valenti and his staff lied about how close they were to finishing the due diligence is immaterial because all of that goes back directly to Veronica Escobar who has the authority to get to the bottom of it all and so far her only reaction has been “it’s tragic.”
So many people are lying that the truth has been completely lost except for the simple fact that your money has been lost as well.