May 16, 2018
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Former Cardinal CEO files countersuit to retain severance

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Here are our tax dollars continuing to be used for such great purposes!!! I completely understand Cardinal’s desire to recoup our tax dollars that went into Topping’s pocket – noble, indeed. But I am stumped as how, supposedly, Topping had the executive authority to unilaterally name his salary?? Did he have such authority – or, like many companies, was Topping’s exorbitant salary a Board decision? And – if Topping’s salary were a Board decision – is Cardinal suing itself for past poor decisions???? Curiouser and curiouser.

Regardless, let’s give a “hat’s off” and a “thank you” to Richard Craver staying on top of this important and upsetting issue. #icantwaituntilwererich (see below for context).

By Richard Craver Winston-Salem Journal

The fired chief executive of Cardinal Innovations, Richard Topping Jr., filed Tuesday his countersuit to thwart the agency’s attempt to recover $1.68 million in paid severance.

A reconstituted board of directors for Cardinal, the state’s largest behavioral health managed care organization, has alleged that Topping used his post to enrich himself and three other executives. That board filed its lawsuit March 29.

Both lawsuits were filed in Mecklenburg Superior Court.

The agency oversees providers of mental, substance abuse and development disabilities services for 20 counties, including Forsyth County. It has responsibility for more than 850,000 Medicaid recipients and more than $675 million in federal and state Medicaid funding.

According to an investigation done by former federal prosecutor Kurt Meyers at the new board’s request, Topping convinced the former board leadership to pay him the severance before he was removed by state health Secretary Mandy Cohen on Nov. 27 as part of a N.C. Department of Health and Human Services takeover of Cardinal.

The current Cardinal board not only wants to recoup $3.8 million in overall executive severance, but also at least $125,000 in damages. The complaint called Topping’s severance “excessive and unlawful payments.”

Topping faces seven claims in the Cardinal lawsuit: breach of contract; breach of fiduciary duties; breach of implied duty of good faith and fair dealing (in his role as CEO); conversion (deleting data from Cardinal-owned devices and not returning Cardinal electronic property); unjust enrichment; constructive trust (knowingly accepting overpayments in severance); and constructive fraud (taking without permission highly confidential Cardinal financial and operational data).

“He inflated his salary without regard to the reputational, regulatory and legal damages it was going to cause,” Meyers said.

Topping claims his reputation has been “severely damaged” in the healthcare sector by the Cardinal lawsuit and investigation.

Topping called claims made in Meyers’ detailed presentation “misleading and false” even though it contained email and text exchanges between Topping, former Cardinal executives and former board chairwoman Lucy Drake about his post-Cardinal plans.

“Topping took these steps acknowledging he would never get another contract with Cardinal, nor likely with any other North Carolina healthcare provider,” Trey Sutten said March 29. Sutten was named as interim CEO by Cohen on Nov. 27 and full-time CEO on March 29.

The Charlotte Observer said among those named by Topping as defendants were Cardinal general counsel Chuck Hollowell, deputy general counsel Stephen Martin and board vice chairwoman Carmen Hooker Odom. DHHS said Tuesday it had no comment about Topping’s countersuit.

Topping was paid as much as $635,000 in annual salary, about 3½ times the maximum allowed under state law.

Topping has claimed the salary, which was raised twice by the former board during his term, was justified based on an independent market survey of Charlotte-area healthcare executives. The Charlotte Observer said Topping claims he and the other former executives were paid at the 50th percentile of market rates.

According to Meyers’ investigation, Topping pressured the former board not to fire him for several months by saying that if he was terminated, his entire management team would also leave with him. According to Meyers, Topping told the board that if that action occurred, it would “end Cardinal as they knew it.”

Topping claimed he did not create the severance platform in dispute.

“Cardinal Innovations Healthcare, Carmen Hooker Odom, Chuck Hollowell and Stephen Martin deny the false claims and baseless allegations brought by former CEO Richard Topping,” Cardinal spokeswoman Ashley Conger said in a statement.

Texts and emails between Topping and Pete Murphy, former chief information officer, epitomized their self-enrichment thinking, Meyers said.

The former board paid $1.7 million in severance to Topping, along with $740,000 to Murphy; $690,000 to Will Woodell, chief operating officer; and $684,000 to Dr. Ranota Hall, chief medical officer.

One exchange— sent Nov. 17 before Topping was fired by the former board — involved Murphy and Topping discussing Topping’s securing 1.5-gigabytes of highly confidential Cardinal management files, including personnel files, before leaving his post.

Murphy wrote that Topping “was smart to take files now.” Topping ended the text with an emoji with a finger over the lips. Meyers said he interpreted that emoji as saying “Shhh. Be quiet, and don’t tell anyone what I’m doing.”

An email exchange between the former executives took place after Topping’s termination by the former board. The board agreed to allow Topping to remain as CEO through Nov. 30.

The context, according to Meyers, was Topping’s work to secure venture capital or private equity for a private startup business, potentially to compete against Cardinal in the planned Medicaid reform marketplace with Cardinal’s confidential financial and operational information in hand.

“I can’t wait until we’re rich,” Murphy wrote. Topping answered, “I’ve made great progress on that front.” (emphasis added).

Topping’s lawsuit claims he was gathering information to create a healthcare smartphone app.

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For background, see blog and blog.



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