Litigation ain’t easy: A Heather Hilliard / SRHS v KPMG update

Ramon Antonio Vargas tells the story behind the story of a determined litigant in former Jefferson Parish CAO Heather Hilliard and her two and a half year journey to justice for the New Orleans Advocate that is good reading as another news story originally broke by Slabbed New Media (here and here) completes its cycle through the news. Looks like I’ll need to shake the tree to see what is happening these days up on 10 at Yenni.  😉

Moving right along in other litigation news, it does not appear KPMG is very scared of the lawsuit that Kevin Holland and company at SRHS filed against the audit firm late last week per April Havens.  I really don’t want to throw any wet blankets on this legal matter but based on the wording in the complaint, I think the only people that will make any money from the endeavor will be the lawyers.  I strongly suspect we’ll be seeing a 12(b)(6) motion asking for dismissal from KPMG and the reason such a motion stands a good chance is actually found in the 2013 Audit Report prepared by Horne CPAs in several places but I will highlight two places, the first on pdf page three of the report.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

You would assume someone that has been in a senior management role at SRHS for as long as CEO Kevin Holland would understand these things but my experience is when the shit hits the fan, the stuffed suits typically pretend they don’t know jack while trying to cover things up and this is indeed the route senior management at SRHS has been taking since last March. Preserving talking points seems to be the paramount concern at SRHS these days and the public money being thrown at the KPMG lawsuit endeavor will be both copious in amount and represent a good example of the wasting of assets, all while management at SRHS tries putting the screws to its own retirees.

Here is the second place that I mentioned and it is on the very last page of the audit:

SRHS 2013 Audit Page 56

Our readers will notice that Horne puts the blame on management where it belongs. The question in my mind is why would Holland, ostensibly blameless in all of this, be working so hard to cover the true nature of the mess. I also wonder on what basis Holland and his sidekick Lee Bond actually expect the retirees to trust them because I’m not seeing it.

44 thoughts on “Litigation ain’t easy: A Heather Hilliard / SRHS v KPMG update”

  1. How is this BS continuing? ALL of senior management, most directors, EVERYONE in finance, and the dithering/clueless in house lawyer needs to be replaced by a new BOT.
    Bond 007 takes the CFO’s place 2 years ago and has not cleaned house? What’s he been doing- making a list of jobs to eliminate?

  2. Holland’s suit is absolutely a red herring designed only to take the blame off the SRHS white collar crime crowd.

    Some trust worthy, non-political lawyer ,who won’t be intimidated or accept personal reward from the SRHS crowd, needs to come forward and file a class action federal suit on behalf the employees and retirees as plaintiffs against the auditors, the state government and personally and individually against all the BOS and BOT scumbags. And then immediately start the discovery procedure to get those documents now being denied to Sun Herald.

    Seems like the Feds are waiting until PROPER civil actions peel back the onion and there has to be an attorney who not only needs the revenue but think of the good will he would generate among the thousands of employees and retirees.

    Dadgum a thousand times better den any Morris Bart one-call dats all commercial.

    1. Lockemeuptight-

      What in the world is a class action going to do? They (retirees) will get half bitten pennies on the dollar! The optimistic 700000 “big ones” divides pretty slim. Especially if they are expected to last 10 more years!


      If you are going to do the right and just thing, stick with Harvey and Denham and keep the pension going. Drop these useless and expensive endeavors the hospital have persued. Get REAL smart people on the BOS and BOT – Ya know, who are qualified to run the show – to make the SRHS profitable again.

      Although, you may have trouble finding people to take the job after justice tears into them. I’m expecting carnage from the gulf coast to Jackson, optimistically speaking.

  3. Susman Godfrey works primarily on a contingency fee basis. They have successfully litigated these types of cases before and have prevailed against KPMG. It is unlikely SRHS is spending any money on this litigation. It is also unlikely Susman would take on a case with poor odds of success.

    The complaint was long and winding, but never specified any damages. It noted the fees charged by KPMG and Horne, and of the failing pension plan. Expect it to be a very fast process with limited discovery. Once there is a answer and a case management order, it will be easier to see how it will play out.

    Between the Horne statement and the two complaints filed by SRHS last week, we may have a potential fall guy: former Director of Financial Services, Wayne Smith. Horne lays the problem at the door of the “inhouse collections agency,” while the KPMG complaint lists several practices and errors in the financial services department. The JCOG suit has also revealed that Wayne Smith was solicited by Gentry Williams.

    As for Roy Williams’ retirement: “Meet the new boss, same as the old boss.”

    1. Pravda:

      Are you kidding me ….. you would trust the same crowd who were charged with the fiduciary duty of running SRHS, who instead secretly and efficiently ran it into bankruptcy by benefitting their cronies, to hire an attorney to reveal the TRUTH and claim damages for the employees and retirees ?

      It is absolutely a Federal crime to collect monies from any employees and retires and not crediting an established pension plan with same monies ! And there should be at least a handful of U.S. Treasury officials crawling and worming ( interrogating under penalty of law) throughout the politically dead and rotting corpses of all SRHS directors including BOS and BOT

      Would yo’ put a stavin’ fox to guard yo’ free run, organic chickens or approve a lifetime child sex offender to teach yo’ child’s kindergarten class ?

      1. What makes you think that the money that was withheld from employees pay did not go into the pension fund? Don’t get me wrong, this looks like it won’t end too good for the retirees and current employees. However, my understanding is there is currently around $130-$140m in the defined benefit fund. Using rough amounts of approx 600 retirees, 2000 other participants (active employee or past employee not eligible for retirement) and average annual pay of $45k (just a guess based on there being a wide job mix at a hospital) and a estimate of average years of service of 20 years (probably high for the entire population mix). Based on those very rough estimates, using the 3% employee contribution amount, you would get an overall employee contribution of $70M. So you would assume the rest would be employer contributions to plan over the years, reduced by plan expenses (retiree pay) plus plan investment earnings.

        1. I think only the Board of Sups can make the retirees whole.

          I harbor doubt as to market value in a sale or long term lease based on what’s happening with the two public Jefferson Parish hospitals.

          1. Unfortunately, about the only people that can make them “whole” (with “whole” meaning they actually get what they were told they would get – NOT what they may have expected, but what they were told, in writing) is the taxpayers of Jackson County. As far as I know, none of the conspir…er, players have the kind of money to make them “whole,” there almost certainly isn’t enough E&O coverage (KPMG, Dogan & Wilkinson or any other potential source) to do it, and I doubt KPMG will lose the suit (the E&O carriers might settle it for lit costs and a token amount, however, but that won’t come close to “whole”). Plus, the various (fiduciary) bonds on the trustees won’t make the slightest dent in the damages. But to kinda balance it out, I suspect more than one of these folks will wind up basically broke, in jail/with a record and with no one left wanting to, er, “hep ’em out.”

        2. Observer:

          Yo’ definitely sound like someone on the inside of SRHS /BOS or BOT or possibly and more likely their PR hired blogging gun, but I read that the pension fund was not funded for a couple of years . Now if you would like to counter that fact please tell us the source of your opposing opinion as it would make the retires a little more hopeful for sure .

          Although after working their entire lives and now to be told to buzz off due to a few self-serving, greedy assholes playing the political game – Monopoly : Crony Capitalism Edition- I don’t believe anyone believes a blogger with a handle like ” Observer”.

          1. Observer seems to have based his/her statements on the audited SRHS financials which are out there.

            Subject to confirmation by the auditors, the pension shortfall was apparently caused by the combination of

            #1 No new entrants to the plan after 2010 (iirc)

            #2 SRHS failing to make it’s calculated contributions to the plan beginning in 2009

            #3 Payouts continuing as if nothing is wrong while more employees retire and accumulating deficits from #1 and #2 bleed the plan.

            As this plan was allegedly run in house by insiders the returns and expenses need to be verified as to reasonableness. I have no reason to disbelieve the reported numbers, but the somewhat unusual nature of this situation does provide both possible motive and possible opportunity for financial misreporting other than the allegedly false pension reports sent to pension plan participants. Not to mention the $88 million accounts receivable restatement and the alleged ‘surprise’ that the pension was not properly funded.

            People commenting with facts and stating opinions based on facts deserve to be treated with respect. Certainly at least until they are actually proven to be both wrong AND ill intentioned.

          2. Lock – are you serious? You read my post which used basic mathematics and publically available information and think I am some sort of insider or PR guy. I am absolutely neither. I have no inside knowledge, do not work at SRHS (and never have), nor do I have any affiliation at all with them. You made a statement that implies that 3% employee withholdings were not put into the pension fund and the US Treasury should be all over this for wrongdoing (I’m not a Fed expert, but also not sure how Treasury would fit into your theory – see “responsibilities” section I’m just pointing out the math doesn’t support your theory. Clearly SRHS hasn’t made an employer contribution to the plan as has been reported in the publically available financial statements (going back to 2010).

            Obviously the pension matter is a very emotional issue that has real impact on a lot of people. Too bad people can’t make logical comments that may not agree with other points of view. Sometimes an outside point of view may actually help people think through and be better educated on a subject than just repeating false speculation.

            1. Observer:

              Your post clearly reflected an optimism of a person unsympathetic with the plight of those no longer working and depending on a full retirement check to pay their bills.

              So if you are not a PR plant then good for you but before you post put yo’ ass in the place of the 600 retires and show grave concern and mercy for them. For those who show mercy will themselves receive mercy says the good book.

              And you will get no apology from me for your baseless optimistic attitude generated by your 4th grade mathematics and your ignorance of the meaning of what bankruptcy means for creditors which in this case are unfortunately retirees and employees who did no wrong to deserve this needless evil !!!

            2. Observer:

              Lock’s modus operandi is to engage in ad hominem attacks after he has made up his uninformed mind about a particular topic; it’s nothing new here. If he decides you are a PR guy (even if you demonstrably are not), then a PR guy you will be. If you engage him, forget about civility, decorum, or anything resembling a respectful give and take. And you seem to really have gotten under his skin because he largely broke character form his usual writing-dialect that only he thinks is cute and clever.

              It’s much like the position Governor Piyush Jindal has taken on “no-go zones.” Nothing you can say or do will disabuse him of his unreasonable position.

              1. Prince Puppet Poop :

                Why don’t you take your critical personality somewhere else or stick to the issues for if you think Observer was not cruelly optimist for the plight of the retirees with his 4th grade math ( i.e. why do we need forensic auditors when we have Observer’s math) then you too are an unsympathetic wretched soul.

                And if you don’t like my style of blogs you always can just not elect to read them, RIGHT?

    2. I think the fee would be the recovery on the breach of contract count.

      It would be out of the ordinary in my experience to execute one engagement letter in 2008 with updates each year thereafter as the complaint alleges. Speaking only for myself I get a new engagement letter each year for audit engagements. Each year stands on its own. The engagement letter used by the parties is therefore important.

      KPMG will make the argument and likely produce a management representation letter where management (should) directly address the estimates embodied in the Allowance for Bad Debts. If management knew they were being too aggressive in the bad debt estimates but cited mitigating circumstances (such as medicaid expansion) to support their aggressive estimates I would argue the clock started to run on the associated professional liability claim.

      The 2012/2011 report would be within the two year statute. I’m not certain any other year would be open. The devil is in the details.

      I have not checked PACER of late but Susman Godfrey’s name was not on the complaint although the PR did mention that firm so there has already been money spent. If the Hospital can claw back the audit fees on the breach, after the lawyers take their cut there would be about $500,000 left, give or take 100K assuming SRHS can prove a breach. Very well could be the early years flew under the radar legitimately.

      It is gonna be fun to watch it unfold. I greatly appreciate your insights into this.

    3. You said: “The JCOG suit has also revealed that Wayne Smith was solicited by Gentry Williams.”

      I understand the facts alleged in the filing by SRHS to be something less specific, unless what was posted when filed last week has been amended. My reference- this link. In fact, I don’t believe that Wayne Smith (or his ob title) are mentioned in that filing. Notably not mentioned (in my opinion anyway) are any process prior to JCOG allegedly presenting a contract which allegedly they had drafted to SRHS.

      Additionally, in the Miss Press story about SRHS filing against Jackson County Outsource Group LLC and John Does 1-5 the following appeared:

      Gentry Williams said the company submitted a five-year contract proposal with Wayne Smith, then the head of SRHS financial services, in September 2012. He said the contract was reviewed three months by a compliance officer, approved by the SRHS board of trustees and signed by then-CEO Chris Anderson.

  4. So lets say KPMG gets nailed for $750,000 in a malpractice claim….. are they also going to be blamed by the PR firm for SRHS for the pension funding debacle as scapegoats and is the public expected to accept that ?

    Every one of the BOSs and BOTs who had any fiduciary oversight should be named individually for not only monetary claims but for personal embarrassment especially those with CPA degrees. That the correct way to get at the TRUTH for the getgo.

    If I were a retiree I would intervene and start to grab part of dem 750,000 beans as part of my pension plan dat I worked my ass off for and being screwed and tattooed out of by the corrupt crowd.

  5. Wonder if Ms Shumate and the Walkers are watching this story develop? Has anyone heard anything on their incarcerations? They should be watching this with great interest since the players are all “dear friends and family”. And it is about time for old Billy Hewes’ brother-in-law, Joe Zeigler to get his leg bracelet off, so he will be roaming the roads again looking for a quick dollar. Maybe he can be a consultant for them over there? After all, he was a Chief-of-Staff at the DMR without a college degree. He might can sniff out the crooks???

    1. I have a feeling that most will probably avoid Joe Z when he is back on the streets. He is in his mid 60’s, will be on probation for a few years and a federal felon resulting from a high profile case in his home state. No word on the others but the inside operations team is anxiously awaiting some fancy tricks from the Governor/DOC and Team Shumate for an early release. I say that because none I have spoke with actually believe she will be in the pen for the full duration of her sentence due to her extensive connections and allegedly being placed on some kind of special work-release program already. I am not sure of the actual wording of the program and that fact has not been 100% verified. We will see if anything happens if it even does. Not a peep regarding Janus since his TV debut which I didn’t buy myself. As far as Scott Walker goes–not a word and I presume he will be right back on his feet in the shape of a high-upper middle class citizen upon release.

  6. BREAKING NEWS…… The re-election of all current Jackson County supervisors is doubt. My unofficial poll of registered voters in Jackson County has incumbents at 1% and anybody except current office holder 99%. Based on my experience dabbling in political campaigns I feel this sampling is very accurate. The SRHS will be the equivalent of a Haitian necktie for all incumbents.

  7. Hallelujah BB!!!! It is about time that the public started flexing their muscle and power. We don’t want or need crooks like this in positions of power of any type!!!! Maybe there is hope for the Coast yet!!!!

    1. I’ll mention another name, a public official that absolutely has some culpability in this matter: State Auditor Stacey Pickering

      I have a post coming that will lay out why.

      1. That would not surprise me either. It seems that Pickering has culpability in a lot of things he is involved with. I believe he is nothing more than a small town hick that survives by bombarding the public with figures and numbers–which are nothing more than the outer layers of the onion.

  8. DA Tony Lawrence: SRHS under criminal investigation by his office, FBI, state auditor

    “PASCAGOULA, Mississippi — Singing River Health System is under criminal investigation by District Attorney Tony Lawrence’s office, the FBI and the state auditor’s office, Lawrence confirmed today.

    “An investigative plan has been formed, and it’s in its early stages,” Lawrence said this morning. “A lot of lawyers have assisted in giving me information that started the questioning process.””

    1. Oh Boy, I knew it would be just a matter of time before Pickering got his hands in the cookie jar. He probably already has a predetermined investigative plan in place to protect any of his “friends” and the politically connected.

      We all witnessed his poor performance in the DMR investigation so I do not expect anything different.

  9. Here’s something to consider: if you have control of a coupla-hundred million in OPM, you don’t need to steal from the principal if you can get a “placement fee” for investing that principal. And if you have a law firm on board whose members are rumored to be, er, “ethically challenged,” AND both the law firm and the main conspir…, er, participants all have long-time, extensive ties to any number of both reputed and convicted local beak-wetters (or they ARE local beak-wetters), is an FBI investigation all that big a surprise?

    1. Multiple hat wearin’ + Beak wettin’ = Big Trouble

      Based on certain events since that have come down since last week I surmised the FBI had arrived on the scene.

      1. Oh, I think one might surmise that the Feds have been on this scene long before the news recently broke about their interest. The retirees’ tort claims, SROs, etc. might arguably be state matters, but conspiracy to commit ERISA violations, pension fund hijinks, the (mis)use of Katrina- and/or BP-related money to build hotels, refurb apartment complexes, and other intertwined things (and the related tax evasi…er, consequences necessitated by such obviously unreportable shenanigans) have likely gotten the attention of any number of federal types not commonly known for a sense of down-home good ol’ boy humor about such things. And since these folks are clearly so adept at this stuff whilst keeping it all under wraps, what are the odds that the list of interested credentialed suits is growing?

        Then, the possibility that Scott Walker could be involved for strike three likely gets a whole ‘nuther group of serious folks interested.

        And given that it is a bunch of S. MS GOPers…well, I’m sure that an Obama-appointed USA, reporting to already pissed-off Obama AG-US and his staff, who have the chance to nail (or at least seriously scare and embarrass) a pack of southern GOP types for various chicanery will be as fair with them as they deserve. And if not, why, shoot, DC is just slam full of GOP insiders willing to lay it on the line to protect the local Jimmy Hoffa wannbes – just look at how being a seriously loaded Dem insider with a GOP senator for a brother-in-law helped keep one of their “brothers from another mother” out of prison…oh, wait…nevermind. And that fiasco raises the issues of local judges here recusing themselves for various reasons and who might have suggested to Judge Giurola that it might be better to let certain folks dig themselves in a little deeper. Gee, if I were a reporter, I might look into cases involving local judges and/or members of a certain law firm…just sayin’…

        1. Nunn,

          Interesting post and I happened to notice the words “BP and Money.”

          It would be interesting to see if anyone would ever perform an “audit” or look into the BP money and anything that rolled through the DMR.

          Charlene Silkwooder may be able to add something to this.


          Have you ever thought of any funny business about BP money and grants that may have the DMR involved?

          1. Yes Eye – plenty of BP money passed through the DMR. Joe Zeigler’s wife was on contract for $50K for six months and got a new laptop computer. Without naming names, there were employees there assigned to the BP office over in Mobile and were paid (double-dipped) for their time. I think that Walker covered all of that up though when John Q. Doe started complaining. Those individuals are still at the DMR and have been promoted.
            There was also a shipyard set up in Jackson county by the DMR. There is legislation on that. I believe it was called the Ocean Springs Shipyard. Go take a look at the Hatchery in Ocean Springs. They replaced those huge light poles at least twice that I know of. And they aren’t cheap. The waste that passed though that place is just unbelievable. Oh yes – the onion hasn’t opened up yet. There is still plenty more before it bursts. The “new” DMR staff that replaced the “crooks”, are just sitting in wait for the new BP money. I hope that our Coastal legislators will put a stop to what is going on. If not, they will all be looking for new jobs this next election themselves. They need to right the wrongs that have been done to people at that DMR to innocent people and get rid of the Bryant appointed garbage.

  10. Don’t you know that ole Fasta$$, Philly Boy, Billy Boy, Puh-la$$-o, Miller, McKay, and the rest of the clans’ butts are clenching???? Maybe we should buy stock in Boudreaux’s butt cream???? Ole Joe Cloyd, Fike, and the rest could get called in under the RICO act? Just like the mafia did. The SRHS may be the straw that breaks the camel’s back, so to speak. or else, the S. H. Anthony thing, or the Harrison county supervisors thing? BTW, why is our illustrious Harrison county supervisor parking his expensive Harrison county truck right in front, on the road, at the People’s bank every day? Guess he’s having coffee with the rest of the “boys”?
    Looks like the Coast has a new movie brewing – pay attention Hollywood!!

  11. I would not expect Governor Bryant to pardon any of the DMR Walker gate participants until he leaves office. And Bryant will likely do this under the cover of night with the Capitol building in the rear view mirror. After all this will be his Christian duty. I expect he will have a copy of the bible in hand open to Paul a bit tacky to guess the exact verse at this point. But he will have that all worked out like Barbour so he can sleep at night. Saw the breaking news. Some secretary somewhere in the hospital system must be feeling really nervous right about now. With Pickering involved its a little late to bring those pencils back.

    1. Well, while that Bible might be a source of a lot of authority for some folks, it won’t offer much to ol’ Wonderhair in issuing any federal pardons…

  12. Don’t worry Singing River Hospital employees and retirees!

    Our famous DA Tony Lawrence, who must have taken lessons from Barney Fife, has thrown his hat in the ring with the State and Federal investigators. If he handles SRH like he did the Byrd deal and other illegal activities in Jackson County, and like the State and Feds handled DMR, they will have no pension period.

  13. I was making a list this morning of who is now investigating the SRHS. If you count the local,state and federal agencies you now have the District Attorney, the Jackson County Board of Supervisors,the Ms.State Auditor, the FBI, the IRS, the Pension Benefit Guaranty Corp., and the US Dept.of Labor. I also can come up with at least 10 individual law firms who are also investigating this scandal. That’s a whole lot of people. Who will be the first indicted? Has Chris Anderson been notified that he is a target? We better all go out today and get what popcorn left on the shelves because there will be a run on this commodity locally and will be harder to find than ice after Katrina. There is one thing for sure. Every single action since 2009 will be scrutinized,every contract will be dissected, every person involved will be questioned and every conflict will be exposed. If the SRHS current management really wanted to get ahead of all of this they would open everything up to the public and not continue to operate in secret because they can.

    1. There are a few missing from your list – from the big boys, there’s the SEC, the USA/AG/DOJ, the USPS, etc. And if anyone involved EVER told a fib (or said anything that even smells like it could possibly be marginally untrue) to anyone with federal credentials, used any form of the good ol’ “do you know who I am/who do you think you are/do you know who you’re dealing with?!” ploy with the wrong person, or otherwise did anything to piss someone off, well, in a situation like this, probably best to either start negotiating while wrapping up your affairs for a stint or start researching countries with no extradition. Given the players involved, I’d say it isn’t unreasonable to guess someone has or several someones have repeatedly stepped on their privates with regard to one or more of the above.

      And then, there’s Greg Davis. Suffice it to say that a pack of GOPin’ backscratchin’ Col. Rebin’ good ol’ boys probably aren’t real high on his Christmas card list. On the other hand, Eric Holder just might be. At least Holder will know who in the heck he is (and will give a flying damn) if Davis decides to make a phone call for some help. And if Davis has some feds standing in his office clamoring for prosecution, it won’t take long to triage it. Plus, he’s smart enough (actually, plenty smart, period) to be making plans for post-2016, which likely don’t involve Jackson County or its good ol’ (white GOP)boy network.

      Then, there’s the MS Bar – after the recent events with Scruggs and Co., Ed Peters, Bobby Delaughter, the Eaton-Frisby mess and a few other embarrassing situations, a normally inert Bar might not want to look quite as docile as usual.

      Then, there are the tertiary players like Ed Trehern, various doctors with personal and financial ties to main players and various lawyers and/or judges whose lips may not have been as firmly attached to the wrong tit (or rear-end, depending on the situation). If any of them decide that it might be better to drop a dime than risk anything, things might really move along. Plus, if any of tertiary players suddenly gets a case of the “do-rights,” again, things get going.

      And let’s not leave the MS Supremes (and their backup band, the COA) out of the mix – they are elected and they may have relationships with some of the players that they might want to get in front of if/when things start to look bad for the home team.

      That’s the problem with a confederacy of dunces…it’s a confederacy of dunces.

  14. All the people in this scenario are asking the public and SRH employees and pensioners to be patient. They will get to the bottom of this problem.

    Who in their right mind would believe the Jackson County Board of Supervisors (namely John McKay) that have now hired a questionable lawyer named Guice who claims there is something mysterious going on or to the effect. The public knows what is going on! The JCBOS including their crony appointed board of trustees and the former and present big wigs at Singing River Hospital, and their ‘hanger ons’ including Williams Family, etc. have screwed the employees and retirees. Who would believe our State or Federal Investigators with their past dealings as guidelines of what is to come?

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