Thursday, Jan. 18, 2007 | 7:07 a.m.
Disturbed by a University Medical Center contract that seemed to do much more for a private company than the hospital, Clark County Audit Director Jerry Carroll sounded the first alarm that triggered 14 months of heightening scrutiny that culminated in UMC Chief Executive Lacy Thomas' ouster this week.
As early as November 2005, Carroll first questioned efforts by Thomas to pad the profits of ACS Consulting Inc., a firm run by a friend of Thomas' hired months earlier to improve the public hospital's lagging debt collection services.
Thomas, according to Carroll, wanted to restructure the ACS contract without the required approval of the Clark County Commission in a way that had the potential to nearly double the profits of his friend's company - up to a total of $8 million - at taxpayer expense.
"I was thinking to myself, "This is outrageous,' " Carroll said Wednesday. "I couldn't understand why he wanted to pay ACS so much more money."
Carroll said George Stevens, the county's chief financial officer, shared his concerns and, after a series of contentious discussions, Thomas dropped the idea.
But that experience, Carroll said, caused him to start raising questions about Thomas' way of doing business at UMC.
By this week, the questions had grown so mountainous - and the answers so unsatisfactory - that County Manager Virginia Valentine fired Thomas, even as Metro officers were seizing hospital records that they suspect will show a pattern of financial favors for Thomas' friends through UMC contracts.
On Wednesday Valentine placed two of Thomas' top executives that he brought from Chicago on paid administrative leave.
Richard Powell, UMC's chief financial officer, and Marlo Hodges, the chief operating officer, were named in a 21-page police affidavit that lays out an alleged Thomas-orchestrated scheme of fraud and misappropriation of county property. The scheme allegedly occurred even as UMC, the valley's only hospital that serves indigent patients, was suffering tens of millions of dollars in losses.
The first steps toward this week's tumultuous events were taken more than a year ago.
In January 2006, Carroll got permission from then-County Manager Thom Reilly, who directly oversaw Thomas, to launch an audit of the ACS contract.
About the same time, the two UMC executives under Thomas, Chief Operating Officer Blaine Claypool and Chief Financial Officer Mike Walsh, abruptly resigned.
In a sworn affidavit this week, Metro Intelligence Detective Mike Ford said Claypool told him that he left the hospital because he did not like the way that Thomas was handing out "professional service" contracts to companies run by his friends and fraternity brothers in Chicago, where Thomas was the director of the John H. Stroger Hospital of Cook County before coming to Las Vegas in November 2003.
The affidavit was used to win court approval to execute search warrants Tuesday at UMC as part of a criminal investigation into Thomas' business dealings.
Before Claypool and Walsh left UMC last January, they voiced concerns about the ACS contract to Carroll and Stevens.
Carroll began to document those concerns in his audit, and in March he sent Reilly a three-page letter informing the county manager of his preliminary findings. He suggested that the ACS contract be renegotiated to include more favorable terms to the county.
After receiving Carroll's letter, Reilly said, he instructed both Stevens and Thomas to regularly brief county commissioners about the status of the hospital's failing financial health.
Commission Chairman Rory Reid said he recalls getting the briefings, but added that commissioners were getting two different stories about UMC's fiscal condition. While Carroll, Stevens and others in the county manager's office were raising concerns that the hospital's debts were piling up, Thomas and his people were assuring the commissioners that the hospital was in good shape.
"We had professionals giving us two different views on where the hospital was financially," Reid said. "It was pretty confusing."
Complicating matters, Thomas stopped giving commissioners monthly financial reports last year on UMC, making it even more difficult for the elected officials to determine whose version was right.
Last September, Carroll delivered the final report of his audit findings to Valentine, who had just succeeded Reilly as county manager. In it, Carroll raised even more concerns about the ACS contract's unfavorable terms to the county.
By this time, Carroll also had picked up on the rumblings at the County Government Center that Thomas was giving sweetheart deals to his friends from Chicago. Carroll and his auditors started to document those deals.
"I thought somebody should be looking into this," Carroll said.
Eventually, he turned over the information to District Attorney David Roger, whose interest was piqued enough in October to hire private investigator David Groover to dig up background information on Thomas' Chicago friends and their companies. By mid-November Roger had seen enough to ask police to formally launch a criminal probe.
Valentine said Wednesday that she thought the county acted prudently throughout the entire 14-month ordeal.
She said she had trouble getting information from Thomas, who resisted answering to the her office.
"He was striving for more autonomy, and I felt that, with all of the financial challenges there, it was time for more oversight," Valentine said.
The dire straits at UMC didn't become crystal clear until Tuesday, when Thomas, after sidestepping commissioners for months, finally presented them with the results of an outside audit showing that UMC's losses over the past fiscal year were $34 million, almost double what he had told them in November.
"We did what we had to do," Valentine said. "We needed to have some independent information before taking some action."
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