A "Simply Outstanding," "Superb" Hospital CEO Cops a Plea to Two Felonies

In all the discussions of what is wrong with US health care, very rarely is the quality of the leadership of health care organizations questioned.  In fact, no major US health care organization seems to have leadership that is anything short of brilliant.  The amazing brilliance of these leaders serves as a rationale for the ever increasing <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">compensation </a>that they receive.  Yet while subordinates, friendly members of boards of trustees, and hard working public relations flacks may stress their leaders' wondrous qualities, there rarely is an opportunity to compare their proclamations with results.<br /><br />A few small items in the New York media provide us one case study of how these proclamations may not square with reality.<br /><br /><b>Background</b><br /><br />In 2005, the CEO of New York's renowned Hospital for Special Surgery announced his retirement.  In a <a href="http://www.hss.edu/newsroom_hss-president-ceo-john-reynolds-succession-plan.asp">hospital news release</a>, we find these pronouncements about outgoing President and CEO John Reynolds,<br /><br /><blockquote class="tr_bq">HSS board Co-Chairman Aldo Papone said, 'John's guidance and devotion to the Hospital for Special Surgery these last two decades have been <b><i>simply outstanding</i></b>. Under his watch, t<i>he quality of care, fiscal health and scope of treatment for musculoskeletal disease at the hospital have reached the highest level in its history</i>.  While we regret his decision, we can only offer a most grateful expression of thanks...'</blockquote><br />Also, HSS board Co-Chairman Dean R. O'Hare said,<br /><br /><blockquote class="tr_bq">He is a <b><i>superb leader</i></b> and we appreciate his thoughtful approach to succession which is emblematic of his service to HSS.</blockquote><br />I cannot find anything on the internet about Mr Reynolds' compensation prior to his retirement, but in 2006, after he took on the position of Co-CEO during the transition, a copy of the hospital's 2006 990 form filed with the US Internal Revenue service, (and still available <a href="https://bulk.resource.org/irs.gov/eo/2008_02_EO/13-1624135_990_200612.pdf">here,</a> note though that rather confusingly, the Hospital still files under its archaic original name, "The New York Society for the Relief of the Ruptured and Crippled,") showed that <i>Mr Renynolds' total compensation was <b>$1,310,603</b></i><br /><br /><b>The CEO as Crook </b><br /><br />Nothing publicly appeared to challenge the notion that Mr Reynolds' leadership was less that "outstanding" and "superb" until a Bloomberg <a href="http://www.bloomberg.com/news/2012-09-26/ex-n-y-hospital-ceo-charged-with-taking-vendor-kickbacks.html">article</a> in September, 2012,<br /><br />.<br /><blockquote class="tr_bq">John R. Reynolds, former chief executive officer of New York's Hospital for Special Surgery, was <i>charged by federal prosecutors with taking $1.4 million in a decade-long illegal-kickback scheme.</i><br /><br />Reynolds, 63, was <i>arrested at his home</i> in Massachusetts this morning, according to a statement from the office of U.S. Attorney Preet Bharara. An indictment unsealed today in Manhattan federal court charges Reynolds with <i>racketeering and making false statements to the government. He faces as long as 25 years in prison if convicted.</i><br /><br />Prosecutors claim that, from 1996 to 2007, Reynolds <i>took money from at least two hospital vendors, a hospital employee and an unidentified health-care organization in the U.K.</i></blockquote><br />Furthermore,<br /><br /><blockquote class="tr_bq"> The government <i>claims Reynolds took a total of $420,000 in kickbacks from at least two hospital vendors, from 1996 to 2002, in exchange for steering hospital business to them. From 2000 to 2005, he extorted an additional $298,500 from a subordinate at the hospital after negotiating an annual bonus for the employee, </i>according to the charges. <i>Reynolds also received $670,000 for approving a clinical partnership between his hospital and the U.K. health-care organization</i>, prosecutors claim.<br /><br /><br />Reynolds is also charged with <i>lying in 2008 to an agent of the U.S. Department of Health and Human Services inspector general’s office. </i><br /><br />'By allegedly exploiting his position at the helm of a world renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees,' Bharara said in the statement.</blockquote><br />Not surprisingly,<br /><br /><blockquote class="tr_bq"> 'Obviously, it was a shock to us,' said Deborah Sale, a hospital spokeswoman, referring to the charges.</blockquote><br />Of course, in the US, people accused of crimes are assumed to be innocent until proven guilty.  So I am now writing about this case because yesterday Bloomberg published the <a href="http://www.businessweek.com/news/2013-07-11/ex-hospital-ceo-reynolds-pleads-guilty-in-kickback-case-1">follow up story</a>,<br /><br /><br /><blockquote class="tr_bq"><div class="">The former chief executive officer of New York’s <span class="ticker_wrap">Hospital for Special Surgery</span>, <i>charged by federal prosecutors with taking $1.4 million in kickbacks, pleaded guilty to two felonies.</i> </div><div class=""><br /></div>John R. Reynolds, 64, today pleaded guilty to <i>wire fraud and making false statements, admitting that he took payments from a hospital employee and lied to investigators about it.</i></blockquote><br />He will be subject to a stiff fine, although less than what he was charged with extracting through his scheme, and may be imprisoned,<br /><br /><blockquote class="tr_bq"> Under a plea agreement with the government, Reynolds will <i>forfeit $718,500</i>. Both sides agreed that federal sentencing guidelines, which are advisory, call for him to <i>serve 27 to 33 months in prison.</i></blockquote><br />The story so far has also been covered briefly by two tabloids, the <a href="http://www.nypost.com/p/news/local/manhattan/special_surgery_ex_boss_in_kickback_4chuFeWsk9Hf9yKfiP8lXL">New York Post</a>, and the <a href="http://www.nydailynews.com/new-york/ex-hospital-ceo-pleads-guilty-1-4m-scheme-article-1.1396279">Daily News</a>.  To date, the Hospital for Special Surgery has <a href="http://www.hss.edu/newsroom.asp">not issued a news bulletin</a> on this. <br /><br /><b>Summary</b><br /><br />So yet another "outstanding," "superb" multimillion dollar CEO turned out to be something rather less, in  fact, to be a criminal. <br /><br /><br />We have frequently discussed how the leaders of large US health care organizations are often hailed as brilliant, and <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">compensated hugely </a>for their brilliance, but rarely publicly subject to any objective assessment of their performance.  In many cases, they seem unaccountable for leadership that may be <a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management">ill-informed</a>, <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">hostile to the health care mission</a>, or even <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal</a> or <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20corruption">corrupt</a>.<br /><br /> The good news is that this criminal was eventually caught.  The bad news is that it only happened 18 years after he began acting criminally, hardly an example of swift justice.  One wonders how many other brilliant health care leaders will years later turn out not to be so, and how many others' performance will never be publicly assessed.   <br /><br />While we breathlessly await the rigorous prospective study that assesses public assessments of the leaders of large health care organizations against objective results, we are stuck with case studies as a means to do so.  This case study shows a particularly stark contrast between the public relations puffery and the sordid reality. <br /><br /><br />Instead of "brilliant" leaders paid like royalty, we would do better with competently collegial leaders rewarded reasonably as part of a team all focused on the health care mission, which puts service to patients first.  As long as health care organizations appear to be a path to riches for their leaders, expect the people who want to lead them to be more interested in their own fortunes than patients' and the public's health.  As long as health care professionals, policy makers and the public assume that those who lead health care organizations are fully qualified, fairly paid, and always do what is right, expect the insiders to continue to run things for their own profit.  <br /><br />The qualifications of those who would lead health care, how much they are paid, what they are doing and what the results of their work are ought to be publicly known and publicly discussed.  Health care professionals, policy makers, and the public should demand nothing less.  .  <br /><br /><br />

A "Simply Outstanding," "Superb" Hospital CEO Cops a Plea to Two Felonies

In all the discussions of what is wrong with US health care, very rarely is the quality of the leadership of health care organizations questioned.  In fact, no major US health care organization seems …

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A Board of Trustees, or a Social Club for the Superclass?

We just <a href="http://hcrenewal.blogspot.com/2009/10/trustee-of-what-caliber-for-hospital.html">posted</a> about the unlikely appointment of one Mr Robert K Steel as a trustee of the Hospital for Special Surgery in New York. Mr Steel appears to have no particular expertise or experience in health care, and no special affinity for its values. On the other hand, Mr Steel was briefly the CEO of Wachovia who presided over that company's demise, despite his avowed goal of keeping it independent. Previously, he served as an Under Secretary of the Treasury during Secretary Henry Paulson's controversial bail-out of financial institutions. He also was Chairman of the Board of Trustees of Duke University during the time of the lacrosse scandal, and pledged his full support to the actions of its President (whom he had a personal role in hiring), including those that seemingly put preserving the Duke brand ahead of protecting the rights of its students.<br /><br />Why would such a person be appointed to the board of a prestigious teaching hospital?<br /><br />Maybe he was seen as a good fit.<br /><br />The hospital board has 42 members in addition to its CEO ex-officio. Of these, 13 are physicians, and 29 are "civilians." Of the latter 29, 23 by my count have major relationships, and frequently have current or past leadership roles in financial companies, some of which were recipients of recent Treasury Department bail-outs. Thus, a majority of all board members come from finance. In addition, 7 of the 13 physician board members have financial relationships with health care corporations that might be construed as conflicts of interest. The details are below:<br /><br /><strong>Non-Physician Board Members</strong><br /><br />Atiim "Tiki" Barber (sports broadcaster)<br />James M Benson - retired chairman of John Hancock Life Insurance; retired Chairman, President and CEO of New England Financial and of GenAmerica Financial Corporation<br />Peter L Briger Jr - Principal and Co-Chairman, Fortress Investment Group<br />Michael C Brooks - Partner, Venrock<br />Charles P Coleman III - Tiger Global Management<br />Leslie Cornfeld (deputy US Attorney)<br />Cynthia Foster Curry (spouse of owner of Toyota dealer)<br />Barrie M Damson - President and Chair, Damson Financial Resources Inc<br />James G Dinan - Chairman and CEO, York Capital Management<br />Winfield P Jones (attorney)<br />Monica Keany - managing director, Morgan Stanely<br />David H Koch - executive vice president and member, board of directors, Koch Industries (a conglomerate that provides "commodity and financial trading services" among other products and services)<br />Lara R Lerner - spouse of Randolph Lerner, former CEO of MBNA, which he sold to Bank of America, now has family holdings (>$1 billion in 2008) of Bank of America stock<br />Marylin B Levitt - spouse of Arthur Levitt Jr, former chair of the SEC, now advisor to AIG and the Carlyle Group<br />Alan S MacDonald - chief client officer, Citigroup<br />David M Madden - founder and principal of Narrow River Management (investment management company that focuses on pharmaceutical companies)<br />Richard L Menschel - senior director, Goldman Sachs (in 2002)<br />Dean R O'Hare - retired CEO of Chubb Corporation, director of DFA Capital Management<br />Aldo Papone - retired chairman of American Express Travel Related Services<br />Gordon Pattee - President, MAP Capital Corp<br />Charlton Reynders Jr - Chairman and CEO, Reynders Gray Co<br />Susan W Rose (philanthropist)<br />William R Salomon - honorary chairman, Citigroup<br />Jonathan Sobel - Global Head of Risk Management, Investment Management Division, Goldman Sachs<br />Robert K Steel - retired CEO, Wachovia (see above)<br />Daniel G Tully - founding partner and managing director, Altaris (investment company focused on "healthcare industry")<br />Mrs Douglas A Warner III - spouse of former chairman of JP Morgan Chase, current director of General Electric (which has both health care and finance divisions)<br />Kendrick R Wilson III - former executive, Goldman Sachs<br />Ellen M Wright (occupation not clear)<br /><br /><strong>Physician Board Members</strong><br /><br />Mathias P Bostrom MD - consultant for Smith & Nephew<br />Richard A Brand MD -<br />Charles N Cornell MD - royalties from Exactech<br />Melvin J Glimcher MD -<br />Steven R Goldring MD - member, board of directors, Telik<br />David L Helfet MD - member of advisory boards, OHK Medical Devices Inc, Healthpoint Capital, Orthobond Corp<br />Carl F Nathan MD -<br />Stephen A Paget MD - consultant to Medarex, Crescendo Bioscience<br />Scott Rodeo MD<br />Thomas P Sculco MD - royalties from Exactech<br />Russell F Warren MD - chairman of the board, Highlands Acquisition Corp, chairman of the scientific advisory board, chief scientific officer, principal member of the investment committee, Ivy Capital Partners, board of directors, Orthonet, royalties from Biomet, member of scientific advisory board, Cayenne Medical, member of scientific board of advisors, HealthPoint Capital, royalties from Smith & Nephew<br />Torsten N Wiesel MD -<br />Philip D Wilson Jr MD -<br /><br /><strong>Summary</strong><br /><br />As we have written previously, boards of trustees of not-for-profit health care organizations are supposed to supervise the management of these organizations, making sure it is prudent, and upholds the organizations' missions. Boards have duties to exercise reasonable care, avoid conflicts of interest, and again, uphold their organizations' missions. Thus, ideally, boards should be composed of people most likely to fulfill these duties.<br /><br />In the real world, current board members usually have sole authority to appoint new board members. Thus it may be all too tempting to make fit with the current board members the main criterion for appointment of new board members. We have posted about university and hospital boards which have pluralities or majorities of members from the finance sector. Such remarkable homogeneity suggests that they picked new board members because of their similarity to current board members. (For example, see posts about the boards of <a href="http://hcrenewal.blogspot.com/2009/09/why-have-governing-boards-forsaken.html">Dartmouth</a>, <a href="http://hcrenewal.blogspot.com/2008/12/what-linked-parallel-declines-of.html">Harvard</a>, and <a href="http://hcrenewal.blogspot.com/2009/04/hedge-fund-u.html">Yeshiva</a> Universities, and of <a href="http://hcrenewal.blogspot.com/2009/01/to-whom-did-scorpions-in-bottle-owe.html">Partners Healthcare</a>.)<br /><br />Thus, the boards of prestigious not-for-profit health care organizations may come to resemble social clubs for the superclass more than collections of passionate defenders of the progress of health care.<br /><br />It is hard to imagine how boards packed with finance industry executives would be the best upholders of academic and health care values, especially after the shortcomings of many finance industry leaders became so obvious in the global financial meltdown/ great recession.<br /><br />If health care is to become more affordable, more accessible, of greater quality, and less demoralizing for health care professionals, health care organizations need leaders known for their devotion to putting patients first rather than their devotion to socializing with their cronies.

A Board of Trustees, or a Social Club for the Superclass?

We just posted about the unlikely appointment of one Mr Robert K Steel as a trustee of the Hospital for Special Surgery in New York. Mr Steel appears to have no particular expertise or experience in h…

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A Trustee of What "Caliber" for the Hospital for Special Surgery

The <a href="http://www.hss.edu/about.asp">Hospital for Special Surgery </a>in New York, a prestigious institution focused on orthopedics and rheumatology, closely affiliated with Weill Cornell Medical College, just announced its newest trustee, whose qualifications for the position turn out to be just a wee bit curious. Here they are as described by <a href="http://au.sys-con.com/node/1121412">the press release</a>:<br /><br />He is a <em>former CEO of Wachovia</em><br /><br /><blockquote><br />Hospital for Special Surgery announced today that Robert K. Steel, former President and Chief Executive Officer of Wachovia Corporation, has been named a member of the hospital's Board of Trustees.<br /><br />Steel facilitated Wachovia's merger with Wells Fargo to create the second-largest retail brokerage in the country.<br /></blockquote><br /><br />Before then, he <em>served in the Treasury Department</em><br /><br /><blockquote><br />Prior to running Wachovia, Steel served in the U.S. Treasury Department as Under Secretary for Domestic Finance, a Senate-confirmed position. In that role, he was the principal adviser to Secretary Henry Paulson on matters of domestic finance and led the department's activities regarding the domestic financial system, fiscal policy and operations, and governmental assets and liabilities.<br /><br />Steel brings a wealth of experience to the Hospital for Special Surgery Board. He regularly testified before House and Senate Committees on matters such as reform at Fannie Mae and Freddie Mac, foreclosure prevention, and the rescue of Bear Stearns.<br /></blockquote><br /><br />Before then, he was a <em>leader at Goldman Sachs</em><br /><br /><blockquote><br />Steel spent almost 30 years at Goldman Sachs, rising to vice chair of the firm.<br /></blockquote><br /><br />He was also <em>chairman of the board of Duke University</em><br /><br /><blockquote><br />In 2009, Steel completed his term as chair of the board of Duke University.<br /></blockquote><br /><br />The other members of the Hospital for Special Surgery board were delighted by Steel's qualifications:<br /><br /><blockquote><br />'All on the Board of Trustees are <em>delighted to have someone of the caliber of Robert Steel join us to help guide the future of our institution as a leader in orthopedics, rheumatology and their related disciplines</em>,' said Aldo Papone, Co-Chair of the Board of Trustees at the Hospital for Special Surgery.<br /><br />Hospital Board Co-Chair Dean R. O'Hare added, 'As patients continue to seek the Hospital for Special Surgery's world class services in record numbers, <em>we are very pleased Robert Steel is here to support this institution</em> and the superb team of people who work here.'<br /></blockquote><br /><br />Setting aside the obvious issues that Mr Steel seems to have no particular knowledge of or training in medicine or health, and nothing in the press release suggests he has particular devotion to the values of health care, what do his cited qualifications really mean? Let's go through them in the order they were mentioned above.<br /><br /><strong>Former CEO of Wachovia</strong><br /><br />In fact, Steel became CEO of Wachovia in July, 2008, only to soon preside over the company's failure and its hurried merger with Wells Fargo. As <a href="http://www.nytimes.com/2008/09/27/business/27bank.html">reported by the New York Times</a>, by September, 2008, Steel had to give up any hopes of keeping Wachovia independent,<br /><br /><blockquote><br />As concern spread Friday that more banks might run into trouble even with a $700 billion rescue for the financial system, <em>Wachovia, one of those hardest hit by the housing crisis, became the latest to reach for a lifeline</em>.<br /><br />Weighed down by a huge portfolio of troubled mortgage loans, the nation’s fourth-largest bank by assets entered into preliminary deal talks with Citigroup, and extended feelers to Wells Fargo and Banco Santander of Spain....<br /><br />In July, the bank hired Robert K. Steel, 56, a former vice chairman at Goldman Sachs, from the Treasury Department, where he worked with Treasury Secretary Henry M. Paulson Jr., trying to resolve the mortgage market crisis. <em>Mr. Steel vowed to keep Wachovia independent</em> and sought to raise $5 billion in capital over the next year by selling noncore assets.<br /></blockquote><br /><br />The deal with Citigroup fell through, and Wachovia was <a href="https://www.wellsfargo.com/press/2009/20090101_Wachovia_Merger">taken over by Wells Fargo </a>on January 1, 2009. So although Wachovia's portfolio of doubtful mortgages was not the fault of Robert K Steel, he did not succeed in his vow of independence proved to be hollow. <br /><br />Furthermore, questions were raised about Mr Steel's overly optimistic predictions about Wachovia's financial conditions just before the company had to enter into merger talks. As <a href="http://query.nytimes.com/gst/fullpage.html?res=9F04E7D91730F933A0575AC0A96E9C8B63">reported by the New York Times </a>on September 30, 2008:<br /><br /><blockquote><br />'Jim, <em>we have a great future as an independent company</em>,' Robert K. Steel, Wachovia's chief executive, told James Cramer on CNBC's 'Mad Money.' <em>'We're also focused on very exciting prospects when we get things right going forward</em>. I didn't have time today to talk about the good things going on at Wachovia.'<br /><br />That interview wasn't last month or last year -- it took place, amazingly, two weeks ago. Wachovia's shares closed at $10.71 that day. On Monday, Citigroup bought the company for $1 a share.<br /><br />What was Mr. Steel thinking? Did he think he could 'spin' his way to survival?<br /><br />On Mr. Cramer's show Monday night, he spent an entire segment apologizing to his viewers about having Mr. Steel on the program and for his own bullish call on Wachovia's stock. 'I screwed up,' he said, referring at one point to Mr. Steel as a friend for 25 years. <em>'I believed in the guy. Did he take advantage of me? Perhaps yes</em>.'<br /></blockquote><br />Early this year, the <a href="http://online.wsj.com/article/SB123275454114111651.html">Wall Street Journal reported </a>that these remarks lead to an investigation by the US Securities and Exchange Commission (SEC):<br /><br /><blockquote><br />The Securities and Exchange Commission is <em>investigating remarks that former Wachovia Corp. Chief Executive Robert K. Steel made about the future of the bank the day before it started talks about a potential merger</em>....<br /><br />Among the issues under scrutiny is whether Mr. Steel, 57 years old, <em>misled investors</em> when he appeared on CNBC's 'Mad Money' program on Monday, Sept. 15.<br /><br />The next day, Sept. 16, Wachovia's board met by telephone to discuss strategic options for the company, including raising money, selling core businesses and merging with another company, according to an SEC filing.<br /><br />On Sept. 17, Mr. Steel called Morgan Stanley CEO John Mack to discuss a potential merger, according to people familiar with the matter.<br /><br />By the week of Sept. 22, under pressure from regulators and with customers starting to withdraw deposits, Mr. Steel was immersed in merger negotiations with Citigroup Inc. and Wells Fargo & Co. executives, according to regulatory filings and people familiar with the matter.<br /><br />After initially agreeing to sell its banking operations to Citigroup, Wachovia on Oct. 3 agreed to sell the full company to Wells Fargo.<br /></blockquote><br /><br />So although Mr Steel could not be blamed for the unfortunate financial position of Wachovia on the day he took over as CEO, he failed in his goal of keeping the company independent, and questions have been raised as to whether his overly optimistic comments just before merger negotiations began misled investors. Thus, his brief performance as leader of Wachovia does not seem something to boast about as a qualification to be a trustee of the Hospital for Special Surgery.<br /><br /><strong>Under Secretary of the Treasury For Finance<br /></strong><br />Mr Steel was appointed to his post at the Treasury Department by Henry Paulson. Mr Steel seemed to have a major role in the Paulson Treasury Department's response to the global financial meltdown of 2008. Criticism of Paulson and his department's response to the crisis is so well-known that we need not repeat it here. In response to the discussion in the news release above about Steel's testimony before congress, it is worth quoting a <a href="http://www.nytimes.com/2008/04/04/business/04scene.html">New York Times article </a>about a hearing that took place after the bail out of Bear Stearns, but before the crisis became full-blown.<br /><br /><blockquote><br />'How do we guard against a future Bear Stearns,' asked Senator Charles E. Schumer. <em>'Was someone asleep at the switch?'</em><br /></blockquote><br /><br />Later,<br /><br /><blockquote><br />Did Henry M. Paulson Jr., the Treasury secretary, mandate a rock-bottom price for Bear?<br /><br /><em>'What did you know and when did you know it,'</em> [Senator Christopher] ... Dodd asked, his voice loud as he pressed Mr. Bernanke, Mr. Steel and Mr. Geithner for an answer.<br /><br /><em>Mr. Steel and Mr. Geithner were artful and vague</em> in their responses....<br /></blockquote><br /><br />And just a few days ago, a story emerged that Paulson's plans to force a merger of Wachovia and Goldman Sachs failed because of the multiple conflicts of interest involved, including those affecting Mr Steel (as <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aDuX0FiPrFA4">per Bloomberg News</a>):<br /><br /><blockquote><br />Paulson, the CEO at Goldman Sachs until mid-2006, contacted current CEO Lloyd Blankfein and an unidentified Wachovia director, urging them to consider a combination, Sorkin reported. Goldman Sachs co-President Gary Cohn and Wachovia CEO Robert Steel -- a former vice chairman at the New York investment bank and an undersecretary to Paulson at Treasury -- thought they were near completion of a transaction after Fed Governor Kevin Warsh said the central bank would consider a merger, according to the excerpt.<br /><br />Billionaire investor Warren Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., was contacted about investing in the combined companies, Sorkin reported. Buffett told a Goldman Sachs banker the <em>merger would never happen because of the investment bank’s ties to officials at the Treasury and Wachovia, Sorkin reported.<br /></em></blockquote><br /><br />So it is not obvious that Mr Steel's work at the Treasury Department covered him in glory, or constituted a particular qualification to lead the Hospital for Special Surgery.<br /><br /><strong>Chairman of the Board of Duke University</strong><br /><br />Mr Steel's time in the leadership of Duke coincided with one of the major scandals to afflict higher education in the 21st century, usually called the Duke Lacrosse Scandal. Very briefly, several Duke University students who were also on the university's lacrosse team were charged with raping an exotic dancer. After they were charged, the university leadership seemed to judge that the players were guilty before the trial, and that the whole lacrosse team had to bear some sort of collective guilt. Eventually, the charges were dismissed for lack of evidence, and the prosecutor who pursued them so avidly was disgraced.<br /><br />It turns out that Mr Steel had a role in this scandal too.<br /><br />According to <a href="http://www.newyorker.com/archive/2006/09/04/060904fa_fact">a New Yorker article</a>, Mr Steel took a leadership role in the hiring of Due President Richard H Brodhead:<br /><br /><blockquote><br /><em>The man charged with bringing Brodhead to Duke was Robert K. Steel</em>, a trustee and chairman of the search committee....<br /></blockquote><br /><br />After the lacrosse players were accused of rape, a bizarre email led Brodhead to abandon a measured approach:<br /><br /><blockquote><br />Brodhead, who had been trying to maintain a balance between avoiding prejudgment and satisfying the mounting pressure for action, was outraged. He said he found the message 'sickening and repulsive,' and he acted immediately. He suspended McFadyen [the student who wrote the email]. <em>Coach Pressler was informed that he had until the end of the day to leave the campus</em>, where he had coached for sixteen years. Brodhead also announced <em>a series of committees that would investigate the team, the administration’s handling of the matter, and the Duke culture itself</em>. In a letter to the Duke community, he wrote that the lacrosse episode 'has brought to glaring visibility underlying issues that have been of concern on this campus and in this town for some time.' The letter went on:<br /><br />They include <em>concerns of women about sexual coercion and assault</em>. They include concerns about the culture of certain student groups that regularly abuse alcohol and the attitudes these groups promote. They include concerns about the survival of the legacy of racism, the most hateful feature American history has produced.<br />Compounding and intensifying <em>these issues of race and gender</em>, they include concerns about the deep structures of inequality in our society—inequalities of wealth, privilege, and opportunity (including educational opportunity), and the attitudes of superiority those inequalities breed. And they include concerns that, whether they intend to or not, universities like Duke participate in this inequality and supply a home for a culture of privilege.<br /></blockquote><br /><br />This quote in retropsect is beyond ironic given that there was never good evidence to support the charges against the lacrosse players.<br /><br />Brodhead cancelled the lacrosse team's season, but it turned out his reasoning, and that of Mr Steel who seemed to have a major role in the decision, was based mainly on the perceived need to preserve the "Duke brand":<br /><br /><blockquote><br />When Brodhead cancelled the season, he had said that the moment was too serious to be playing games. What he meant, in part, was that Duke could not be seen to be playing games. From the start, Brodhead had been forced to navigate among several potentially hazardous interests—lacrosse parents who felt angry and abandoned by the school, dismayed alumni and donors, the agitated citizens of Durham, the clamoring press—<em>while protecting what is known in the Allen Building as 'the Duke brand.' </em>On that fitful weekend in late March when the TV satellite trucks hit campus, the lacrosse team could be seen practicing for the Georgetown game, a scene that became an endless video loop suggesting institutional indifference. <em>'We had to stop those pictures,' Bob Steel says. 'It doesn’t mean that it’s fair, but we had to stop it. It doesn’t necessarily mean I think it was right—it just had to be done.'<br /></em></blockquote><br />Clearly, according to Mr Steel and his protege, President Brodhead, preserving the Duke brand was more important than the fair treatment of its students.<br /><br />In 2007, as per <a href="http://www.foxnews.com/story/0,2933,265481,00.html">this Fox News report</a>, the North Carolina Attorney General dispelled the accusations against the lacrosse players.<br /><br /><blockquote><br />[Attorney General Roy] Cooper said Wednesday that not only was there insufficient evidence proving the three assaulted an exotic dancer at an off-campus lacrosse player in March 2006, but there was <em>'no credible evidence that an attack occurred at that house on that night</em>.' He even proclaimed the players '<em>innocent</em>.'<br /><br />'The result of our review and investigation shows clearly that there is insufficient evidence to proceed on any of the charges,' Cooper said. 'Today we are filing notices of dismissal for all charges.'<br /><br />He added: 'We believe these cases were a result of a tragic rush to accuse and failure to verify serious allegations. Based on these significant inconsistencies of evidence and the various accounts given by the accusing witness, we believe these three individuals are innocent of these charges.'<br /></blockquote><br /><br />After their exoneration, Mr Steel sent out a message affirming his support of President Brodhead's decisions (presumably including suspending the lacrosse season to preserve the Duke brand, firing the lacrosse coach for no obvious reason, and launching an unwarranted witch-hunt against erroneous attitudes toward sexual assault, and race and gender.) Per <a href="http://durhamwonderland.blogspot.com/2007/04/steel-e-mail.html">the Durham-in-Wonderland blog </a>(written by Prof KC Johnson, who also wrote <a href="http://www.amazon.com/Until-Proven-Innocent-Correctness-Injustices/dp/0312369123">the book </a>about the Duke lacrosse scandal), here is what Steel wrote:<br /><br /><blockquote><br />Throughout the past year <em>President Richard Brodhead consulted regularly with the trustees and has had our continuing support. He made considered and thoughtful decisions in a volatile and uncertain situation. Each step of the way, the board agreed with the principles that he established and the actions he took</em>.<br /></blockquote><br /><br />Finally, Steel is now a defendent in a law-suit in the aftermath of of this case, <a href="http://abclocal.go.com/wtvd/story?section=news/local&id=6099859">per the AP</a>:<br /><br /><blockquote><br />Three unindicted Duke University lacrosse players have amended their civil lawsuit against the school and the city of Durham stemming from false rape accusations two years ago.<br /><br />The Herald-Sun of Durham reported Wednesday <em>the players allege that Duke trustees chairman Robert Steel controlled the school's response and that the school was most interested in protecting its image. </em><br /></blockquote><br /><br />So Mr Steel's handling of the Duke lacrosse scandal during his time as chairman of the board of that university also did not exactly cover him in glory, or provide an obvious qualification for him to be a trustee of the Hospital for Special Surgery.<br /><br /><strong>Summary</strong><br /><br />So Mr Steel<br />-as CEO of Wachovia failed to keep the company independent, and is under investigation of charges that he misled stock-holders;<br />- as Under Secretary of the Treasury was involved in what many believe was a bungled strategy to combat the global financial meltdown mainly by handing billions of dollars to the misguided Masters of the Universe who brought the meltdown upon us; and<br />- as Chairman of the Board of Duke University seemed to put an ultimately unsuccesful attempt to defend the Duke brand ahead of the rights of its students, and is now the defendent of at least one related lawsuit.<br /><br />It is too soon to tell whether the SEC investigation of the lawsuit will be decided for or against Mr Steel. However, it seems utterly bizarre that the board of the Hospital for Special Surgery would regard Mr Steel's track record as indicative of the "caliber" needed to lead one of the country's premier hospitals. <br /><br />How Mr Steel inspires such praise brings to mind some findings of pollster Frank Luntz that <a href="http://www.latimes.com/news/opinion/la-oe-luntz27-2009sep27,0,4242608.story">appeared in the Los Angeles Times</a>:<br /><br /><blockquote>Today, Americans are boiling mad, and the elites from Washington to Wall Street to West Hollywood don't get it. It can best be summarized by 12 short words bellowed by Howard Beale, the deranged TV anchor in the movie 'Network': 'I'm as mad as hell, and I'm not going to take this anymore.'<br /><br />Americans in the unhappy majority are struggling to keep their jobs as million-dollar bonuses are being awarded at companies their tax dollars bailed out.<br /><br />The core American complaint about politics is that wrongdoing isn't punished, other than at the next election. <em>From scandalous personal behavior to bailouts of everyone and everything except the hardworking middle class, Washington is seen as the source for America's mistakes</em>. <em>Enforcing rules and letting failures fail would stop the excesses today and prevent the mistakes of tomorrow</em>.<br /><br />Such accountability in business would likewise <em>prevent executives at imploding companies from walking away with millions while their employees get skunked</em>.<br /><br />For business and political elites, the message should be clear: Restore trust.<br /></blockquote>Mr Steel's unlikely career trajectory shows how once someone becomes a member of the superclass, the new power elite that spans business, government, and academics, that person is likely to continue to wield power no matter how poor his or her track-record, to the detriment of nearly everyone else.

A Trustee of What "Caliber" for the Hospital for Special Surgery

The Hospital for Special Surgery in New York, a prestigious institution focused on orthopedics and rheumatology, closely affiliated with Weill Cornell Medical College, just announced its newest truste…

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