Will Taxpayers Bear Burden of Attorneys’ $6.4 Million Fee?

“I am most proud of the fact that, as part of the settlement, retirees who worked hard for their benefits will not have to pay any fees or expenses for the recovery of their pension,” Reeves said.

Excerpt from press release of Reeves & Mestayer

Doug Walker repeated the statement nearly verbatim in the lead up to his interview with attorney Jim Reeves. While those statements don’t tell the whole story they are certainly true.  Under the agreement reached by Reeves and Billy Guice, retirees will not have to pay attorneys’ fees or expenses directly, because the taxpayers of Jackson County will likely do so.

In our previous post, we theorized that the alignment of the county’s payments to Singing River and Singing River’s payments into the settlement constituted a de facto pension plan funding by the county. When the information is put into the form of a chart showing all payments, a clear pattern emerges: the county is paying the attorney’s fees.  We will again use the duck test: if it walks like a duck and talks like a duck… it’s a duck.

When attempting to determine whether or not taxpayers are actually paying the attorneys’ fees, we need to examine:

• The amount and payment structure of attorneys’ fees
• SRHS budget and ability to pay without outside help
• The amount and structure of county support
• Any agreements, documents, or media reports that will illuminate the numbers

Amount and Structure of Attorneys’ Fees

This is an easy matter of fact.  Reviewing documents filed in federal court, we find:

SRHS Budget and Ability to Pay

On August 27, 2015, Kevin Holland presented the SRHS budget to the JCBOS.

In the budget, Singing River Health System administrators promised to put $1.2 million toward the failing employee pension and projected a $700,000 profit next year, but they also asked the county for $2 million.

Jackson County approves hospital budget, AP, September 9, 2015

The 88 percent pension plan we put forward [in June], contemplated us putting $1.2 million per year for the next four years. $3 million for the next four years after that and then $4.5 million starting in 2024,” said Holland.

In 2016, in a razor thin budget,  SRHS only has $1.2 million to contribute to the pension plan. They are asking for $2 million in extra money – for what purpose?  Combine the $1.2 million available for the pension and the requested $2 million and you arrive at the exact amount attorneys will receive in 2016: $3.2 million.

“We obtained financial records and hired experts to determine how fast they could pay it back reasonably,” Reeves said. “Anything faster would probably have drove, in our opinion, Singing River to bankruptcy.

Jim Reeves to Sun Herald, January 5, 2016

Reeves states that the hospital DOES NOT have the ability to repay at a faster rate. Considering that SRHS has committed to the same funding schedule it originally proposed in June 2015, we find this to be reasonable. Given that SRHS is now required to pay $6.4 million more in 2016-2018 than it planned to, we must examine where Singing River will find the money.

It reasonably appears that SRHS does not have the ability to independently pay $6.4 million in attorneys fees.

Amount and Structure of County Support

On October 20, 2015 Billy Guice announced that the county will provide $13.6 million in funding to SRHS for the purposes of indigent care and bond support. (We rebutted these assertions in our previous post.)

Three schedules are provided by the Settlement Agreement filed in federal court:

1. SRHS Consideration – Combined SRHS payments to attorneys and to the pension trust
2. County Support – Shows when and how much the county will give to SRHS
3. Attorneys’ Fees – Shows when and how much attorneys will be paid

What is not shown: a schedule of when and how much SRHS will pay into the pension trust.  Lacking this, we compiled our own schedule.²

It is clear that the dates in which the county provides funding to SRHS are the same dates on which the attorneys are to be paid.  There are some dates in 2017 and 2018 where the attorneys are paid more than the available funding from the county. We assume that payments by the hospital, one week after the county’s, will make up the difference.

When the amounts paid by the county and received by attorneys in the period 2016-2018 are totaled, both equal $6.4 million¹.  Lest you think this is a coincidence, we refer you to the Term Sheet released in October 2015. The documents were prepared by attorney Lucy Tufts, of the Mobile firm Cunningham Bounds, who is working with Reeves. These numbers represent what Reeves referred to at the time as a “done deal.”

The draft text of the Term Sheet shows that the county was to pay $11.6 million as outlined in Exhibit B.

Exhibit B uses the figure of $13.6 million, a difference of $2 million.

That extra $2 million might show up somewhere.  Let’s flip the page to Exhibit C.

On the same day (January 4, 2016)  the county is sending SRHS $2 million, SRHS is also sending $2 million to attorneys. Consider this quote in the Mississippi Press:

The county has agreed to ante up $2 million upon the settlement’s agreement before the year’s end. Then it will give $2 million in January 2016, Guice said.

Billy Guice to the Mississippi Press, October 20, 2015

Guice’s negotiations on behalf of the county were fundamental to the settlement and he was involved early in the process:

The government of Jackson County, where Singing River is located, was not a party in the litigation, but according to Tufts, it was involved in the settlement negotiations early on because it had an interest in the conclusion of litigation. The county will pay about $14 million to support indigent care and prevent default on a bond issue.

Lucy Tufts to Law360 January 4, 2016

Contribution Agreement Prohibits Using County Money for Attorneys

In the Contribution Agreement between the county and SRHS there includes an entire section on how to deal with attorneys’ fees.  The plain language of the Contribution Agreement states:

“The funds contributed by Jackson County to SRHS may not be used directly or indirectly to pay the plaintiffs’ attorneys in the Litigation.”

We take that to mean that if SRHS doesn’t have $3.2 million of its own to give to attorneys in 2016, it is barred by this agreement from doing so. The agreement also sets up an escrow account for making payments as outlined in the Settlement Agreement. This money is supposed to come from a source independent of the county’s funding.  It is difficult to determine where Singing River might find this extra money in the budget.

As stated above, it is our opinion that the hospital has no independent means of contributing $3.2 million to attorneys’ fees.  The language in the Contribution Agreement is at odds with the reality of the hospital’s lack of funds and the payment schedules between both the county and attorneys.  It is our opinion that the language in the Contribution Agreement as to attorneys’ fees is little more than smoke and mirrors designed to obscure the true nature of the funding.

Bottom Line

When all of the facts are considered in part and in whole, it is our opinion that the county is indeed paying the attorneys’ fees.  While there is a convoluted mechanism for accomplishing this, when it is broken down to its basic parts and the window dressing stripped away, it becomes apparent.  Since plaintiffs in the federal cases have made no claim against Jackson County, it is also likely that these payments constitute a violation of Section 96 of the Mississippi Constitution.

One final thought on Billy Guice:

Also during mediation, “no one ever talked about $6.4 million in attorneys’ fees,” Guice said.

“That would never be signed by me,” he said.

1. County Support in 2016-2018 is $6,400,000 and Attorneys’ Fees for the same period are $6,450,000. There is a difference of $50,000 which represents less than one percent (1%) of the total amount; the difference is considered insignificant for this discussion.
2.  It is also clear from the chart that attorneys will garner nearly double the amount the pension plan receives during this period. This will be the subject of a later post.

Timeline

• August 27, 2015 Kevin Holland presents need for $1.8 – $2 million in funding to JCBOS
• September 8, 2015 JCBOS approves SRHS budget, tables talk of $2 million funding from county to SRHS
• September 29, 2015 Special Master Britt Singletary announces in open court settlement will be announced soon
• October 8, 2015 Attorney Lucy Tufts (working Jim Reeves) begins drafting the documents seen above
• October 17, 2015  SRHS Watch breaks the story of settlement between county, hospital, and Reeves
• October 19, 2015 Billy Guice states to public that he and JCBOS have not seen the document
• October 20, 2015 Billy Guice announces that county has agreed to provide $13.6 million in funding to SRHS
• October 20, 2015 Jim Reeves describes settlement as looking like a done deal and expects it to be signed by all parties within a week
• November 2,2015 Elections for Jackson County Supervisors
• December 21, 2015 JCBOS approves funding agreement for SRHS after secret discussion on last day of term
• January 3, 2015 Settlement agreement filed in federal court at 11 p.m., just hours before new board convenes

Sources:

Settlement Agreement

1. Motion for Preliminary Approval of Class Settlement Agreement
2. Stipulation of Agreement and Compromise of Pro Tanto Settlement – includes payment schedules seen above as Exhibits A, B, & C
3. Proposed Notice to Settlement Class – not approved by the Court
4. Proposed Order to Judge Guirola for certification of Settlement Class – not approved by the Court

Term Sheet and exhibits, as circulated in local media

Media Coverage