Tuesday, June 25, 2024

New nonprofit petitions AG Josh Stein to ensure NHC Endowment transparency, performance

Senator Harper Peterson (center right) looks on as Save Our Hospital, Inc. founders host a press conference in City Hall in 2020; he’s now formed a nonprofit Heal Our People’s Endowment and is petitioning the attorney general to hold a public hearing on the endowment, formed by $1.25 billion in funds from the hospital sale. (Port City Daily/Johanna F. Still)

NEW HANOVER COUNTY — A group of county residents have retained legal counsel to request Attorney General Josh Stein hold a public hearing to address their concerns about the New Hanover Community Endowment.

READ MORE: NHC Endowment invests nearly $6.8 million for Northside grocery store

ALSO: New Hanover Community Endowment announces resignation of president and CEO

On March 29, Heal Our People’s Endowment posted a petition expressing concerns about mismanagement, leadership changes, and the lack of transparency of the county’s $1.25 billion endowment, born from the sale of the county-owned hospital to Novant in 2021.

Secretary of State records show Heal Our People’s Endowment incorporated as a 501(c)(3) nonprofit on Thursday. Some of the group’s members — including former state senator Harper Peterson — previously requested the attorney general’s intervention in the 2020 sale of the county’s hospital. Peterson argued the transaction involved potential malfeasance, questionable legal practices, and inadequate public engagement.

Four years later, Peterson believes his concerns have been vindicated.

“The community has just lost confidence,” he told Port City Daily. “And they’re helpless. And they need the proper authority to intervene.”

The petition indicates state statute assigns the attorney general the duty and authority guarantee the endowment functions with community participation, transparency, and independence. 

Because state attorney generals are charged with oversight of charitable organizations, the petitioners requested Stein — who is running for governor in 2024 — hold a public hearing on the issue. 

The petition asks for:

Endowment Board members who:

  • Reflect our community’s racial and economic diversity
  • Are free from political influence or allegiance to Novant
  • Are leaders with expertise in public health and safety, education, and economic development
  • A majority of whom are selected by the community at large

Endowment investments and grants that:

  • Will receive ongoing oversight by the attorney general’s office
  • Are in line with charitable purposes and the foundation’s formative documents

On Wednesday, Stein’s spokesperson Nazneen Ahmed told Port City Daily his office was “continuing to keep an eye on this issue” but didn’t have additional comments.

The group, whose members Peterson said would be disclosed next week, believes the endowment is failing to meet its foundational purpose, to address systemic county issues including health, education, community development and equity through distribution of grants. 

The endowment’s first grant cycle in 2022 totaled $9 million to over 100 nonprofits, followed by $53 million in 2023 to go to single-year and multi-year grants for more than 30 local organizations. It also announced $6.8 million in February for the Northside Food Co-op, with endowment leadership saying more grants are coming this year — specifically to address the housing crisis. 

Peterson argued many grants have been allocated without a clear plan to provide partnerships with nonprofits to develop sufficient communication and mentoring.

“Their strategic plan is generalities,” he said. “There’s nothing specific about it, no targeted goals, no schedule, no timeline, no projections.”

Endowment board chair Bill Cameron said the strategic plan was adopted in 2023 to guide the allocation of the second grant cycle. It includes goals such as becoming the safest, most stable and connected community in the state, developing a world class health system, and providing all residents of all demographics the best possible health outcomes. It does not include specific metrics or dates to achieve goals.

“That was our first strategic grant cycle,” Cameron added. “And now in 2024 we’ll have another strategic grant, but there is no single year, or two years, or three years, or four years, or five years that can solve all of the issues that we have identified in our strategic plan. This is a long term process and it has to be looked at over a long period of time.” 

Board members and CEO

The petition — with 237 signatures by press —  argues Novant has excessive power over decisions, as six members are appointed by the hospital’s board, while five are appointed by county commissioners. Stein’s approval of the 2020 deal included requiring two additional endowment-appointed board members to promote diversity and professional expertise.

The petitioners state the additional appointees fail to address Novant’s disproportionate influence because they are subject to appointment and removal by the Novant-appointed board majority. They also claim it is unclear if the additional appointees have full voting rights; Cameron clarified they do.

Heal Our People’s Endowment is represented by Vandana Shah — the former executive director of the NC Health and Wellness Trust Fund and associate attorney general with a focus on state nonprofits — and Raleigh-based attorney Robert Zaytoun, who primarily works on medical cases.

In an April 4 letter sent to Stein, Shah and Zaytoun cite a 2021 memorandum to the attorney general requesting he restructure the board to remove Novant’s majority and monitor spending to guarantee its alignment with appropriate charitable purposes 

“It appears that your office did not follow up on any of these recommendations, resulting in a widespread and significant breach of community trust as evidenced by occurrences over the last 8 months,” the attorneys wrote. 

Shah and Zaytoun cite the abrupt departure of CEO William Buster in February as indicative of a crisis within endowment leadership. 

Buster — “a renowned African-American public foundation administrator of national prominence,” the petition states — served as senior vice president of Asheville’s Dogwood Health Trust, a grant-making foundation formed from the sale of former nonprofit hospital Mission Health to for-profit HCA Healthcare in 2019. He joined the endowment in January 2022 and abruptly exited at the beginning of February. The endowment has not explained nor answered media questions as to why he left.

The endowment paid $135,000 to BoardWalk Consulting LLC, which specializes in nonprofit executive searches and helped recruit Buster, according to its 2021 IRS filing. Buster was making $329,000 annually.

Additionally, petitioners describe the September 2023 replacement of board members Virginia Adams and Hannah Gage with former commissioners Woody White and Pat Kusek — who voted in favor of the hospital sale — as a significant loss in diversity and expertise. Heal Our People’s Endowment states this move has impeded public confidence in the organization.

Commissioners voted last fall 3-2, with Jonathan Barfield and Rob Zapple dissenting, to move forward with White and Kusek. This was made despite endowment chair Cameron asking the commission to consider reappointing Gage and Adams.

Barfield criticized the removal of Adams, particularly, who is African-American, stating it would diminish the board’s diversity.

“The conversation right now would be to remove the one person of color that we put there,” he said last fall. “My question to commissioners is: What message are we sending to New Hanover County as a whole when we remove any diversity of our appointments at all?”

The pattern of unforeseen departures continued shortly after, as Kusek unexpectedly resigned in March without explanation. On April 1, commissioners appointed Mary Lyons Rouse, a development associate at Cape Fear Academy, as the replacement.

Cameron told PCD it would be inappropriate to comment on Buster’s resignation, as it is a personnel matter, but said the board has given updates on the issue. It formed a committee led by Shannon Winslow — vice chair of the endowment — with members Cameron (endowment chair), White, Cedric Dickerson, and David Sprunt to choose a third-party firm to aid the search.

“I hope it does not impede the confidence of the public,” Cameron said. “We’ve got a very capable board, there’s an opening in the position and I think we are going through the correct process to try to find a new chief executive.”

At the April 1 commissioner meeting, Cameron estimated it would take four to six months to find a new CEO and noted the endowment is reviewing proposals from three third-party firms. Cameron told PCD new developments in this plan will be announced Monday.

Housing 

In addition to leadership shakeups, the petition states Heal Our People’s Endowment  was “deeply troubled” by the second grant cycle in December 2023. The group acknowledges the board included important initiatives, but criticizes the failure to address housing.

“It is the number one concern of the community,” Peterson told PCD. “It should be the number one concern of the endowment.”

According to housing expert Gregg Colburn, gross rents in Wilmington have increased by 50% over the last decade as available housing has not kept apace with population growth. A 2022 housing assessment by Bowen National Research shows there is a gap of 12,147 rental units (up from 10,776 units in 2020) and 16,875 for-sale units (up from 13,017 units in 2020), with average homes costing $312,103, more than the state average of $238,552. 

As well, the region continues to experience an uptick in homelessness. The Cape Fear Continuum of Care found in the tri-county region the unhoused population increased by 60% from 2022 to 2023. 

Applications have been turned over to the endowment in this sector for consideration. For example, New H.O.P.E. CDC recently joined with other churches to submit applications to create two day centers and two homeless shelters, Rob Campbell, who started New H.O.P.E., told PCD earlier this year.

Cameron said the board is still developing a comprehensive plan to address housing, but is targeting more grants for this focus area in 2024.

“Our staff has spent hundreds of hours meeting with housing people trying to put together a coordinated effort to help housing and that is certainly a high priority for the endowment,” Cameron said. 

Peterson said he has spoken to nonprofit leaders who expressed frustration and confusion regarding their ability to gain funding. He added if the endowment keeps “pushing it off,” it will drive workforce out of the county — meaning teachers, nurses and first responders and law enforcement, who could choose to live elsewhere due to lack of affordability.

“The endowment has had three years to get it right and they failed,” Peterson said. “They need to admit that. And stop using the excuse that they care or that they’re trying the best they can. That’s fine with private money and private interests. This is the public’s interest and the public’s money. … The public doesn’t know what’s going on behind the curtain and the public should know because the public is impacted by housing affordability. And there should be an open discussion ongoing — all resources brought to the table.”

Novant 

The petition points out 42% of the cycle’s grants were allocated to nurse and health-worker training programs directly benefiting Novant, as over $10 million will be allocated to both UNCW and CFCC, $1.6 million will be given to New Hanover County Schools, and $250,000 will be granted to the Wilmington Chamber of Commerce. The money funds a strategic plan to help train, recruit, and retain health professionals in the next three years.

In June 2022, a federal report found Novant’s new stewardship of the hospital was failing to provide a safe environment for patients, as the hospital did not maintain sufficient staffing in nine out of 10 cases. Regulators from the Centers for Medicare and Medicaid Services temporarily put Novant’s NHC hospital in “immediate jeopardy” of losing its Medicare contract.

The company cut many of its travel nurse contracts months before the CMS investigation, but announced it would restore them as part of its action plan to remove its “immediate jeopardy” status with CMS.

Nurses who spoke to PCD said Novant overworked its employees, putting patients in serious risk; the CMS report found staff failed to monitor and respond to patient conditions in half of cases. 

Peterson said he’d heard countless anecdotes of worsened service, higher prices, and lowered morale among the hospital staff since Novant’s takeover. 

“What was supposed to be an improvement has been just the opposite,” he said. “And for them to have their hands on the people’s money is ludicrous.”

In the letter to Stein, Shah and Zaytoun note there is no guarantee UNCW and CFCC health-field graduates will stay in New Hanover County.

“Given that the local Novant hospital shortage partly stems from Novant’s own managerial decisions and considering Novant’s influence over so many Endowment board appointments, this disproportionate expenditure raises serious concerns of a conflict of interest,” they wrote.

Cameron described the claim as “absurd” and said the endowment board does not answer to Novant or the county.

“I completely disagree with the thought that our grants are for the benefit of Novant when it comes to our nursing and health workers,” he said. “Those workers benefit patients. You cannot have good health treatment of patients without the health professionals including nurses and a lot of medical technicians and those sorts of things.”

The chair said the reason the board’s majority was composed of Novant appointees was to give it flexibility to make investment returns it would be legally unable to make if the majority of its leadership was appointed by the county. 

Specifically, he cited BlackRock’s management of the endowment’s investment portfolio, which began in October 2022. The investments are not public and the chair said he could not disclose the cost of BlackRock’s services. 

The endowment’s most recent IRS filing for fiscal year 2022 states it paid $72,000 for investment management fees and $316,572 in consultant fees, but does not specify the firms. 

Peterson argued the absence of investment disclosures is indicative of broader transparency shortcomings.

“People have a right to know how their money is being spent and invested,” he told PCD. “It’s not private funds. This is not a private business. This is public and they’ve made it private, and that’s at the heart of this entire discussion.”

Transparency

In September 2020, Raleigh based-attorney and former Wake County representative Don Munford — the county’s contractor for developing the endowment’s formation documents — told commissioners his design purposefully avoided open meetings law, arguing it would increase outside political interference in the private foundation’s fiduciary decisions.

White agreed with Munford’s stance in a 2020 email to PCD: “Allowing politicians to grandstand to a community foundation by way of the public meetings laws would undo one of the primary reasons why this was initiated.”

Commissioner Rob Zapple — the sole dissenter in the 4-1 vote to sell the hospital — cast doubt on Munford’s argument. He argued political influence occurs behind closed doors and accountability would increase with more transparency.

Former commissioner chair Julia-Olson Boseman, who was disbarred in January after the state bar found she misappropriated client funds and engaged in a conflict of interest, countered Zapple’s claim at the time: “Any suggestion that any of us are doing anything behind closed doors or not in front is just not true. So I don’t appreciate the continued suggestions and innuendos.”

While the endowment is not subject to disclosure laws required of government bodies because it is a private foundation, Stein did require the organization hold two annual public meetings and create a community advisory group among his conditions for approving the sale in January 2021. The new rules were not included in original documents, according to his review.

But Cameron said the board strives to include public input through the community advisory council and directly with the board.

“All of the directors are pretty visible people,” he said. “We see from people and hear from people on a regular basis. And people are not shy about suggesting things about what we should be doing as an endowment, nor should they be. So I think we’re getting a lot of input and I believe we are processing it in a very professional way.”

Cameron argued the endowment’s public openness standards were designed to optimize decision-making. 

“You can’t run an endowment by community,” Cameron said. “That would not work. Instead of having 13 people trying to present ideas and stuff and come to a decision, you’d get thousands of people with competing ideas trying to come to a decision. And that fundamentally doesn’t work.”

Peterson disagreed. 

“What would they be afraid of? I mean, that’s the democratic process. You engage, you open the door, you allow people to listen, to participate, to interact. [There’s] none of that. It’s a closed club.”

The petition comes amid new developments in Stein’s oversight of the agreement for another North Carolina charitable organization, Asheville’s Dogwood Trust.

In December, Stein sued HCA Healthcare for failing to meet agreed-upon levels of emergency and cancer treatment care and the attorney general agreed to a new independent monitor for the company on Tuesday. PCD asked Cameron his thoughts on the issue but he said he was focused on New Hanover and did not have a comment.

Peterson said Heal Our People’s Endowment will provide more announcements soon and hold its first board meeting next week. PCD asked if AG Stein doesn’t look into the petition, what the nonprofit’s long-game will be.

“We will respond accordingly to the best interest of the citizens of New Hanover County,” Peterson said.


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Shea Carver
Shea Carver
Shea Carver is the editor in chief at Port City Daily. A UNCW alumna, Shea worked in the print media business in Wilmington for 22 years before joining the PCD team in October 2020. She specializes in arts coverage — music, film, literature, theatre — the dining scene, and can often be tapped on where to go, what to do and who to see in Wilmington. When she isn’t hanging with her pup, Shadow Wolf, tending the garden or spinning vinyl, she’s attending concerts and live theater.

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