Pierce candidate's presidency at medical school ended in lawsuits

Congressional candidate Stan Flemming, a Pierce County councilman, touts numerous public and civic accomplishments to underline his leadership skills. They include his tenure from 2007 to 2009 as president of the Pacific Northwest University of Health Sciences, a medical school in Yakima.

However, Flemming doesn’t mention that his stint ended in a flurry of lawsuits and acrimony.

Court records tell two stories of Flemming’s term as president. Both revolve around money.

Version A:

In 2007, Flemming reluctantly takes charge of Pacific Northwest University of Health Sciences, a new nonprofit college built on shaky financial footing and a dubious business model.

Flemming steers the place to long-term viability. He departs in November 2009 after local powers usurp his authority, offend his ethics and violate his contract. He sues the university for his severance pay: $708,000.

Version B:

University leaders sue Flemming, saying he doesn’t deserve his severance pay. They contend he verbally resigned his position on Nov. 10, 2009, after “a period of escalating misconduct, fiduciary and contractual breaches that would have otherwise led to his termination.”

The stories ended at the same moment in May 2010: a settlement agreement with strict confidentiality provisions, noted at the end of the case file in Yakima County Superior Court.

Attorneys for both sides say they can’t discuss terms of the settlement. Flemming says he never resigned. He says the university agreed to pay him in full, “100 percent.”

Either way, Flemming doesn’t work at the school anymore.

THE ALLEGATIONS

The News Tribune noticed the lawsuits in the course of standard campaign coverage, which included background checks of local candidates. Flemming, a Republican, is seeking a seat in the newly created 10th Congressional District.

Before the case settled, 11 university administrators and employees filed sworn declarations attesting to Flemming’s actions.

The declarations allege mismanagement and cronyism. They state that Flemming’s tenure left the college in financial turmoil, teetering at the edge of losing its accreditation: the right to graduate students and award degrees.

In a recent interview, Flemming said 90 percent of the allegations in the declarations were “proven to be wrong” during the course of settlement negotiations and related depositions. Those records can’t be examined due to the confidentiality agreement, he said.

“I would have loved to have this in an open record,” Flemming said.

His departure was no secret: The Yakima Herald-Republic, paper of record in the community, covered the story at the time. However, the news drew little attention in the South Sound, Flemming’s home base.

IMPRESSIVE BACKGROUND

Flemming, 59, has a long and sparkling résumé. He’s a physician, a former state legislator and a retired brigadier general in the Army Reserves (medical command). He was the first mayor of the City of University Place and a longtime city councilman. His campaign website refers to him as the city’s “founding father.”

The site touts Flemming’s leadership in various settings, and briefly refers to his tenure as president of the Pacific Northwest University of Health Sciences. Records show he was the third president in the school’s short history.

Gary Lofland, a Yakima lawyer who worked with Flemming at the university, said he could not discuss specific legal matters. He offered a general assessment of Flemming’s character and abilities.

“I dealt with Stan on a number of employment and other related issues involving people at the university,” Lofland said. “I found Dr. Flemming to be pretty reasoned and measured in his approach. Do I think Stan Flemming is a trustworthy guy? From what I’ve seen, absolutely.”

2008 OPENING

The nonprofit university opened in 2008 to local fanfare: one of only 26 colleges of osteopathic medicine in the nation. The college’s first class – 69 students – graduated in May of this year.

“We believed … that by educating and training primary care physicians we could make a significant contribution to the health and welfare of the chronically underserved communities in the Northwest,” wrote Dr. Lloyd Butler, a retired physician and one of the leaders of the coalition that built the college.

The statement comes from Butler’s declaration in the December 2009 lawsuits that pitted the university against Flemming, and two other ex-administrators, Timothy Morris and Don Menard.

Butler, chairman of the college’s board of trustees, took over as the college’s interim president after Flemming’s departure. He stepped down July 1 of this year when the current president, Dr. Keith Watson, took the helm.

WEARING MANY HATS

Court records include Flemming’s contract with the university. He was hired at an annual salary of $425,000, with benefits that included moving expenses and severance pay.

A stipulation in the contract noted that Flemming would “conduct himself at all times in a manner that reflects the highest standards of personal conduct, morals and professional ethics.”

Flemming carried a heavy schedule. He was still a University Place city councilman, commuting back and forth over the Cascades, sometimes missing meetings in both places – 65 of 191 council meetings in University Place, according to a 2010 News Tribune story. Flemming said he didn’t miss “essential” council meetings and attended others by phone. Records from the lawsuits, including a statement from his former executive assistant, refer to his absences at the school.

He was still a doctor, still the chief medical officer of a physician network in Pierce County he’d founded, and still involved in the military.

SHAKY FINANCES

His early months as university president were filled with optimism, but the school stood on shaky financial ground in 2007. Flemming said he spotted the problem the day he took office.

Before his arrival, university leaders had negotiated a real estate deal with Sun West Inc., an Oregon company that subsequently filed for bankruptcy and was charged with fraud by the Securities and Exchange Commission. The company’s troubles threatened the university’s ownership of the land that housed the campus.

In court records, Flemming contended Butler made money on the Sun West deal. Butler denied it.

Flemming said he told the board the Sun West agreement was a financial albatross. He renegotiated it on better terms shortly after his arrival. He successfully lobbied state lawmakers for additional school funding, and oversaw the opening of two specialized colleges within the university.

He also worked closely with Morris, the college’s chief operating officer and chief financial officer and a key figure in the lawsuits.

Declarations state that while skipping work to get tattoos (at least eight times), Morris ordered a staff member to bring him drinks from the liquor stashed in his office. The declarations add that Morris conducted a pair of extramarital affairs – one with a college staff member – and wrote a doctoral dissertation on company time.

Flemming said the tattoo appointments were unsubstantiated and that the affairs predated his arrival.

In October 2008, Morris had ordered the school’s controller, Ann O’Brien, to pay Flemming a salary advance of $75,000, split into five checks, according to a declaration filed by O’Brien.

O’Brien, a certified public accountant, questioned the payments. She asked Morris for a record of board approval.

“Dr. Morris became enraged and told me never to question his judgment. I delayed awaiting board approval and consulted with the HR director and a member of the board of trustees.”

– O’Brien declaration

Flemming’s contract included a standard annual raise of $10,000. The rest of the money was an advance on his salary. The board had approved a raise for Flemming in executive session, records state, but not as a lump-sum advance.

Asked about the matter by The News Tribune, Flemming said the board’s finance committee approved the payment.

“In my opinion,” O’Brien wrote, “the advance payment to Dr. Flemming should have been an expense taken over the following year. … The harm to the school was a short-term cash shortage at a time of uncertain future cash flows.”

MORE PROBLEMS

New signs of trouble surfaced in early 2009 as the economy tanked. Financial woes coupled with growing concerns about university leadership unnerved the school’s local backers.

The key donor group was the Osteopathic Foundation of Central Washington, a coalition of physicians that backed the university with more than $10 million in active accounts: money used for operations and reserves.

On paper, the foundation’s alliance with the university included a cooperative agreement that spoke of sharing information, including records of the school’s finances. Apart from that agreement, Flemming’s job description directed him to “strengthen the bond between the university, friends and benefactors.”

On Jan. 14, 2009, leaders of the investor group sent a sharp letter to the board.

“We have major concerns over the administrative and financial management and activities of PNWU,” leaders wrote.

They requested records of current and future budgets and information about future cash flow. They asked whether the board had evaluated Flemming’s performance.

The board defended Flemming and offered a meeting with leaders of the investor group. Board chairwoman Karen Hyatt backed the president.

“We believe Dr. Flemming is the person who is in the right position at the right time to lead this institution,” she wrote.

In spring 2009, Flemming pushed for increased enrollment and tuition at the school, saying the university’s business model of 70 students was “a fatally flawed business plan from the outset.” Too few students, too undercapitalized, he argued. He wanted to jump to 110 slots.

Flemming said as much in a letter to the Commission and Osteopathic College Accreditation, a national entity that draws its authority from the U.S. Department of Education. COCA held the card that controlled the school’s viability: provisional accreditation.

The college was a rookie institution. Growth and expansion were supposed to be slow, with COCA providing full approval as the school matured. Flemming’s note was a surprise. COCA representatives had visited the school in January, only two months earlier, and said the place appeared on track with its existing business plan.

Flemming wanted to accelerate. He told The News Tribune that college administrators and the board knew about his intentions. His letter told COCA the original enrollment plan and business model were “inherited” and shouldn’t have been accepted. COCA leaders told him he could make his case at a May 2 agency meeting in Chicago.

While Flemming pushed for expansion, Morris pushed for money. By April 2009, he’d completed his doctoral dissertation at Gonzaga University. (The dissertation revolved in part around the formation of PNWU and Morris’ role in its creation.)

The degree added a notch to Morris’ résumé. According to his contract, it triggered a raise from $180,000 to $250,000.

Morris could have taken the raise over time, but he wanted the extra money immediately. Again, he told O’Brien to sign two checks – one for $10,000 (his annual raise) and one for $70,000. Again, O’Brien, along with human resources director Stefanie Durand, resisted signing the checks.

“The University was having to utilize vital reserves and seek alternative financing to meet cash flow requirements,” O’Brien wrote in a sworn statement. “When Dr. Morris heard about my questioning, he called me in and said, ‘Do what you’re told!’ ”

According to records, O’Brien and Durand refused to authorize the checks unless Flemming signed them first. Flemming did, and O’Brien sent an email to Morris, telling him a payment of $70,000 would appear on his next paycheck.

“COOL,” Morris replied.

In a recent interview, Flemming acknowledged that the board didn’t want to pay Morris up front. Flemming said Morris’ contract required the raise.

The contract was signed in 2006, the year before Flemming arrived at the school. It said Morris was entitled to a raise if he obtained his Ph.D. It didn’t say he would get the money all at once.

Either way, the internal strife over the payments led to a tense meeting between Morris and Angela Girard, Flemming’s executive assistant.

“Tim responded by saying that he and Dr. Flemming had agreed to his salary increase as one lump-sum payment over a year ago.”

– Girard declaration

Two weeks after receiving the money, Morris told school administrators the university had a cash-flow crisis.

FRAYING FRIENDSHIPS

Flemming was juggling worries. He was fencing with COCA over accreditation and battling school backers over fiscal management.

He traveled to Chicago on May 2, and gave his pitch for increased enrollment. COCA leaders were unhappy, court records state – the university had said it was on firm financial ground in January. Now the president was saying the school couldn’t sustain itself financially.

Meanwhile the friendship with local investors was fraying.

On May 6, Flemming responded to the request by the Osteopathic Foundation of Central Washington to view financial records. Citing legal advice, Flemming said he was “rescinding our provisional agreement” to share financial records.

His letter said he was speaking on behalf of the university and the board of trustees.

Declarations in the case say board members didn’t see the letter or approve it beforehand, nor were they aware of the legal advice Flemming mentioned. They knew Flemming would respond to the foundation. They didn’t expect the tone or the refusal.

“I and many other members were of the opinion that the University should simply share its financial records with our interested stakeholders,” Butler wrote. “Dr. Flemming, clearly, did not agree, and he chose to express his disagreement in a manner that only heightened the conflict with our stakeholders.”

The troubles were just beginning. On May 12, 2009, COCA sent a letter to the university labeled “provisional accreditation with warning.” COCA leaders cited 14 areas of deficiency at the school, and stated, “the quality of the total program is threatened.”

The letter came to Robyn Phillips-Madson, the school’s chief academic officer. She immediately shared it with Flemming.

“It was a very troubling letter, as it imperiled our accreditation. I assumed at the time that Dr. Flemming would share the letter with the board at a minimum.”

– Phillips-Madson declaration

Phillips-Madson was wrong. Flemming didn’t share the letter with the board. For months, members would remain in the dark, according to the declarations.

In July, board members upbraided Flemming over Morris, his duties and the payments he’d received. Flemming told board members he’d been “blind-sided” by Morris. He promised to take steps and separate the duties of the chief operating officer and chief financial officer.

Weeks later, the board told Morris his contract would not be renewed – but that didn’t mean getting fired. Flemming, following the plan he’d described to the board, gave Morris a new title: chief business officer. Morris would move back to Western Washington and handle his executive duties from Redmond, at an annual salary of $180,000.

To replace Morris, Flemming announced a new hire in September 2009: Don Menard, Flemming’s former chief of staff in the Army Reserves, would become the university’s chief operating officer on a three-year contract at a salary of $180,000. Declarations state Flemming had promised the job to Menard a year earlier.

“We were told at the time that Mr. Menard was a colleague of Dr. Flemming’s from the military, and that he was qualified for the position. The Board was shocked at the size of this salary. Dr. Flemming reported that he did not need the permission of the board to hire a COO, but was reporting it to the board as a courtesy.”

– Butler declaration

Board members couldn’t tell whether Menard was qualified for the job.

“There were very serious concerns about Mr. Menard’s experience to perform the position of COO of a medical school,” Butler wrote.

Flemming said board members, apart from Butler, raised no concerns about Menard’s hire at the time and approved the salary. Court records indicate board members and school administrators met Menard several times before the hiring, during get-acquainted visits arranged by Flemming.

Flemming said Menard is a friend and qualified for the job. He acknowledged he didn’t interview anyone else for the position. He denied allegations in the declarations that said his contract required recruiting candidates from the Northwest. (Menard lived on the East Coast.)

However, Flemming’s job description, contained in court files, includes the following stipulations:

• Emphasize at-will employment of all university employees.

• Seek out and give preference to persons who are qualified from the Pacific Northwest.

Menard’s hiring came against the backdrop of a greater crisis involving accreditation. Board members didn’t know it yet. On Oct. 1, 2009, the same day Menard was officially hired, the COCA sent a letter of warning to the university, addressed to Phillips-Madson, chief academic officer.

The letter said the university’s provisional accreditation would be withdrawn in 30 days unless various deficiencies were corrected, including problems with financing and governance.

Loss of accreditation would spell fiscal disaster. Students would have to be reimbursed for tuition payments toward worthless degrees.

Phillips-Madson immediately shared the letter with Flemming. He didn’t share it with the board. She learned he hadn’t shared the earlier letter, either.

“I was astounded when I learned this. Appalled,” Phillips-Madson wrote in a sworn statement. “Dr. Flemming said that the letters were ‘confidential,’ and for that reason he had chosen not to share them with the board. I found this explanation preposterous.”

Board member Karen Hyatt heard about the COCA letter Oct. 3, according to her declaration, but didn’t know what it said. Board members finally saw the full text Oct. 15, having learned of it through back channels among the school’s local investors, records state.

“It was not until after October 15, 2009, that I saw one of the letters and realized what we were up against,” Hyatt wrote.

Board members confronted Flemming and demanded an explanation. He said he believed the COCA letters were confidential.

“Absolute nonsense,” Butler would write later, adding that the university’s future was in jeopardy. “It is simply ludicrous for Dr. Flemming to claim that the report was confidential and needed to be hidden even from the board.”

Even Hyatt, Flemming’s longtime supporter on the board, was disappointed with his explanation.

“I think this a lame and baseless excuse,” she wrote in a sworn statement. “I believe he was instructed by COCA to keep the ‘warning’ confidential but do not believe the confidentiality was meant to include the University’s board.”

Flemming admits he didn’t share the October letter with the board immediately. He now calls it an error in judgment. He said he had spoken with a COCA administrator who said the letter was “a shot across the university’s bow,” and added it was for Flemming’s eyes only.

“I was wrong to not have taken that to the board,” Flemming said. “But at the time when the director of COCA was saying don’t do it, I made a decision not to. In retrospect, hindsight’s 20-20.”

It was the beginning of the end for Flemming’s tenure, but university leaders faced a more pressing problem. They had two weeks to save the school’s accreditation.

A major internal scramble followed. Phillips-Madson, Butler and other university leaders crafted a presentation they hoped would persuade COCA leaders.

The effort succeeded, according to the declarations. Accreditation was saved, but one loose end remained – the university had to prove it was on firm financial footing. That meant a new quest for investors.

At the same time, the board proposed to Flemming a “team management structure” that would involve working with a pair of consultants chosen by the board. The three members had to agree before making decisions. In theory, the two outsiders could veto a decision by the president.

With board members present, Flemming initially agreed to the arrangement, university leaders state in court records. He soon changed his mind.

“My ethics and leadership style doesn’t allow for such a model.”

– Flemming email, 11-9-09

On Nov. 10, Butler and Hyatt met with Flemming and told him they had secured a potential $5 million investment that would satisfy COCA’s requirements for fiscal stability.

But there was a catch.

“That investment allegedly was contingent upon my removal as president,” Flemming wrote in a declaration. “I indicated that if I was standing in the way of the university’s success, I would consider resigning in accordance with the terms of my contract.”

Butler and Hyatt recalled the meeting differently.

“Dr. Flemming resigned. There is no other way to put it. … He sat down with Dr. Butler and me and said, ‘I’m tendering my resignation.’ I asked if he was sure he wanted to do it. He said, yes, he was sure. He said he had discussed resigning with his wife and he was sure. It was an emotional and teary exchange.”

– Karen Hyatt declaration

Two more declarations signed by other university administrators said Flemming told them the same thing later that day: “I’m tendering my resignation.”

The next day, Nov. 11, Flemming flew to Portland with Morris to meet with Sun West investors. It was a settlement conference – an effort to resolve the financial loose ends for good.

Flemming said he spoke to Hyatt after the meeting.

“Don’t come back,” he recalls her saying.

That same night, Flemming also spoke to Gretchen Eickmeyer, the school’s vice president of advancement and development. According to a declaration filed by Eickmeyer, Flemming said he thought he had secured $5 million in funding for the university as an element of the Sun West settlement – but it hinged on his continued service as president.

“He suggested, however, that the judge might not approve the settlement if he were no longer president of the school,” Eickmeyer wrote. “He also indicated that the purported five million dollar loan would not be available unless he was leading the school, as he had ‘cultivated’ the loan.”

Board members met Nov. 13, accepted Flemming’s verbal resignation, agreed that cause for termination existed and sent him a letter saying so. The documents appear in the court file.

Cause for termination was a big deal. It meant Flemming wouldn’t receive the severance pay outlined in his contract. That amounted to more than $700,000.

Flemming responded immediately with a Nov. 14 note to Hyatt, saying he hadn’t resigned.

On Dec. 29, six weeks after allegedly telling administrators he was resigning, Flemming sued the university and said he hadn’t resigned.

“I never offered my resignation and would not have done so without any financial provisions to protect my family while I pursued replacement employment.”

– Flemming declaration, 12-30-09

Morris and Menard joined him in the lawsuit. The three sought compensation, including double damages.

The university countersued, filing 11 declarations from board members, university administrators and employees.

Binding arbitration

The case stalled in January 2010. The parties agreed to submit their dispute to binding arbitration and abide by the findings – but they reached their settlement before the arbitration could take place. Meanwhile, Flemming announced his campaign for a seat on the Pierce County Council.

Flemming’s attorney in the case, Judith Lonnquist, said she could not discuss the terms of the settlement with the university. She said she deposed the college employees who filed sworn declarations.

“I deposed all those people who gave declarations,” Lonnquist said. “I can’t tell you any more than that. After I made the depositions, they made an offer of settlement – so draw your own conclusions.”

Brendan Monahan, the attorney who represented the university in the case, offered a brief statement in response.

“With respect to Ms. Lonnquist’ s comments, all I can say is that I disagree profoundly with her description of the manner in which the matter unfolded,” Monahan said. “While Dr. Flemming’s decision to comment publicly on his lawsuit against the University is unfortunate, the substance of his remarks is something the University will be taking up with him directly. For its part, the University simply maintains that the matter was amicably resolved to the mutual satisfaction of the parties, and the University will continue to honor all of its commitments in that regard.”

Flemming won his campaign for a seat on the County Council on Nov. 2, 2010. In December 2011, he announced his run for Congress in the newly created 10th District.

Friends on his Facebook page include Morris and Menard. Menard, now an aviation manager for one of Paul Allen’s companies, is listed on Flemming’s campaign site as an endorser.

Morris, now a management consultant based in the Seattle area, lists himself on his LinkedIn profile as “your go-to COO.”

sean.robinson@thenewstribune.com
253-597-8486