She Dealt a Death Blow to Illinois 'Pay To Play'

An Interview with Pamela Meyer Davis, ACFE's 2009 Cliff Robertson Sentinel Award Recipient

By By Dick Carozza

2009-SeptOct-Pam Davis 
Pamela Meyer Davis refused to let corrupt Chicago businessmen bully her with extortion. She contacted the FBI to report the          crime and blew the whistle on a fraud that would eventually aid the government in the case against former Illinois Gov. Rod Blagojevich. Davis was presented with the 2009 Cliff Robertson Sentinel Award.
Pamela Meyer Davis is a Hospital Administrator in capital letters. In 1988, she became the president and chief executive officer of Edward Hospital, in Naperville, Ill., near Chicago. She quickly built the sleepy institution into a regional health-care provider with cardiac services, a cancer center, a pediatric emergency department, residential care, and more. So in 2003 when she detected possible fraud in the Illinois Health Facilities Planning Board, she had no idea that she would add "undercover spy" to her résumé and help begin an investigation that eventually would lead to the arrest and indictment of former Illinois Gov. Rod Blagojevich.

The night before Davis was to appear before the planning board to ask for approval for a new medical office building, she received a call from P. Nicholas Hurtgen, a senior managing director of Bear Stearns in Chicago, who told her to pull the project from review because, "I supposedly needed their advice and help in terms of signed contracts before this project would be approved," she said. She had heard this type of pitch before, so she ignored the phone call.

The next day, the planning board soundly rejected Davis' proposal and did so with "disdain, anger, and inappropriate questioning," she said. After the vote, a Kiferbaum Construction Corp. executive came over to Davis and stated they had "told me to pull the project and that I should now understand they were serious about the fact that I would never be approved unless I entered into a construction contract with them," she said.

Davis recognized their tactics as blatant extortion. "My inner voice - my instincts - were screaming and shouting that this was not something I could engage in," she said. So she called 411 and got the number for the FBI.

The FBI was skeptical, but the bureau agreed to do some investigating. She invited Hurtgen and Jacob Kiferbaum, the owner of Kiferbaum Construction, to her hospital office to talk about the project. FBI agents had wired her and were listening in from a nearby van. After just a few minutes of discussion, they called her on her private line and said, "It's extortion! Get them out!"

And so began Davis' eight-month surveillance that would gather evidence to convict Hurtgen, Kiferbaum, and others, and help begin U.S. Attorney Patrick Fitzgerald's Operation Board Games, which would lead him through a "pay to play" scheme all the way to the governor's office. Blagojevich's trial is slated for June 2010.

The ACFE presented the 2009 Cliff Robertson Sentinel Award to Davis at the 20th Annual Fraud Conference & Exhibition for her courage and tenacity in pursuing crooked state officials. The inscription on the award reads, "For choosing truth over self."

What kept you from agreeing to any kind of deal with the administrators of the Illinois Health Facilities Planning Board and Kiferbaum Construction Inc.? 

As the president and CEO of a not-for-profit organization that provides health-care services to a population of more than a half million people, it is my responsibility to ethically and appropriately manage the resources to fulfill the mission of providing health-care services to the individuals in our service area. So I will not, and cannot, compromise the trust placed in me by our board of trustees to honestly and ethically fulfill my responsibilities as CEO. My ethical standards did not allow me to consider making a deal with the Illinois Health Facilities Planning Board or any individual involved in the extortion attempt on Edward Hospital.

I read that the FBI agents first thought you were a crank. When did they realize you were most definitely not? 

The FBI agents, after listening to an initial meeting in my office with Nicholas Hurtgen and Jakob Kiferbaum, acknowledged that my instincts were probably correct, and they became exceedingly interested in gaining more information to determine the extent of corruption.

What advice did the FBI agents give you during the surveillance? Did the agents counsel you on how to converse with the suspects? How did you hand off the tapes to the agents? Did they continue coaching you through the process? 

The FBI gave me broad latitude to converse with many of the subjects under review. Following each meeting, I handed off the tape to the FBI agents in a variety of locations including their home office, restaurants, Marshall Field's department store, and my office. I was, and am, exceedingly angry toward the corrupt businessmen. However, after spending time with them in a variety of settings and hearing about their families, I began to develop a sense of deep sadness about the impact of their corrupt behaviors on their spouses and children.

Maintaining secrecy during my undercover work required isolating myself from conversations with staff. I would walk away from encounters with innocent people who inadvertently were being recorded due to my work with the FBI. I was required by law not to discuss this case with anyone unless I received a court order to do so. Ultimately, I was able to share my situation with the chairman of the hospital's board of trustees, who was extremely supportive.

During your May 5 testimony to the Illinois General Assembly's Joint Committee on Government Reform, you said that "pay to play" schemes have been targeted at hospitals because the "temptation for corruption is huge." How should the Illinois system be overhauled? Are other hospitals nationwide put in these untenable positions? Should the federal government step in? 

I believe that planning for health-care services is best left to health economists and health planners. The Illinois legislature recently passed a law that reforms the Illinois Certificate of Need [CON] program. However, even with the changes recently passed, the CON process is still broken because it essentially protects the status quo as opposed to allowing the health-care services to respond to normal market conditions. There have been numerous reviews of the economic impact of CON and, to date, there have been no documented savings in health-care costs that are attributable to the CON process.

What were some amusing moments of your surveillance for the FBI? 

The FBI agents told me they had never eaten better in their lives at the restaurants I was taking them to for surveillance! Unfortunately, sometimes I received some unwanted advances. One man, trying pick me up at one restaurant, asked if I was alone, although there were more than 20 agents in the room at the restaurant who would be listening to every word he said!

When and what caused you to stop surveillance work for the FBI? 

I abruptly stopped working undercover with the FBI when my story was leaked to the Chicago Sun Times. I still don't know to this day who or how that information was leaked, but it immediately stopped my working communication with the FBI. I did not have any meaningful additional interaction with the FBI again until I reviewed my recorded tapes in preparation for the trial of Nicholas Hurtgen with Bear Stearns. Ultimately, he pleaded guilty and I was not required to testify at his trial.

Before you were involved in the FBI surveillance, did you have any inkling that such corruption existed in the Illinois hospital construction approval process? 

I had been aware of the widespread corruption in Chicago. I have never personally been involved in corruption and was shocked and appalled at the arrogance of the "bad guys" and the arrogance of the demands made upon me. I was also shocked that other executives had experienced these illegal approaches but either agreed to the extortion schemes or said no, but failed to report it to the appropriate authorities. I firmly believe that all of us, as responsible citizens, must take a stand against corruption or we will lose the very freedoms that make America a strong and wonderful country.

Have you ever received approval to expand Edward Hospital into Plainfield, Ill., which was the project request that first started all this?  

As of today, Edward Hospital has received approval to develop many outpatient services at our Plainfield location. We currently have a medical office building and an immediate care center, which has been converted into a 24-hour emergency room. Construction is underway on a major cancer center on this site, and we also run an outpatient surgery center. The proposal for inpatient hospital beds still has not been approved, but we continue to submit Certificate of Need applications to complete our development of health-care services for the ever-expanding population of Plainfield.

How do you feel about your role in getting the ball rolling that led to Fitzgerald's Operation Board Games and the exposure of Illinois political corruption? What are your thoughts now that the investigation has led to alleged crimes in the highest elected office in Illinois? 

I feel a sense of pride in my work with the FBI and the U.S. Attorney's Office. I have developed a deep respect for the consistent and excellent work provided by these individuals. As for myself, I had faced stress before, but nothing on this scale. I really had two jobs at the same time - the president and CEO of Edward Hospital, and working covertly for the FBI.

When working with unethical people, it definitely takes a toll on your outlook of the world. I began to be paranoid and began to distrust individuals and large businesses. I became concerned about the safety of my family, and I had to distance myself from the people I worked with because I didn't want to tape any conversations inadvertently of innocent people who had routinely talked with me both on a personal and professional level.

I have since recovered my sense of equilibrium and positive outlook. I once again do believe that most people are, in fact, good and trustworthy. Individuals sometimes fail to recognize that each and every one of us can make a difference in how we live our lives and the impact we have on others. Because of the way most people live their lives in quiet anonymity, it becomes easier to simply turn away from taking a stand against evil. But with increasing awareness of unethical behavior and the concomitant negative impact on business, many people are now willing to do the right thing. I am confident that justice will prevail in spite of marginal players.

What prevents other people in your position from having the gumption to blow the whistle on fraudsters? 

The individuals who tried to extort Edward had vast experience and many years of extorting many other individuals and companies. Why no one stood up and exposed them, why others went along with their schemes, why many simply said no, but didn't report them - I don't know. As I shared with the attendees of the ACFE Annual Fraud Conference, I do believe that a well-known quote by Edmond Burke sums it up for me: "All that is necessary for the triumph of evil is that good men do nothing."

What advice would you give would-be sentinels?  

Every individual citizen can make a difference in the way our society works. I believe that individuals have a responsibility to behave in an ethical manner and then, more importantly, only through individual action so we can protect the freedoms that we so cherish in America. I believe the rewards of doing the right thing more than offset the perils of being a whistle-blower. In the end, the satisfaction of having done the right thing far outweighs the short-term stress of working undercover.

Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE, began the association in 1988 to train fraud examiners to not just investigate fraud but to help deter it. You're not a fraud examiner, but you've demonstrated many characteristics of one. Can you give our members some encouragement as they persevere in uncovering fraud and amassing evidence? 

I am a firm believer that most people are, in fact, good both in personal relationships as well as in the business area. I also believe that due to many high-profile indictments in Illinois, that we are looking at a future that will not tolerate continued corruption in our government and business. I am optimistic that there are many, many people who are willing to stand up and be herd and who will, through our voting process, ensure that future leaders are ethical.

How has the experience helped you as a manager?  

I believe each leader and manger has a responsibility to perform in an ethical fashion and establish processes within their institutions that reinforce ethical business practices. I have had the good fortune of working with many talented and ethical employees and leaders. Through our interactions, we reinforce and remind each other of the requirements to perform in an ethical manner. In fact, I believe corporations actually succeed financially is they are run in a moral and ethical fashion.

Dick Carozza is editor-in-chief of Fraud Magazine. 


Hospital System Grows Under Davis' Leadership  

Pamela Meyer Davis serves as president and chief executive officer of Edward Health Services Corporation (EHSC), of Naperville, Ill., and is a member of the governing body of each wholly owned entity in the EHSC System.

Previously, she served for 11 years in senior administrative positions, including chief operating officer, with Christ Hospital and Medical Center in Oak Lawn, Ill. She also served for two years as assistant administrator of Lutheran General Hospital in Park Ridge, Ill.

EHSC is a full-service, regional health-care provider offering access to complex medical specialties and innovative programming. Edward Hospital has 317 private patient rooms and offers more than 60 medical surgical specialties and subspecialties. In 2008, Crain's Chicago Business ranked Edward as the ninth largest "Chicagoland" hospital. It is the largest employer in Naperville and the busiest hospital in DuPage County for inpatient discharges, births and emergency visits, according to the Metropolitan Healthcare Council.

Davis holds a bachelor of arts degree in economics and social studies and a master of arts degree in hospital and health services administration from the University of Iowa in Iowa City. She's a Fellow of the American College of Healthcare Executives, has served on the DuPage Community Clinic Board of Directors, and was a 1990 Fellow in the Leadership of Greater Chicago Program.

Davis also served on the editorial board of Frontiers of Health Service Management and was board chairman of the Gift of Hope organ and tissue donor network representing Illinois hospitals. She is also a founding member for the Benedictine College - Center for Values Driven Leadership and one of the founders of the Naperville Community Bank.

She received the Anti-Defamation League's 2003 Maimonides Health Care Leadership Award honoring individuals in the medical community whose leadership and character are demonstrated in both word and deed.

Davis was named the Daily Herald 2005 Naperville Person of the Year. In 2008 she received the AAUW (American Association of University Women) Woman of the Year Award, the prestigious CAPS Public Service Award for exceptional service to the community "for her courage and integrity in taking a personal stand against public corruption," and an honorary doctor of humane letters degree from North Central College.

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