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The $1.9-million went to a for-profit company owned by the nonprofit hospice, the director says.
By WILLIAM R. LEVESQUE, Times Staff Writer
© St. Petersburg Times, published February 27, 2003
LARGO -- Hospice of the Florida Suncoast acknowledged Wednesday that at least $1.9-million in charitable donations was funneled to a software company owned by the nonprofit hospice.
Hospice executive director Mary Labyak said the money was a loan to be repaid by the for-profit software company, and that she considered it a proper use of donated money.
"I've met with thousands of donors through the years, and they give money to support the mission of hospice. And they want their money to be used in any way that does that," she said.
Others aren't so sure, including former employee Fluffy Cazalas, who sued Hospice on Tuesday.
"When people give money to hospice, nowhere is it disclosed that some of the money may be going to a software startup with all the attendant risk," said Jonathan Alpert, attorney for Cazalas.
The lawsuit alleges hospice violated a Florida law barring charities from misrepresenting how contributions are spent.
Labyak initially told the St. Petersburg Times on Tuesday that no charitable contributions were diverted to the software company.
Asked about the $1.9-million Wednesday, Labyak acknowledged it came from donations. But because it was a loan to be repaid with interest, she said, it should not be considered a gift.
"It was never just given to them," she said. "We would never take charitable dollars and just give it to this subsidiary."
She compared the money to any overhead cost, like the electric or water bill. Donors don't need to be specifically told because the software produced by the company enhances hospice's overall mission of caring for the terminally ill in Pinellas, Labyak said.
So far, she said, Suncoast Solutions has repaid about $88,000 and should retire the loan in eight years.
Hospice has directed other contributions to the software company since its incorporation in late 1998, Labyak said. But she disputes that the total is $7.6-million, as Alpert's lawsuit says.
She said a large part of that $7.6-million was spent before 1998 to develop software for the hospice in Pinellas.
Records show the $1.9-million loan was first approved on May 30, 2001, by the Hospice Foundation of the Florida Suncoast, hospice's fundraising arm, for "extraordinary cash flow needs." The following day, hospice's board approved the $1.9-million payment to Suncoast Solutions.
Robert Wharrie, a lawyer and board member of the foundation who voted to approve the loan, said he does not recall the meeting or the vote.
But speaking generally, he said, he would not favor charitable contributions' being used to fund any for-profit venture.
"If someone gives a donation to the foundation, it's presumed to be for a charitable service," he said.
It isn't unusual, or improper, for a nonprofit charity like hospice to form a for-profit subsidiary to generate additional revenue, according to the American Institute of Philanthropy in Chicago.
"But there is always a certain risk with a for-profit venture," said Daniel Borochoff, president of the institute. "With that kind of thing, it is better that there be full disclosure to donors."
The suit said Suncoast Solutions is unprofitable, but Labyak says it has been profitable for two years. But hospice's records don't bear that out, Alpert said.
Suncoast Solutions markets software that allows doctors or nurses to track patient information by laptop computer from remote locations.
The subsidiary has sold software to about 100 other hospices, Labyak said, and employs 20 people. Labyak serves as the company's president.
In addition to her hospice salary of about $183,000, Labyak collects a $20,000 salary from Suncoast Solutions.
The lawsuit was filed in Pinellas Circuit Court on behalf of Cazalas, described in the suit as a former employee who also donated money to hospice.