The chairman of the Westchester County Board of Legislators said the county should recoup all the money won in damages if it decides to engage in a lawsuit with KPMG Peat Marwick, the former auditor of the Westchester Medical Center.
Legislative Chairman William Ryan said last week the board would argue that any potential money awarded should go to the county and not the med center, since county taxpayers have subsidized the hospital for the last several years.
“If there are damages, if the med center was damaged by the negligence of the accounting firm, we would say that it was taxpayer money that was advanced to the med center to keep its doors open and that the money should be returned and re-credited to the taxpayers of the county,” Ryan said in an interview last week.
Earlier this month, members of the board”™s Committee of the Whole met with attorneys from the firm Nixon Peabody L.L.P. to discuss the possibility of bringing a lawsuit against KPMG.
County Executive Andrew Spano has already stated his desire to bring a malpractice suit against the firm and needs the Board of Legislators to approve it.
Nixon Peabody attorney Frank Penski told legislators at the meeting that the basis of the lawsuit would be KPMG”™s failure to report “reportable conditions” in its annual audits to the hospital.
Under the terms of the hospital’s spinoff from the county in 1998, the hospital had to pass such notices on to the county.
During the meting, Deputy County Executive Larry Schwartz said the accounting firm did not identify “reportable conditions” or serious red flags about the hospital”™s accounting systems until 2004.
He said the same accounting systems were in place in 1998 when KPMG began its audit of the center.
However, Ryan said afterward the board wants to make absolutely sure there is a solid case against KPMG before moving forward.
“We have quite a few questions dealing with a wide variety of issues,” he said. “We”™re not interested in spending more taxpayer money only to find that the case is thrown out. Also, no one at this point can guarantee what the award would be.”
To that end, Ryan said the board would meet with its own counsel “that specializes in this type of litigation” before deciding whether to proceed.
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“We want to be clear what the likelihood is of the success of this suit should we proceed ahead with it,” he said.
As of press time last week, Ryan said the board was leaning toward making a decision by sometime this week.
Spano has said he hopes to recoup $50 million to $200 million in the lawsuit.
Gov. George E. Pataki signed a bill in August 2006 that authorized the medical center to receive $75 million of additional Medicaid reimbursements over a three-year span by reclassifying itself as an urban hospital.
Westchester County also has partially subsidized the medical center for the past several years and will give about $15 million to the center in this year”™s budget.
The county guarantees about $250 million of the hospital”™s debt.
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