Borough sues for Rea severance package
The City and Borough of Wrangell filed suit in First District Court on July 11 seeking to have an amendment to the employment contract of former Wrangell Medical Center CEO Noel Rea voided, and to order that Rea return a six-figure severance check paid to him after his termination by the board on June 20.
According to court documents, that severance check, in the amount of $520,788.58, was paid to Rea via a wire transfer on June 21 – one day after the board voted 6-1 to fire him without cause.
The suit, which names Rea, along with recalled board members Mark Robinson, Sylvia Ettefagh, Linda Bjorge, Lurine McGee, Jim Nelson and LeAnn Rinehart, is asking the court to direct the former hospital chief to return the severance payment – and to declare that if Rea fails to return the payout, the recalled board members named in the suit are liable to the borough for the full amount paid to Rea.
According to borough attorney Bob Blasco, the portion of the suit asking to have the second amendment to Rea’s contract declared void is based upon what he believes were illegal acts by the board.
“The action of the six recalled board member defendants approving the second amendment exceeded their authority as elected officials under the Borough charter and Borough code, and thus, constituted an ultra vires act,” Blasco stated in the filing.
An ultra vires act is, legally, any action taken by an entity that is beyond the power or scope of their authority. Acts deemed to be ultra vires are considered to be invalid and revocable.
Blasco also added that because the borough believes the actions of the board were illegal – and intended to benefit Rea financially – the borough is entitled to a complete refund of the severance check.
Ettefagh said she believes the suit has no merit and is politically motivated.
“Basically, I think this is a frivolous lawsuit,” she said. “I think there has been friction between the city and hospital board since our last mayoral election and that this is the culmination of two years of a p—-ing contest between the current mayor and the hospital.”
Mayor Maxand, for his part, said the suit was filed to protect the interest of Wrangellites.
“The court filing should speak for itself,” Maxand said. “The assembly takes very seriously its responsibility to protect the public’s interests. Making this filing, to recover these funds, is a step in that direction.”
Ettefagh added that she believes she took her membership on the WMC board seriously – and that her action in voting to fire Rea was in the best interest of the borough.
“I took the actions that I took very seriously and was thinking about the long-term effect on the city,” Ettefagh added. “Despite being recalled, and despite all the garbage that the Borough Assembly has thrown at the WMC board, I continued to commit myself to the oath that I took to protect the city.”
The suit also alleges that board president Mark Robinson directed interim hospital CEO Olinda White to make an “immediate” payment to Rea after the adjournment of their June 20 meeting. That move, Blasco states in the suit, was illegal based upon language in Rea’s contract.
“The six recalled board member defendants knew or should have known that their action directing immediate payment to (Rea) was contrary to the provisions of the (contract) which provided ‘the first payment will be made on the 60th day after the date of termination,’” the document states.
Rea’s acceptance of the wire transfer by White has also been called into question in the filing by the borough.
“Defendant Rea knew or should have known acceptance of the immediate wire transfer constituted an illegal private gift of public funds,” Blasco stated. “Rea knew or should have known that his illegal action would have a severe financial impact on the WMC, and that he intended to affect that severe adverse financial impact by his actions.”
The complaint also added that when White tried to protest making the payout, board members told her that they were her supervisors and that she needed to comply.
Rea, White and Robinson would not comment on this story.
Rea’s contract also included an Evergreen clause and Golden Parachute clause. Blasco stated those sections constituted an illegal private gift of public funds, which is illegal under the Alaska constitution.
Evergreen clauses are a contract provision that automatically renews the length of the agreement after a predetermined period, unless a person is terminated. Rea’s Evergreen provision allowed for his contract to be renewed automatically every year based upon his performance. The Golden Parachute section of his contract called for, among other entitlements, paying a total salary of $185,169.27 owed during the first 12 months of his five-year contract, less any amounts already received, and payment of 100 percent of premiums for coverage under his WMC group health plan for a 5-year period.
Of all the claims filed against the seven defendants, the most serious is a conspiracy allegation relating to payment of the severance package.
The complaint states that the board conspired to, in Blasco’s words, “enrich” Rea by approving the second amendment to his contract after knowing they would be subject to the June 19 recall election, and by holding a meeting the day after eight members were recalled – where Blasco believes they had planned ahead of time on firing Rea without cause.
The conspiracy allegation also states that the board communicated amongst themselves and with Rea prior to their June 20 meeting, “for the sole purpose of putting into effect the severance payments to Rea of approximately $1,000,000 of public funds.”
The allegation also states that the board acted illegally by not noticing the possible firing of Rea on their meeting agenda, and that they planned in advance to make the immediate severance payment, both of which could be considered a violation of Alaska’s Open Meetings Act.
Rea and the six recalled board members have 20 days from the date they receive their summons in the case to respond to the borough’s allegations.