Carle tax trial, Day 3: CEO finishes second day of testimony; more planned

Carle tax trial, Day 3: CEO finishes second day of testimony; more planned

URBANA — The top executive of the Carle Foundation, Dr. James Leonard, faces a third day of testifying Monday, when a trial is set to continue in a lawsuit Carle filed against state and local taxing authorities.

Leonard — Carle's CEO and the first witness called — was questioned half of Thursday and all day Friday. For most of Friday, government lawyers questioned him about internal and public documents related to Carle's charity care, its growth plans, the relationship between the former for-profit Carle Clinic and nonprofit Carle Foundation and the 2010 purchase of the clinic by the foundation for $250 million.

Some of the documents were more than a decade old, covering the years on which the lawsuit is focused, 2004 to 2011, when four of Carle's properties in Urbana were assessed for property taxes over Carle's objections — prompting the lawsuit filed in 2007.

Leonard recalled favoring the 2010 acquisition of the clinic by the foundation, saying he believed it would result in shared goals and uses of resources versus competing interests.

A prior merger effort between the hospital and clinic in the late 1990s was unsuccessful, partly because the clinic physicians were concerned about their roles in the merged organization, he said.

Asked how the eventual acquisition has worked out, Leonard said, "better than I would have hoped for."

David Buysse, deputy chief of the public policy division of the state attorney general's office, and county Assistant State's Attorney Joel Fletcher led Leonard through years worth of Carle's annual Community Benefit reports, which include the amounts of free and discounted care that financially eligible patients receive, along with some of Carle'sannual tax returns and changing policies for charity care.

While Carle didn't limit charity care through its annual budgets, and income limits for its charity care were broadened over the years, a 2006 Carle strategic planning document setting goals for 2012 made reference to a goal for charity care of 3 percent of Carle Foundation Hospital's gross patient revenues.

Leonard didn't have answers to questions about why several annual Community Benefit reports didn't reflect Medicare and Medicaid payment shortfalls — which are costs for patient care that Medicaid and Medicare don't reimburse — for the hospital, while growing amounts of those shortfalls were reflected under non-hospital Carle Foundation services.

Leonard was also questioned about 72 Carle Foundation jobs eliminated in 2008, a wage freeze that went into effect for Carle Foundation Hospital employees the following year and his own salary that rose from $968,626 for the fiscal period of July 1, 2008, to June 30, 2009, to $1,141,164 the following year.

Asked by Fletcher if the former Carle Clinic stopped accepting Medicare patients at some point, Leonard said he didn't recall.

Carle is seeking, in addition to a judgment restoring its charitable tax exemptions for 2004-11 on the four Urbana properties, refunds from seven taxing districts in Champaign County on taxes it paid under protest for the disputed years — plus interest.

The lawsuit also includes a breach of contract accusation against Urbana and Cunningham Township related to a 2002 settlement agreement in which Carle paid local taxing districts money in exchange for them not challenging Carle's property tax exemptions for the length of the agreement.

Next up on the witness list following Leonard will be Robert Tonkinson, Carle's former chief financial officer.