Short of hospital nurses in recent years, St. John's Health Center in Santa Monica hired a recruiter in England and flew one of its top executives to London to interview job candidates.
The recruiter's firm, Stateside Nursing, found 105 nurses and the hospital paid the company nearly $700,000 in recruiting fees and for providing "acculturation services" to help the foreigners adjust to life in Southern California.
Despite all those payments, none of the nurses ever arrived in Santa Monica.
Now the hospital is pursuing a court fight over this costly failure, saying it was the victim of fraud, bribery and unfair business practices. But the legal battle may also yield unflattering details about the inner workings of one of the area's best-known hospitals, which recently saw a high-profile management shake-up.
In the case headed to trial next month, St. John's accuses the recruiter, Lisa Taylor, of paying about $128,000 in bribes to Victor Melendez, the hospital's former vice president of human resources. The hospital is suing the pair in Los Angeles County Superior Court.
Both Melendez, through his lawyer, and Taylor deny the allegations, and they say the payments to Melendez were not bribes. He was paid for previous recruiting work unrelated to the hospital contracts, they said. Taylor says changes in U.S. immigration rules prevented the nurses from coming to work.
There's no indication that this nurse-recruitment saga prompted the recent dismissals of St. John's former chief executive, Lou Lazatin, and her chief operating officer, Eleanor Ramirez, by the hospital's owner, the Sisters of Charity of Leavenworth Health System in Denver. In November, the Catholic nonprofit escorted Lazatin and Ramirez off the hospital premises one morning and fired 15 of the hospital's 17 board members by email.
Taylor wants the two former executives to testify in this case and explain their departure. "We want to know why they aren't there anymore," she said. "It goes to their credibility." Neither Lazatin nor Ramirez could be reached for comment.
Michael Slubowski, chief executive of the Sisters of Charity, has declined to comment on the specific reasons for the St. John's dismissals, and he said the hospital "doesn't publicly discuss legal matters."
There have been discussions in recent months about selling the 266-bed hospital, which has tended to celebrities and politicians over the years. St. John's reported a loss of $13 million for 2011, the latest state data show, and patient revenue slipped 8% to $891 million.
The nursing shortage at St. John's was a common problem for many hospitals across California.
In 2006, Melendez, the hospital's newly hired human resources executive, set out to remedy that problem. He recommended three recruiting firms to the hospital, including Taylor's Stateside Nursing, according to his lawyer, Vincent S. Ammirato. In a contract that year, St. John's agreed to pay Stateside an $8,000 recruitment fee for each nurse it found.
The hospital sent Melendez to London, where he and Taylor interviewed dozens of nurses and 52 of them accepted job offers, according to the hospital's lawsuit. Stateside billed Saint John's for about $200,000 in initial fees.
Stateside then offered to provide "acculturation services" for the 52 nurses at $2,000 per nurse to help them acclimate to life in the U.S. because many were originally from the Philippines, India and other countries. In court filings, the hospital contends that Melendez didn't have the authority to approve those additional expenses because they weren't included in the contract. Rather, the hospital said, those payments were just a way for Taylor to pocket extra money for the alleged bribes.
By August 2007, even though no nurses had arrived, St. John's agreed to pay Stateside even more. The hospital boosted Stateside's recruitment fee to $13,000 per nurse from $8,000 earlier.
The hospital says Melendez wasn't authorized to sign the new contract. Ammirato, Melendez's lawyer, said that his client did not act alone and that Melendez's boss, the former chief operating officer, was involved in negotiating Stateside's agreements and approving its invoices.
In mid-2007, Melendez left St. John's for another job, so the hospital sent other human resource officials to London to interview nurses. Stateside found 53 more nurses and it billed for additional fees. Overall, according to court documents, the hospital paid Stateside $669,550 in upfront fees in 2007 and 2008.
St. John's said it became suspicious later in 2008 when Stateside's director of sales sent a letter to the hospital alleging that the recruitment firm was overcharging St. John's and paying bribes to Melendez. Based on this tip, St. John's sought to recoup its money and subpoenaed Melendez's bank records.
Stateside wired Melendez $51,843 in February 2007 and sent him an additional $51,943 the next month, according to the hospital's lawsuit. Those wire transfers took place shortly after Melendez authorized two payments of $52,000 apiece to Stateside. Later in 2007, Taylor wrote him another check, for $25,000. Taylor and Melendez don't dispute those payments.
In October 2010, an arbitrator found that Stateside engaged in "unlawful and fraudulent business practices" by paying Melendez to gain improper advantages in its contracts. The arbitrator awarded the hospital $1 million in damages, interest and legal fees.
Stateside went through liquidation in England, Taylor said, and she couldn't defend herself at the arbitration hearing. The hospital hasn't collected any portion of the arbitration award since her company shut down.
Taylor said she had satisfied her obligations by finding the nurses and getting them licensed to work at St. John's. The U.S. had adopted a policy in 2006 that made it more difficult for some foreign nurses to obtain work visas. St. John's said in its suit that Taylor misrepresented that she could handle those immigration issues.
"We got the nurses as far as we could get them when the U.S. government ran out of visa numbers," said Taylor, 47, who now lives in Colorado. "I'm looking forward to telling my story at trial."
chad.terhune@latimes.com
St. John's in court fight over failed nurse recruitment effort
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