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TRUTH: Lou has known

Gov. Lou Leon Guerrero

By Troy Torres

Benita Manglona is taking the fall for not remitting withholding taxes from Guam Memorial Hospital Authority employees’ payroll the past five years, even though several other people knew and looked the other way. One of them is current hospital administrator Lillian Perez-Posadas, who ironically fired Ms. Manglona from her job as GMH chief financial officer.

Ms. Perez-Posadas, prior to her appointment by Gov. Lou Leon Guerrero as the GMH administrator, was the vice chairman of the GMH Board of Trustees. In a response to Kandit’s inquiries as to her knowledge of the withholding tax debt, Ms. Perez-Posadas wrote, “As a former [Board of Trustees] member, no I was not made aware of the non-payment of withholding taxes.”

Records of GMH board meetings, however, say something different. As late as August 30, 2018, at a meeting attended by Ms. Perez-Posadas, Ms. Manglona clearly did report that, at the time, $4.1 million was owed for income tax withholdings from employees. The entry in the minutes of the meeting under Section D, report of the CFO, reads, “Accounts payables as of July 19, 2018 was $16.9M of which $9.4M were over 90 days outstanding. At risk were payroll payables of $9.4M with $4.1M of that amount owed for income tax withholdings, and $3.1M owed for retirement. Ms. Manglona noted that the hospital continued remitting the employee shares to the retirement fund.”

Ms. Perez-Posadas did acknowledge her awareness of the non-payment of retirement contributions to the Government of Guam Retirement Fund. “What we, the board members, were advised and even served with a legal ‘writ of mandate’ was the failure to pay the employees’ retirement,” she wrote.

The current GMH administrator wasn’t just made aware of the withholding taxes issue last year, though. Public records and reports dating back to 2016 indicate widespread knowledge among public officials of the issue. It’s because former Gov. Eddie Calvo, former GMH administrator PeterJohn Camacho, and Ms. Manglona made no secret of the hospital’s precarious financial situation.

Beginning in 2016, Mr. Calvo convened a Hospital Modernization Task Force. Among its goals was to build the infrastructure to accommodate money-making services at GMH so the hospital could sustain itself without legislative appropriation. The initial investment, as he called it, would come from proposed bond proceeds. A portion of the bonds would pay down GMH’s debt. A portion of that debt was the growing payroll taxes overdue to the Department of Revenue and Taxation.

Former Senator Dennis Rodriguez, who was the legislative health committee chairman, also helped with solutions. He led a task force himself that proposed a new hospital facility, as well as a robust plan for universal health coverage for all residents. A portion of his plan also would have addressed the hospital’s growing debt to vendors, including the payroll taxes. Then-Bank of Guam president Lou Leon Guerrero, among others, was an active member of that task force. She was aware of the problem, as well.

The Calvo and Rodriguez task forces, each developing solutions between 2016 and 2018, had the active involvement and participation of high-level officials, senators, GMH management, and its board, to include Ms. Perez-Posadas.

By 2017, the task force’s findings of critical needs at GMH had produced enough public pressure to light a fire under the rest of the legislature. On July 10, 2017, following extensive consultation with the GMH Board of Trustees, Mr. Calvo sent Bill No. 141 to senators, asking to float a $125 million bond to fund the totality of his plan for GMH, including the payment of taxes.

At the time, GMH was suffering through its second fiscal year of underfunding from the Legislature for its operations, despite repeated warnings from Mr. Calvo himself.

The political reality was two-fold. First, Democratic senators saw GMH as an achilles heel for then-Lt. Gov. Ray Tenorio, who was already mounting his gubernatorial campaign upon the pedestal Mr. Calvo had cemented for him. Second, it was rumored that Mr. Rodriguez, the health committee chairman, would run for governor as well. Senators were dead set against feathering either of their caps. GMH’s financial success would be political achievements for Mr. Tenorio and Mr. Rodriguez. Its continued problems would make it harder for their election.

By November 17, 2017, the financial situation had taken a nose dive, as rumors of a Centers for Medicare and Medicaid Services inspection of GMH were swirling. Mr. Calvo had a hearse parked in front of the Guam Legislature that day to build even more pressure on senators to pass his or any solution to solve GMH’s problems.

Mr. Rodriguez introduced Bill No. 185 to dedicate excess revenues from that fiscal year to GMH operations. Senator Therese Terlaje Introduced Bill No. 225 to use excess hotel occupancy tax collections for GMH. Then-Speaker BJ Cruz introduced Bill No. 260 to raise alcohol taxes and dedicate the funding to GMH. Senators remained apprehensive about floating a bond to fund the critical GMH improvements and its growing accounts payables.

News of a report of deficiencies by CMS came by the start of 2018. Mr. Calvo threw the Legislature into session on Valentine’s Day 2018 to consider a bill that would increase the business privilege tax by 50 percent and dedicate most of that funding to GMH. Senators defeated the measure. On February 28, 2018, he threw them into session again, this time to create a general sales tax that would fund GMH. Senators adjourned before any debate on the bill. So he threw them right back into session with an identical measure. They rejected it.

By March 7, Mr. Calvo took the extraordinary step of calling the Legislature into session to authorize him to furlough employee work hours, essentially ordering a 32-hour workweek for non-essential GovGuam employees through the end of the fiscal year. The savings from the furlough would go to GMH, which was quickly approaching a deadline to submit a financial plan to CMS or risk all Medicaid funding.

That was the wakeup call to senators, but only insofar as they were concerned about the immediate CMS threat - not the overall financial condition of the hospital. That’s when Senator Joe San Agustin introduced the infamous Public Law 34-87, signed into law by the governor on March 16, 2018 as the only compromise the Legislature would make. The concession cost taxpayers increased prices on nearly almost everything on store shelves and every service available. The San Agustin law increased the BPT by 25 percent, with some of the proceeds benefiting GMH, but only for CMS corrections. Senators, by the time they were done decorating the political Christmas tree, had found one pet project after another to plunta from the proceeds of the tax increase.

Ms. Manglona and Mr. Rodriguez led the chorus against the non-prioritization of funding for GMH. In hearing after hearing Ms. Manglona implored senators to provide the funding GMH needed to sustain itself and, at the least, to pay its debts, including the payroll taxes. Senators, hospital officials and its board, to include Ms. Perez-Posadas clearly were aware of the problem. Despite this, on several occasions it was only Ms. Manglona who would endure the scrutiny of senators through the several hearings held on these matters.

Mr. Rodriguez introduced several bills, each geared at solving the GMH and tax refunds funding crisis. One of the measures would have removed the special privileges in the BPT law that exempt banks from paying taxes on actual gross receipts. In a meeting at his office in March 2018, members of the Guam Banking Association, to include Ms. Leon Guerrero’s Bank of Guam, vehemently opposed the measure. Mr. Rodriguez explained to them that GMH needs the funding. None of the members relented and actively lobbied other senators against the bill.

But Ms. Leon Guerrero’s culpability in the GMH financial crisis is mired directly in irony itself. Upon entering office in January 2011, Mr. Calvo was apprised of a $21 million debt GMH owed to the Retirement Fund and to DRT for payroll taxes. The chairwoman of the GMH Board of Trustees at the time? Banker Lou Leon Guerrero. On the morning of February 17, 2011, Mr. Calvo fired Ms. Leon Guerrero and the other members of the board for hiding the major financial discrepancy, among other reasons.

It is a debt and a mess that Ms. Manglona was sent to clean up, when she was transferred from her post as one of the most decorated directors of Administration in Guam history to help the hospital as its CFO. Following her arrival, Ms. Manglona did stabilize finances there. She got the Billings system working better than that of Guam Regional Medical Center, which still struggles with its system. She hired coders and streamlined the business office, while prioritizing funding to the medical staff, medical supplies, and patient care.

Her decision to pay for areas of patient care against the growing payroll tax debt was set against the fiscal reality that the legislature had not provided enough funding to take care of both requirements. And the decision was hardly hers alone. She made these decisions in concert with her Board of Trustees, which Ms. Perez-Posadas was the chairman of. The same Board of Trustees Ms. Leon Guerrero was the chairman of.

The unfortunate irony, is that when Ms. Leon Guerrero and Ms. Perez-Posadas needed someone to take the fall, they chose the person whose contributions have most benefitted the financial affairs of Guam Memorial Hospital.

Ms. Manglona was the director of Administration, when Mr. Calvo solved the tax refunds crisis in 2011 and when the deficit was eliminated for the first time in 20 years in 2012. Earlier this year, Ms. Manglona had achieved the impossible for GMH - the rebasing of TEFRA, which increased the rates GMH could charge to insurance companies and to CMS for the first time since 1997. Ms. Leon Guerrero did not give Ms. Manglona any credit for the achievement, saving the credit instead for herself.

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