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New Revelations | Tahoe Forest Hospital Report

Research raises serious conflict of interest concerns for Tahoe Forest Hospital CEO
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A TIMELINE: The Schappers and Tahoe Forest Hospital

• 2001: In a Chapter 7 bankruptcy filed in 2000 and discharged in 2001, Bob and Marsha Schapper claim Medical Practice Solutions, Inc. as joint property. Marsha Schapper is listed at the company’s president and secretary. Bob Schapper is listed as vice president and treasurer.

• 2002: Bob Schapper is hired as CEO of Tahoe Forest Hospital.

• 2003: In a statement of information document filed with the California Secretary of State’s office on July 28, Marsha Schapper is listed as CEO of Medical Practice Solutions and Bob Schapper is listed as Chief Financial Officer.

• 2004: Tahoe Forest Hospital District contracts with Medical Practice Solutions, paying the company $18,562.50 during six months of billing beginning Feb. 1, 2004.

• 2004-2010: Medical Practice Solutions’ billing more than triples from $56,984.98 in 2004 (the first full year the company was contracted) to $179,817.56 in 2010 (the last full year the company was contracted).

• 2010: Marsha Schapper is hired as an employee of Tahoe Forest Hospital on Oct. 1. She assumes the role of executive director of multi-specialty clinics at a yearly salary of $155,481 (plus a potential bonus of up to 6 percent).

• 2012: Bob Schapper’s salary increases to $404,227 per year and includes a potential 15 percent bonus. At this point the Schappers were earning $629,000 each year from the public hospital district when full bonuses were awarded.

• 2014: Marsha Schapper’s salary increases to $170,144. On May 14, her employment is terminated in what the hospital calls a “consolidation of management of all clinics.”

Editors’ Note: The Tahoe Forest Hospital District Board of Directors held a special board meeting on Friday, July 11, where they held a closed session on the performance of CEO Bob Schapper. During open session, the board noted that it had been investigating the possible conflict of interest between Schapper, his wife Marsha Schapper, and Medical Practice Solutions for the past couple of months and that the investigation is ongoing. The board also said it would respond publicly to Moonshine Ink’s most recent reports on the hospital in the publication’s next issue.

For the last decade, Tahoe Forest Hospital, a public, taxpayer-funded special district, has contracted with and employed Marsha Schapper, the wife of the hospital’s CEO. But new information now ties Tahoe Forest Hospital CEO Bob Schapper directly to the company headed by his wife that contracted with Tahoe Forest Hospital for more than seven years at a total price tag of $915,000.

A Moonshine Ink review of the paper trail of Marsha Schapper’s company, Medical Practice Solutions, Inc., shows that Tahoe Forest Hospital CEO Bob Schapper was listed as the company’s chief financial officer in both 2003 and 2013, and claimed to be joint owner of the company in 2000. At the time of publication of this article, at least one hospital district board member said he did not know of Bob Schapper’s direct ties to Medical Practice Solutions.

Bob Schapper’s role as the CEO of a taxpayer-funded hospital district while serving as an officer of a company that contracted with Tahoe Forest Hospital for nearly $1 million raises serious conflict of interest concerns for the hospital.

A stringent California statute known as government code 1090 prohibits California special district employees from having any influence over a contract in which they have financial interests. Violations of the code carry severe punishments, with the stiffest consequences involving a felony conviction, a voiding of the contract that was created in violation of the state statute, and a lifetime ban from ever holding a public position in the state again.

California Government Code 1090 states that “members of the legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.”

In previous reporting on the hiring of Marsha Schapper at Tahoe Forest Hospital, Bob Schapper and hospital district officials have said Bob Schapper did not draft, approve, or negotiate the contract with his wife and that she reported directly to Chief Financial Officer Crystal Betts, who reports to Bob Schapper. But those statements were made before the full extent of Bob Schapper’s involvement with Medical Practice Solutions was uncovered. Bob Schapper did not respond to requests to comment for this article.

Even the purported distance between Bob Schapper and his wife’s contract and oversight may not be enough to shield him from the consequences of code 1090.

As Grover Trask, a former district attorney and current ethics lawyer, wrote on “As one court stated: ‘However devious and winding the chain may be which connects the officer with the forbidden contract, if it can be followed and the connection made, the contract is void.’”

A section of California code 1091 does give an exception for a public official with a “remote interest” but it stipulates that “the employee or agent is not in a primary management capacity with the contracting party, is not an officer or director of the contracting party, and holds no ownership interest in the contracting party.” Records uncovered by Moonshine Ink make strong management, officer, and ownership connections between Bob Schapper and Medical Practice Solutions.

The employment contract Marsha Schapper had with Tahoe Forest Hospital is questionable after reading codes 1090 and 1091. In October 2010, she became a full-time employee of the district as the executive director of multi-specialty

clinics. The statute calls into question whether Bob Schapper could have avoided a conflict of interest with his wife during the three and a half years she held a director role in a critical department of the hospital system’s operation.

The code governs contract negotiations, and the state lays out a broad definition of contract involvement.

“An official participates in the making of a contract if the official is involved with its preparation at any stage in the process. The contract-making process begins at the time the idea for the contract is conceived and continues through the actual execution of the contract. That means that planning, determining the scope of the contract, drafting plans and specifications, setting contract terms, evaluating applicants, and negotiating are all included,” the California Attorney General’s website says.

A willful violation of government code 1090 can be punished as a felony and can result in a state prison sentence. A violation of the code could also void the contract, meaning that all payments made under the contract may be returned. Government Code 1097 further allows for a civil fine of “three times the value of the financial benefit received by the defendant for each violation,” which could equal nearly $3 million in the case of Marsha Schapper’s Medical Practical Solutions contract with the hospital.

California Government Code 1090 cases are not regularly prosecuted in the region. Nevada County District Attorney Cliff Newell said that he could only find a single code 1090 case that his office has prosecuted during his tenure — a 2003 case where the court ordered the contract to be re-paid. Newell said the district attorney’s office only investigates when a case is referred to them by a citizen or by law enforcement.

Marsha Schapper no longer works at the Tahoe Forest Hospital District. After more than seven years contracting with the hospital and another three and a half years as an employee of the hospital, she was terminated on May 14, 2014.

Schapper was terminated because “the position of executive director [of multi-specialty clinics] has been eliminated to allow consolidation of management of all clinics,” said Ginny Razo, chief operating officer of Tahoe Forest Hospital, in an email to Moonshine Ink.

The Secretary of State Paper Trail

Medical Practice Solutions contracted with Tahoe Forest Hospital beginning on Feb. 1, 2004. The company worked on doctor contracts for the hospital’s outpatient clinics and negotiated with insurance companies over reimbursement.

A statement of information form filed by Medical Practice Solutions with the California Secretary of State’s office lists Bob Schapper as chief financial officer of the company in 2003 and again in 2013. The filing shows that Medical Practice Solutions claimed Bob Schapper as an officer at the same time he was managing the public special district hospital.

Curiously, Medical Practice Solutions did not file a statement of information form between 2004 and 2012, in violation of California filing requirements. The gap in filing coincides precisely with the time the company contracted with Tahoe Forest Hospital. Businesses are required to file the form with the state either every year or every two years, depending on the type of business. Failure to file can result in fines and the suspension or forfeiture of the business entity, according to the California Secretary of State’s office.

It is not completely clear what Bob Schapper disclosed about his involvement with Medical Practice Solutions to the board of directors of Tahoe Forest Hospital. A call to long-time hospital district board members Roger Kahn and Larry Long yielded little comment on the matter. Kahn said that he had become familiar with California Government Code 1090, but declined to comment further. Long said the board has retained outside legal counsel to review the California statute, but ended discussion of the topic after that. Long did say that he was unaware that Bob Schapper had held an officer position in Medical Practice Solutions before the company contracted with Tahoe Forest Hospital.

Bankruptcy Filing Sheds Light on Medical Practice Solutions

To understand the questionable contracting between Marsha Schapper and Tahoe Forest Hospital, you have to rewind 14 years to 2000, two years before Bob Schapper came to Tahoe Forest Hospital. Bob Schapper was CEO of Palm Drive Hospital in Sebastopol, a hospital that has subsequently declared bankruptcy and closed its doors. Despite income of $367,000 in 1998, $174,325 in 1999, and $141,808 in the first eight months of 2000, the Schappers appeared to be in deep financial trouble. They had a total of 23 credit cards holding $163,623.16 in debt, as well as a loan to Medical Practice Solutions of $37,108.78. Despite the appearances of a luxurious lifestyle — according to a Chapter 7 bankruptcy filing, the Schappers were driving a nearly-new leased Corvette and GMC Denali, Bob Schapper was wearing a $1,500 Rolex, and Marsha Schapper had a $2,500 mink coat in her closet — their debt was overwhelming them.

The Schappers decided to file Chapter 7 bankruptcy, which allows for the liquidation of non-exempt property and its distribution to creditors in exchange for their debt being wiped clean.  

During the bankruptcy filing, the Schappers divulged some information about the ownership and officers of Medical Practice Solutions, the company that would soon become a contractor of Tahoe Forest Hospital. They claimed the company as “joint property” and listed their positions in the company. Marsha Schapper was listed as president and secretary; Bob Schapper was listed as vice president and treasurer.

The bankruptcy was closed on July 23, 2001, and just over a year later Bob Schapper was awarded the job as Tahoe Forest Hospital’s CEO with a starting salary of $190,000 per year.

By Feb. 1, 2004, the Tahoe Forest Hospital District had agreed to a contract with Medical Practice Solutions. The board of directors meeting minutes from the meeting where the contract was approved shows no discussion on the matter. The contract was part of the meeting’s “consent calendar,” meaning it was approved along with a bundle of other matters by a single vote.

By 2012, Bob Schapper’s salary had more than doubled to $404,227 in base pay and had the potential to earn a 15 percent annual bonus. Together, Bob and Marsha Schapper were earning up to $629,000 a year from the public special district.

Today, Bob Schapper is still listed as the chief financial officer of Medical Practice Solutions even after the company contracted with the taxpayer-funded special district hospital for seven years and nine months at a price tag of $915,283.46.

Other Connections

But the connection between Bob Schapper and his wife Marsha Schapper is not the only ethically questionable contract engaged in by Tahoe Forest Hospital management. A pattern of Tahoe Forest Hospital leadership hiring or overseeing relatives, or sending Tahoe Forest Hospital work to relatives, has developed at the special district.

Moonshine Ink found that Tahoe Forest Hospital’s marketing and communications department, which is headed by Paige Nebeker Thomason, paid Nebeker Thomason’s brother Miles Nebeker in 2011 and 2012 for copywriting and marketing services. In a list of Tahoe Forest Hospital vendors, Miles Nebeker showed up 19 times over the course of less than a year and a half.

Paige Nebeker Thomason said the hospital district never contracted with her brother, who is an award-winning creative director and copywriter, but did use him as a freelancer.

“We use the services of many creative freelancers based on the nature of the project. These are not contracted positions, rather straight time, and are selected based on the needs of the project and the expertise of the freelancer,” said Nebeker Thomason.

Other municipalities have specifically outlawed any involvement in contracts or employment between family members. The City of San Francisco’s code of ethics “prohibits City officers and employees from making, participating in making, or seeking to influence a City decision regarding an employment action involving a relative.”

Along with previous disclosures made in Moonshine Ink that the medical director of the Gene Upshaw Memorial Tahoe Forest Cancer Center, Larry Heifetz, oversees a facility where his wife, radiation oncologist Daphne Palmer, is employed, these issues raise serious ethical concerns about the internal operations of Tahoe Forest Hospital.

~ Jackie Ginley contributed research to this article. This article was funded in part by the Fund for Investigative Journalism.


Reader comments so far...

Cleo's picture

Dear Moonshine Ink, I cannot thank you and Jackie Ginley enough for pursuing this important topic. With Tahoe Forest Hospital being the number one employer in the region, and our only resource for local medical care; (even though it is one of the most costly in the country) it is imperative our community be aware of how OUR dollars are being managed. The Board of Directors has looked the other way when it came to the Schappers for many many years and hopefully public outcry will demand Bob's ouster - as nothing less than a complete restructuring of business and rebuilding a culture of trust (which Bob Schapper has destroyed internally) can possibly return this rural hospital to its historic past which focused on incredible care by its medial and support staff. Instead Bob Schapper has treated this vital community resource like his own personal dynasty while we, as a community, have paid for it along the way. Enough is enough - bravo and thank you again!

Hankskool | Tahoe City
No, TFH is not the largest employer in the area, though it's own metastasis mirrors exactly that of the regions real largest employer , the entirely publicly funded and privately profiting road construction and greenwashing industries. All seem to operate this day with complete disregard for the people who actually live in this region. Thanks to the Crony Capitalists running these industries a once entirely beautiful region has been transformed permanently into one gigantic industrial park. KEEP TAHOE ORANGE!

Red Dog Red | Truckee
Once again, Moonshine Ink shows that when it comes to investigative journalism, it's the only game in town! Kudos to David Bunker for this revealing and disturbing article. The relationship between Mr. Schapper, the Tahoe Forest Hospital Board of Directors and the Schapper family business seems to point, inevitably, to at least one of several conclusions: 1. Mr. Schapper is an amazingly convincing (and perhaps dishonest) person who persuaded a naive Board that hiring his company to provide contracted services for the hospital that he oversees was legal and ethically appropriate. 2. The Directors of Tahoe Forest Hospital may be woefully unprepared to understand and discharge their legal and fiduciary duties as representatives of the community. 3. Other members of the TFH executive staff were equally ignorant or dismissive of their responsibilities to the Board and the public in allowing this unethical and possibly illegal contractual relationship to be established and continued. 4. The Hospital District counsel must have been completely unaware of the lengthy and lucrative agreement between the Hospital District and the Schapper family business. The District's counsel must have been unaware of the mandatory information filing with the Secretary of State disclosing the legal ownership of the Schapper family business. The District's counsel evidently believed that having Mrs. Schapper - as the contractor - report to one of Mr. Schapper's subordinates would somehow avoid the obvious appearance of impropriety and possibly illegal conflict of interest. Seriously. 5. Mr. Schapper was forbidden by law from taking part in or influencing any discussion regarding the contract with his family business, so where did the idea to hire Medical Practice Solutions originate? Did some other member of the TFH executive staff do a web search and come up with - ta daaa! - the name of the company as a potential vendor? Seriously? Sadly, this appears like the worst kind of small town, 'good ol' boy' cronyism. It is so out of keeping with our little town and the values that the people here embrace and exemplify. This situation is a devastating indictment of the leadership, management and moral compass of both Mr. Schapper and the TFH Board of Directors. It is not, however, a stain on the good name of the TFH staff, who have always managed to do a superlative job in spite of the climate of fear that pervades the organization. Fortunately, there is tremendous professionalism, compassion and competence still in evidence at Tahoe Forest Hospital, even if it can't be found in the executive offices or boardroom.

bob | Truckee
Thank you Dave Bunker for pursuing information regarding this story. Excellent reporting and should get the attention of our Teuckee Citizens. The hospital costs are completely out of line. Thank goodness that patients are shopping around. An MRI in Reno is 1/3 the cost of one at the hospital. Your last story regarding the Bob Schapper compensation plan in comparison to programs at other hospitals should have been enough in itself. Medicine is big business and our hospital seems to be no different. It seems our citizens may have been mislead to tax themselves for the betterment of some of the hospitL management.

tcmiguel | Tahoe City
Add James Hood, COO Tahoe Institute for Rural Health Research and his wife, Kari Hood who works for the Tahoe Forest Hospital Foundation to the list of relatives connected to the TFHS.

Thank you for the excellent article on Mr. and Mrs. Schapper and Tahoe Forest Hospital. This was very informative investigative reporting. I have heard from employees at TFH that there are some serious problems with the way the hospital is run but for fear of their jobs can not come forward with this information. This article does an excellent job of bringing this situation to light. Hopefully, this is just the beginning of the investigation into this situation.

Mouse | truckee
I too, have heard stories from the fine people who are the daily care givers at TFH. The environment is loaded with fear of the administration and shabby treatment of the staff. Mr. Schapper apparently has created the environment "my way or the highway".....Employees are not going to speak out. They cannot afford to lose their jobs.

TTM | Truckee
Thank you Moonshine Ink. What governmental agency is responsible for investigating this type of conflict of interest at a special district? Would Nevada County District Attorney Office be responsible for filing charges? We have a great community, but must guard against cronyism and abuses of power that can so easily crop up where there are only few employers offering middle class jobs.

North Shore
As a former employee of the Hospital, the instances of nepotism mentioned in the excellent article are but the tip of the iceberg. Nepotism is absolutely Rampant at this institution. I was personally at staff meetings with the Tyrant Marsha Schapper who ruled the clinics with an iron fist. Marsha and her shadow CFO Crystal Betts were besides themselves if anyone in the billing/coding departments ever questioned the amounts of time (MONEY) that the physicians were charging the Insurance Companies. I wonder if CFO Crystal Betts sister-in-law is still working in the coding department (the people there determine how much money the physicians charge the Insurance Companies. The Moonshine should take a look at the Hospitals Billing Department at the bottom of Tahoe Donner (Total Downer to the locals). This is where Marsha Schapper and Crystal Betts spent most of their time during my tenure at the Hospital. And they were not there to socialize.

TruckeeCS | Truckee
Well, this upcoming Tuesday the 22nd is the monthly open to the public board of directors meeting at the hospital. I urge those concerned to be in attendance: Also, the special meeting board minutes have been posted. The minutes have have been completely omitted - not even a single sentence to be redacted. It seems that there was also a similar meeting on June 24. The board is keeping this as quiet as possible and the community must demand transparency. My fear is that these meetings are being used as a negotiation for relieving Mr. Schapper of his duties with some kind of severance. I feel that Mr. Schapper and his wife have bilked the community of enough money and we cannot allow this to happen. I've always brushed off the complaints surrounding the hospital and its spending as simply coming from anti-tax citizens. This article has convinced me otherwise. Kudos to Moonshine Ink for incredible reporting - something that other news outlets in the area have yet to mention.


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September 12, 2014