Loretto Hospital in Austin on Aug. 18. The Illinois Attorney General is investigating the West Side hospital after reports of insider contracts.(Colin Boyle/Block Club Chicago)

The Illinois Attorney General’s Office is investigating Loretto Hospital after reports by Block Club Chicago and the Better Government Association revealed millions of dollars in insider contracts and raised questions about oversight by the hospital’s board.

A spokesperson for the attorney general declined to provide details of the probe but issued a statement confirming its existence. 

“Our Charitable Trust Bureau requested information about Loretto’s potential misuse of charitable assets,” the spokesperson said in an email response to questions about the inquiry. “As this is an ongoing matter, we cannot provide additional information at this time.”

The probe follows a series of reports by Block Club and the BGA detailing contracts awarded to a former executive’s friend; hospital-funded Caribbean trips and other benefits for board members, including vice chairman state Sen. Kimberly Lightford; and the hospital’s vaccine distribution scandal.

A spokesperson for Loretto did not immediately respond to a request for comment. In the past, the hospital has defended its business practices and said it was finding new ways to generate revenue and provide high-quality health care.

Any findings of wrongdoing by the attorney general could threaten Loretto’s Illinois nonprofit status, although the attorney general’s office would provide no details on the scope of the inquiry.

Judith Sherwin, a Chicago attorney who has represented health care agencies and nonprofits for four decades, said the development represented a blow to Loretto. 

“The situation with Loretto is such a shame,” said Sherwin, who is not connected to the hospital or the probe. “It’s a small hospital in an underserved community taking care of poor people. It’s not an institution you want to see having problems like this, having to respond to an investigation of potential misconduct by the people in charge.”

Scandals Bring Scrutiny

Loretto, a cash-strapped safety-net hospital, changed leadership in 2018, bringing on current President George Miller and installing Dr. Anosh Ahmed as chief financial officer and chief operating officer.

In recent months, it’s come under scrutiny over a series of scandals.

Ahmed resigned from Loretto in March after Block Club reported ineligible people were vaccinated at places with ties to Ahmed — including people at Trump Tower, where Ahmed lives, as well as a luxury jewelry shop and a high-end Gold Coast steakhouse. State Rep. LaShawn Ford resigned from the hospital’s board amid the reports, and Mayor Lori Lightfoot called for an independent investigation into the vaccine misuse.

But questions about the hospital have extended past its vaccines.

Block Club and the BGA reported in April that Ahmed’s friend and business partner, Sameer Suhail, created companies that won contracts worth millions from the hospital. An investigation in May showed Lightford and others accepted perks and payments from the hospital while serving as board members.

Loretto’s board is responsible for overseeing contracts and financial billings to ensure top vendors aren’t overcharging or charging for services that weren’t provided. 

Lightford has been paid by an insurance firm owned by Loretto, which also paid for her to travel to the Caribbean for firm meetings, records show. Loretto paid for those trips, including stays at a luxury hotel, Lightford said. Lightford’s campaign fund also has accepted more than $38,000 in contributions from a key hospital management contractor, records show.

Lightford said in an interview she was not aware of the attorney general’s investigation.

“I don’t know anything about the attorney general’s probe,” she said.

After the stories disclosing Loretto’s contracts with Suhail, Loretto imposed stricter oversight of the hospital’s largest contracts, Lightford said.

“We made sure we put parameters in place,” she said. “Now we have to review every contract that’s over $750,000 as a result of this.”

Lightford said she received $4,800 annually from the hospital’s insurance firm and had little say in choosing the Caribbean hotel where she and other Loretto board members stayed. 

Loretto was forced to create its own offshore insurance firm several years ago when leading U.S. firms wouldn’t service the hospital, Lightford said. Cayman Islands laws require board members to travel to the island to attend board meetings, she said.

“There was nothing wrong with what I did,” she said. “I’ve just been busting my butt to try and keep the hospital open for 20 years. … It hasn’t been easy.’’

The BGA and Block Club also found the board chairman’s law firm billed the hospital for at least $3 million in legal fees over 11 years, although Loretto said his firm worked at a discount.

And the hospital’s compliance officer, who vets all staff and board conflict of interest statements, has private business ties to Loretto’s top attorney, who is tasked with defending the institution against legal claims and government investigations. 

Health care ethics experts said it’s not illegal for board trustees to do business with the hospital, but such personal financial entanglements could compromise the board’s independence.

The hospital is also facing questions about the contracts awarded to Suhail.

Soon after Ahmed joined Loretto in 2018, Suhail created three companies that received contracts with Loretto worth nearly $4 million in that first year, Block Club and the BGA first reported in April. One of the contracts was to overhaul the hospital’s billing system and another was to revamp the hospital’s psychiatric unit.

Suhail attorney Joseph Hylak-Reinholtz said Suhail has not been contacted by the attorney general or any government investigators about the contracts. Suhail’s companies have improved care at Loretto and saved the facility millions of dollars, he said.

Suhail and Ahmed severed their business ties in May following the Block Club and BGA reports, Hylak-Reinholtz said.

Ahmed could not immediately be reached for comment.

The 122-bed safety-net hospital serves mainly low-income people and patients of color, records show. It is run as a tax-exempt non-profit corporation, and its $81 million annual budget comes through the taxpayer-financed Medicaid program, as well as state grants and donations.

Inquiries like this one by the attorney general “are not particularly common,” said David Bea, a Chicago attorney who has represented hundreds of nonprofit clients over the past two decades. “I’ve seldom seen an organization under investigation. It’s pretty rare.” 

If the Charitable Trust Bureau does find serious problems, it can impose fines or even revoke a charity’s authority to operate in Illinois and its power to solicit contributions, Bea said. The attorney general’s office also can make a referral to the IRS if they believe a further audit is warranted.

“If there’s criminal activity, they can pursue the individuals,” Bea said.

CONTACT: pascal@blockclubchi.org