Profit at a SoCal Non-profit?

Some say the CEO of a community health network scrimps on quality care

When Anthony Dao was voted onto the board of Mission City Community Network in 2010, he saw it as a way to give back. A few years earlier, when the self-taught electrical engineer was out of a job, with a pregnant wife and no health insurance, the nonprofit medical clinic had helped him. Maybe now, he thought, he could return the favor.

After sitting through his first few monthly meetings, Dao had nothing but praise for the man who ran the place: Nikhil Gupta. The clinic, which provides medical, dental, and psychological care for the poor and the uninsured, was expanding, and it had millions of dollars in the bank. “I thought everything Nik was saying at the board meetings was great,” Dao said. “This guy was amazing. I looked up to him.”

During the next couple of years, though, Dao’s impression changed. It seemed odd, he said, that the nine-person board went along with everything Gupta wanted, with little discussion. At the same time, Dao, a Vietnamese immigrant, began to hear rumblings from inside the clinic, whose main office is a lime green cinder-block building next to a body shop in North Hills. Apparently things were not as wonderful as they had seemed.

Jacqueline Guinn, Mission City’s chief medical officer, had confided to Dao that several doctors, nurses, and other medical personnel were miserable under Gupta’s leadership. Employees could be fired, she said, if they talked to a board member. Many thought Gupta was more interested in profits than patients, most of whom were women and/or Latino. Dao sat down for coffee with Jerry Scharlin, then Mission City’s chief operating officer, who had once been a close friend of Gupta’s before he developed his own reservations. “Do you know how much money Nik is making?” Scharlin asked Dao, who took a guess: “$300,000?” Scharlin shook his head. “Anthony, you have no idea,” he said.

Stunned, Dao asked Guinn to conduct an anonymous survey of Mission City’s medical staff to learn what was amiss at the clinic. Even though their names would be omitted, some were so afraid of Gupta that they laundered their answers, sending them to relatives and friends who forwarded them to Dao with their IDs removed.

Parts of the survey reinforced what Dao already knew. As a former patient, he had experienced long waits, had seen a different doctor each visit, and had sometimes not received calls about his test results, though he still felt grateful for the care. But Dao was surprised to learn of employees’ widespread dissatisfaction over low salaries and high turnover and of their concerns about assembly-line medicine. “The facility is supposedly a nonprofit organization, but where is the money going?” one person asked. Wrote another: “I dislike the pressure to see patients quickly and in less time than is safe.”

Nurses came to Dao and other board members in tears, reporting that they often lacked clean bandages and sometimes didn’t have toilet paper or drinking water; these charges were also noted in the survey responses. Many complaints involved Gupta himself. An employee lamented that because Gupta ran “a one-man show”—he holds several clinic titles, including chief executive officer, chief financial officer, and executive director—“nobody has the power to do anything without his permission.”

A second employee predicted, “We believe that Mission City is on its way to becoming another headline in the media unless immediate action is taken to rectify years of injustice, fraud, and wrongdoing.”

Dao, by then the board secretary, vowed to rein in Gupta. He also hoped to remove Gurdip Malik, Mission City’s longtime board chairman and Gupta’s chief ally. Dao lobbied the eight other board members and thought he had persuaded a majority to stand with him. In fact, at one meeting the board voted to strip Gupta of most of his power, leaving him in an advisory role as president. But more contentious meetings followed. The police were called to one but merely asked a few questions and left; security guards were posted at the door of another. In March 2014, Dao and three like-minded board members received letters saying that they had been voted off the board—at a meeting they had not attended. During the next board meeting, according to an attendee, four new board members were introduced as friends of Gupta and his wife. The controversial CEO wasn’t going anywhere.

Today Nikhil Gupta is paid $763,656 a year, which includes a $250,000 bonus based on Mission City’s net profits, a perk typically reserved for a corporate executive rather than for the head of a small nonprofit. Mission City, which has more than a dozen locations around Southern California, receives $21.8 million in annual revenues, according to its latest available tax return—nearly all of it from federal, county, and state governments. Gupta’s salary is two to three times greater than those of people running larger clinics in the state. For example, the CEO of the Venice Family Clinic is paid $258,213 a year, the head of St. John’s Well Child and Family Center in Los Angeles makes $286,703, and the CEO of Northeast Valley Health Corporation takes home $270,960. Within the clinic itself, Gupta, who is 57, has no peers in terms of salary. The next highest-paid employee is a psychiatrist who earns $339,782 a year, according to Mission City’s 2014 tax return.

Gupta’s Mission City contract is for ten years and may be renewed for another decade in June 2017 unless the board gives him a year’s notice next month. The contract is unusually generous: It provides not only an annual bump of 4 percent, but also a cost-of-living increase; it guarantees him six weeks off a year, with no limit as to how many vacation days he can accumulate, and the ability to cash out 50 percent of whatever time he’s banked whenever he wishes.

As Gupta’s salary has grown, so have his benefits. When he signed his current contract in 2007, it included $1,000 a month for health insurance. He now receives $1,800 a month, according to calculations based on his contract. He started with a car allowance of $300 a month. Today he receives double that. What’s more, if he drives outside of Los Angeles County for work, he is reimbursed the IRS mileage rate, which is currently 54 cents a mile.

Mission City is entirely Gupta’s show. In addition to serving as CEO, CFO, and executive director, he is president and chief technology officer. A 2014 press release even called him chief operating officer. He has used the many hats he wears to justify his compensation, saying he is saving Mission City money. Gupta, who was born in India and grew up in Zambia, claims to work seven days a week.

As Dao and his fellow board members learned, however, Gupta also works hard to protect his interests by pushing out those who disagree with him, no matter if they’re a doctor, a board member, or one of the clinic’s founders. Since 2014, he has gone through at least four chief medical officers and three chief operating officers, among them Michelle Matyi, who previously worked at Planned Parenthood in Pasadena and was fired from Mission City after three-and-a-half weeks on the job.

Gupta has five titles at Mission City, including CEO and CFO
Gupta has five titles at Mission City, including CEO and CFO

Former board members, doctors, and other staff members told me that Gupta runs the clinic in a way that ensures he meets his bonus targets. They said Gupta still stints on supplies, requires the overbooking of patients, and leaves the clinic in disrepair. Gupta won’t even give his own employees free flu shots—a common practice among health care providers. “The thing about Nik is that he is one of the stingiest men I know,” a former board member said. “He just squeezed blood out of that organization to keep his numbers up.” (While Gupta cites a lack of funds when doctors ask for higher salaries and better supplies, the clinic’s most recent tax return showed that Mission City had nearly $16 million in the bank.)

Gupta’s contract, especially the clauses that encourage penny-pinching by linking his bonuses to profits, violates almost all tenets of nonprofit management. Trent Stamp, executive director of the Eisner Foundation and founding president of Charity Navigator, which evaluates nonprofits, didn’t believe me when I told him that Gupta’s contract specified a bonus based on “net profits.” “None of it makes any sense,” he said. “Everything about it takes you down the road of impropriety, whether it’s real or perceived. Every dollar raised over what you spend is supposed to go back into the mission of the organization, not to enrich any of the people who run it.” When I described Gupta’s compensation package to Regina Birdsell, president and CEO of the Center for Nonprofit Management, she said simply, “Eww.”

Gupta did not return calls to his office, his cell phone, or his home—a three-story, 5,944-square-foot house with six bedrooms, eight bathrooms, a swimming pool, and an elevator, built on nearly an acre and tucked into the side of a hill in Bel-Air. (The Web site zillow.com puts its value at nearly $7 million.) Gupta also did not reply to e-mails or to a note left at the clinic’s North Hills office.

Mission City’s attorney, Richard A. Block, defended Gupta. “You understand his compensation is far below the compensation of many managers of these exempt organizations here in California?” he asked. When I told him that wasn’t true, he said, “I had done some online research at one point, and I found quite to the contrary.” He declined to share his research.

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Mission City was founded by Dr. Bruce Hector and Dr. Ajit Arora in the early 1990s. They had opened their private practice more than a decade earlier, but the San Fernando Valley neighborhood where it was located was rapidly being transformed from a predominantly white area to a mainly Latino one in which few people had health insurance. After President Ronald Reagan signed the Immigration Reform and Control Act in 1986, Hector and Arora performed physical examinations on thousands of immigrants to make sure they were healthy enough to qualify for amnesty. Many later returned to the private clinic for care. Although the patients often couldn’t afford to pay, the doctors had a policy of not turning anyone away.

Their solution was to spin off Mission City as a community clinic in order to make it eligible for government grants. “The sole reason we started the clinic was because the people in this neighborhood needed medical care and had no money,” Hector said. “That’s what community health clinics are designed to do.”

Along the way, Hector and Arora forgave a $500,000 loan from their medical corporation to Mission City. They felt it was for the common good. Now, watching Gupta’s growing paycheck, Hector thinks they were taken advantage of. “Talk about a sucker,” he said, referring to himself.

Gupta joined Mission City in 1997 as its accountant, becoming CFO in 1999 and CEO in 2001, when he earned $148,154. Unlike the heads of most clinics, who have backgrounds at nonprofits or as health care administrators, Gupta is trained as a CPA.

His compensation began to grow rapidly in 2007 after the Mission City board held an all-expenses-paid retreat at the pirate-themed Treasure Island Hotel & Casino in Las Vegas. Amid the blackjack tables and slot machines, Gupta complained that his annual salary—which by then had risen to $264,280—wasn’t high enough. He wanted a raise. “He was being pretty hard-nosed that he needed something substantial,” said Scharlin, the former director of the Los Angeles Community Redevelopment Agency, who attended the retreat when he was a board member.

Few doubted Gupta’s business acumen or how hard he worked. He had kept Mission City afloat when there were fears it might go under. Scharlin aside, most of the board members had little financial expertise. (Federal law requires that 51 percent of the board members of a clinic like Mission City must be patients there.) Several were frightened that Gupta would quit, so the board doubled his pay to $531,652, which included his bonus.

Then Gupta set about protecting his payday. Former board members and employees said Gupta handpicks board members who will follow him unquestioningly and who have hardly any understanding about the responsibilities that come with their supervisory role. One board member thought Gupta owned the clinic, Scharlin said, and another thought that the board worked for him, not the other way around. “[I]t appears that the CEO/CFO directs the activity of the Board,” said a 2013 report from the federal Health Resources and Services Administration, the primary federal agency charged with improving access to health care services for people who are uninsured, isolated, or medically vulnerable. “The Board…does not appear to be actively engaged in determining direction for the organization.”

Many said Gurdip Malik, the longtime board chair, helps stifle dissent. The owner of a wholesale clothing business, he is well known in the Sikh community for his charity work. “I always tease him that the rest of the family runs the business and makes the money, and he spends it on Sikh causes,” said Dr. Narinder Singh Kapany, founder of the Sikh Foundation International in Palo Alto, where Malik is a trustee.

Despite his experience with other nonprofit enterprises, Malik seems to view Mission City much as Gupta does. “Malik looks at this as a business, not as a public enterprise, a nonprofit,” Arora, Mission City’s cofounder and a friend of Malik’s, told me before his death in late 2014. “He is looking at how much profit he brings in. That is success for Malik.” When I called Malik and asked him to comment, he hung up on me.

Mission City’s treasurer, Surinder Singh, another longtime board member, is a relative of Malik’s, according to Arora. When I asked Singh about Gupta’s contract, he said he didn’t know its duration or how much Gupta was paid. Still, he added, “if he makes $1 million, that’s not enough.”

Aida Vlught, an immigration consultant who’s served on Mission City’s board for close to 20 years, told me she didn’t know Gupta was being paid more than $700,000 a year. “I don’t really care,” she said before hanging up.

Claudia Bobrow was an elementary school teacher who sat on the board from about 2008 to 2010. She was a neighbor of Scharlin’s, and he’d asked her to fill a vacancy. Bobrow had spent a decade on the nonprofit board that governs Los Angeles Hebrew High School, and she told me she found her stint at Mission City troubling. Many board members rarely showed up at meetings, opting to call in instead. Bobrow said she thought it was odd that as a new board member, she was never offered a tour of the clinic or a basic orientation. She learned of Gupta’s salary only when she was put on a committee to update the bylaws. “I was completely blown away,” Bobrow said. “I was insulted. I thought I was helping save this organization that was barely making it.” She quit the board soon after.

Federal law states that nonprofits should pay reasonable compensation: “an amount as would ordinarily be paid for like services by like enterprises under like circumstances.” The guide for charities issued by California’s Office of the Attorney General says that a nonprofit such as Mission City “cannot distribute ‘profits,’ gains or dividends to any person.” The office also says that payment of excessive compensation is illegal.

It is unclear whether Mission City has violated the law because no supervisory agency has weighed in. Regulators are woefully understaffed. Oversight of the 117,689 nonprofit businesses registered in California sits with the IRS and the state attorney general, but experts say authorities do not have the manpower to effectively monitor them.

Rachele Huennekens, a spokesperson for California attorney general Kamala Harris, said the office usually waits until it receives a complaint to investigate, although not all complaints lead to investigations. When the attorney general’s office prosecutes someone for excessive compensation, she said, it tries to recover the money from the executive and return it to the nonprofit. Huennekens said the attorney general has filed two lawsuits alleging excessive compensation in the past five years. Neither involved Mission City.

The IRS, too, has the ability to intervene. Kenneth Price, an attorney who specializes in nonprofits, said the agency could impose an excise tax on the overpaid executive and on board members who approved the salary. The nonprofit could lose its tax-exempt status, too, he said, if wrongdoing is found. But that would presume someone with authority is scrutinizing Mission City. So far, despite several allegations about Mission City’s business practices and questionable spending of public monies, no such watchdog has emerged.

Mission City Community Network headquarters in North Hills
Mission City Community Network headquarters in North Hills

In 2008, California’s Department of Health Care Services wrote that it was “in receipt of reliable evidence of fraud or willful misrepresentation” by Mission City under Medi-Cal regulations. Among the problems, according to DHCS documents: “A Department physician reviewed the medical records and determined that the frequency and duration of the psychological services appeared to be driven by financial factors rather than by patients’ needs.”

So that same year the agency indicated it would withhold millions of dollars in Medi-Cal payments from Mission City. When Gupta challenged DHCS, an administrative law judge upheld the decision. However, a spokesperson for the department said that after the agency performed additional reviews, no funds were withheld, and money has continued to flow from the department—more than $8.7 million in the first ten months of 2015 alone. The agency declined to offer an explanation for this about-face.

A couple of years later, trouble with the staff erupted. In 2010, after learning about Gupta’s exorbitant salary from a Web site run by the Service Employees International Union, outraged employees sent a letter to each board member, decrying everything from the shabby treatment of employees to a roof that had been leaking for ten years to a complaint that patients sometimes had to wait four hours to be seen. “Rather than a community clinic for poor families and individuals, our organization has become a mass production factory,” said one letter, repeating a grievance often heard at Mission City.

Gupta convinced the board that the letter writers were nothing more than troublemakers. But they raised enough concern that Malik, the board chair, asked Block, Mission City’s lawyer, whether Gupta’s salary could endanger the nonprofit’s tax-exempt status. Block, who had helped negotiate Gupta’s contract, told Malik in a letter that it wouldn’t.

If the amount of money Gupta was paid angered staffers, it startled outsiders. A person whose firm was involved in a proposed multimillion-dollar finance deal with Mission City in 2013 pointed to Gupta’s salary as a big reason his company pulled out. “We saw his overall compensation figure, and we were alarmed by that,” he said. Representatives from this person’s firm were turned off, he said, when Gupta took them on a tour of the clinic’s facilities in his Mercedes. “I don’t think I’ve ever seen that with nonprofits,” he said. “The executive director driving off in a luxury vehicle.” Explaining why the deal was scrapped, he called it a “risk…in terms of our reputation.”

Seemingly the biggest threat to Gupta should have been three highly critical reports issued by the federal Health Resources and Services Administration, the agency charged with improving access to health care for underserved communities. The reports, issued in 2009, 2013, and 2014, which I obtained through Freedom of Information Act requests, spotlight low employee morale, high turnover, salaries that were $5 to $10 an hour lower than those at comparable clinics, and a lack of standard benefits for Mission City’s medical professionals, such as allowances for continuing education, payment of medical license fees, and certification from the Drug Enforcement Administration. The 2013 report also cited “significant issues” with “patient care, facility upkeep, and maintenance and operations.”

The reports blasted the concentration of power under Gupta and the incompetence of Mission City’s board of directors. At least as far back as 2009, HRSA concluded that the CEO and CFO positions should not be held by the same person. The 2013 report also concluded that Gupta’s assertion that he was saving Mission City money by holding multiple positions was nonsense. “Many small health centers do not have dedicated individual key management staff for all possible positions, but they do not pay one person two salaries for filling multiple roles,” it said. “The CEO is typically paid for one position only.…”

The report didn’t stop there. “While there appeared to be no expense spared to compensate some of the key administrative staff,” it said, “this has seemed to be done at the expense of sacrificing other staff salaries, benefits, facilities, and infrastructure.”

In an e-mail, an HRSA spokesperson explained that after the 2013 report, the agency provided “multiple technical assistance sessions” to the board that spelled out “HRSA governance expectation, including its authority to evaluate performance, set the salary of the CEO, and to oversee operations of the health center.” Several Mission City staffers, however, told me little changed.

The 2014 report noted that Mission City had enough money in the bank to buy Gupta out of his contract. The authors said board members were “very divided and unsure of their roles and responsibilities” and found “no evidence” that the board had reviewed the agency’s previous report or other important documents. Board members hadn’t seen a record of Gupta’s evaluation, which was performed by Malik, and didn’t know his salary, according to the report. Additionally it concluded that the board hadn’t been told that the clinic had purchased its electronic medical records system from Gupta’s brother, which was a conflict of interest. Mission City doctors told me it had cost hundreds of thousands of dollars. “It was clear that the Board was being directed by [the] CEO,” the report stated.

HRSA investigators found that while the medical director had been on an extended leave, a physician’s assistant—a person with far less training—took her place and that there were no plans to fill the job. “This is a potential risk for MCCN patients and staff,” the report said (several physicians have since filled the position). The report noted that even before her leave, the medical director had been working with an expired license. And yet Mission City continued to draw government funding. In fiscal 2015, the clinic received $4.963 million from HRSA. Just a few years earlier, it had given Mission City $5 million to build another clinic near the main facility.

It was around this same period that a Mission City doctor suspected the clinic was engaging in Medicare fraud, and the U.S. Department of Health and Human Services’ Office of the Inspector General began to investigate. The doctor, who asked to remain anonymous for fear of retribution from Gupta, provided me with an e-mail exchange with Michael Orton, a special agent for the inspector general, beginning in April 2011. The doctor recalls telling Orton about the claims of fake billing and handing him patient files; Orton said the investigation could take several years.

In an April 27, 2011, e-mail, Orton told the doctor that he had an appointment with an auditor for the Los Angeles County Department of Health Services. Still, nothing happened. Finally, in 2013, the doctor e-mailed Orton, but the e-mail bounced back. The doctor contacted Wade McFaul, assistant special agent in charge of the inspector general’s Los Angeles Regional Office. “I am concerned that MCCN has committed millions of dollars in fraud…” the doctor wrote, referring to Mission City. McFaul told the doctor that Orton had retired and he couldn’t find anything in the agency’s system about the case. Orton would not comment for this article.

When I began asking questions about the investigation, the Office of the Inspector General referred me to Diane Cutler, the assistant special agent in charge of hotline operations, based in Washington, D.C. After I explained what had happened, Cutler said that Orton should have opened a file in the office’s computer system. She also criticized Orton for revealing to the doctor whom he was interviewing. “This is not our standard operating procedure,” Cutler said. Regardless, she told me, the case was dead.

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For nearly 20 years, from the day the clinic opened its doors, Dr. Bruce Hector—one of Mission City’s two founders—had worked there part-time. Knowing how much he cared about the place, staff members confided in him about the sorry state of affairs. “They were being asked to do things that compromised their integrity,” Hector said.

One day in 2011, he walked into Gupta’s office and repeated the complaints that he was hearing. Gupta told him he would speak to the medical director. The result, seemingly, was only one change. Construction had begun at the clinic. Gupta said this would necessitate the closing of some exam rooms, and there was temporarily no space for Hector. The doctor offered to change his schedule. Gupta told him no nurses were available. Hector offered to bring his own. He was turned down. Even after construction was finished, Hector was not called back.

Effectively shut out of the place he’d helped build, Hector continued hearing from employees. He and cofounder Ajit Arora wrote letters to the board, asking to be placed on the panel, and Hector made a presentation to the group, pressing their case. They never heard back. Now Hector was desperate. In July 2014, he sent a complaint about Mission City to the Office of the Attorney General in Sacramento. “I’m fearful that the current CEO Nik Gupta may be misappropriating public funds and depriving the community of needed service,” he wrote, ticking off the complaints that had been heard before: the lack of raises, the poorly maintained offices, the unsanitary conditions, the long wait times. He mentioned the firing of the four board members and how he was “abruptly terminated.” He estimated Gupta’s salary, with bonuses, was $900,000.

Weeks later Hector received a form letter. “Unfortunately,” it said, “we lack the staffing to enable us to investigate all of the thousands of complaints we receive, and must limit ourselves to those few which we believe to be the most significant. We do, however, review all complaints submitted to us. As a matter of law and policy, the Attorney General’s office does not provide information regarding its pending investigations and audits.” It has now been nearly two years since Hector received that letter, and no one I interviewed has heard anything about an investigation.

When Hector talks about what has happened to the clinic, he gets angry, and the four-letter words start to flow. He’s getting ready to retire, and if things had turned out the way he and Arora had intended when they opened the place, he would have happily volunteered at Mission City. “I invested a hell of a lot making that place,” he says. “I’ve practiced 45 years, and it’s the only thing I feel ashamed of in my career.”


Jeff Gottlieb shared the Pulitzer Prize for Public Service in 2011 for Los Angeles Times stories that uncovered corruption in the City of Bell.

 

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