For Immediate Release
Thursday, November 21, 2002
AFSCME Asks Securities and Exchange Commission to Formally Investigate Tenet Healthcare
Washington, DC —The American Federation of State, County, and Municipal Employees (AFSCME), AFL-CIO, today asked the Securities and Exchange Commission (SEC) to open a formal investigation into Tenet Healthcare Corporation (NYSE: THC - news) regarding the release of misleading and incomplete information to shareholders as well as engaging in insider trading shortly before negative news was made public. Currently, the SEC is reportedly pursuing only an "informal" inquiry into recent events.
AFSCME's complaint details inadequate disclosure by Tenet in its10-K, annual report and other communications released over the last year. The complaint alleges that Tenet's materials fail to adequately disclose: (1) the risky nature of its unsustainable and aggressive pricing strategies; and (2) the portion of Tenet's Medicare revenue which was received as Medicare outlier payments.
AFSCME officials assert that Tenet CEO Barbakow's professed ignorance to the company's pricing strategy is not a credible explanation. AFSCME further asserts that Barbakow and other senior management failed in their obligation to fully disclose the risks associated with the company's aggressive increase in gross charges and its disproportionate receipt of Medicare outliers.
In addition, AFSCME is calling for an investigation into suspicious insider trading. Of particular concern to AFSCME are sales made by insiders between October 2-28, starting when UBS Warburg analyst Kenneth Weakley began making inquiries of Tenet personnel regarding outlier payments and ending when his report was issued. Notably, former COO Thomas Mackey made $9.92 million in an October 4 sale; the timing of this sale is unsettling since Weakley reportedly had raised the outlier payment issue with one of Mackey's colleagues just two days earlier.
AFSCME is the nation's largest public service employees and health care workers union with 1.3 million members. Pension trusts maintained for the retirement benefits of its members own approximately 11.8 million shares of common stock of Tenet or about 2.4 percent of outstanding shares. Boards of Trustees and Investment Boards govern these plans, which are operated autonomously of each other and AFSCME. AFSCME's staff retirement plan is also a shareholder in Tenet. AFSCME has collective bargaining agreements with Tenet covering approximately three percent of Tenet's 106,000 employees.
