Funes to appear in court June 12

Funes
John Paul Funes

John Paul Funes, the former chief fundraiser for Our Lady of the Lake Regional Medical Center, will appear in U.S. Middle District Court on Wednesday, where he will be arraigned on charges of wire fraud and money laundering in connection with the theft of $550,000 from the hospital foundation he headed for more than a decade. He is expected to plead guilty at a later date.

Once the plea deal occurs, it will end one of the most difficult chapters in the history of OLOL, which stunned the community last November when it announced it had fired Funes for allegedly stealing foundation funds.

In the months since, OLOL officials have been working to rebuild trust within the community and meeting individually with donors. They’ve also implemented changes to internal controls at the hospital and foundation staff levels and created new committees of the foundation board to try to address the shortcomings that enabled Funes—a once-trusted and well-known community leader—to get away with stealing so much money for so long without being detected.

“It doesn’t sound glamorous, but these are real steps, significant changes, that will make a meaningful difference,” says Christel Slaughter, who has been serving as interim president of the OLOL Foundation since December.

One of the most significant changes has come about as a result of an internal audit completed earlier this year by Deloitte into processes at OLOL. It now requires all expense vouchers at the foundation be approved in triplicate—by the foundation executive director, Kelly Hurtado, OLOL President and CEO Scott Wester, and the finance department.

While it may seem like a standard practice in most organizations to have at least some oversight of expenditures, Funes was able to approve his own vouchers.

In another change, the hospital finance staff is reviewing payments to vendors and, in some cases, conducting audits to get a better handle on how foundation money is being spent. They will then report back to the foundation board, which plans to begin conducting greater oversight into foundation finances.

To that end, the foundation board is creating a new finance committee that will drill down into the details of monthly financial reports and bring those analyses back to the foundation board at monthly meetings.

“The board isn’t going to conduct the kind of oversight we would expect the hospital accounting and finance departments to do,” Slaughter says. “But they’re going to be paying closer attention and the president knows he is going to be asked tough questions, and that sets a tone and culture that we are being responsible fiduciaries in handling donations.”

In addition to the finance committee, the board is creating a new executive committee and retooling its governance committee, both of which are intended to give the board—which operates under the larger OLOL board of directors—a more active and engaged role in overseeing foundation activity.

While the changes have been put into place, fundraising has continued at the OLOL Foundation, and Slaughter says the $50 million capital campaign to raise money for the new Children’s Hospital does not appear have been affected. Two special events also exceeded their goals.

“We haven’t seen any drop off that we know of,” she says. “But you don’t know what you don’t know so I think people are waiting to see what is going to happen—to make sure they’re going to fix some of the gaps in improving internal controls.”

Part of rebuilding donor trust involves repaying the funds Funes is charged with stealing from the hospital. Though the federal charges filed against him earlier this week indicate he stole $550,000, OLOL’s internal audit has determined the actual figure was $810,000. That money has been repaid to the foundation by its insurance company and OLOL will continue to pursue restitution for the full $810,000, hospital spokesman Ryan Cross says.

In another new development, the foundation has announced a search for a permanent president and CEO. Board member Tom Adamek will chair the committee. Cross says the hospital hopes to have someone in place by October.

(Correction: This story has been corrected since its initial publication to reflect that Funes will only appear in court Wednesday for an arraingment and will not be pleading guilty at that time. Daily Reports regrets the error)

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