Two men, two sides to Palm Drive Hospital's future

One man was a Vietnam War fighter pilot whose résumé includes examples of assignments to perform a “financial turnaround” for hospitals.

The other is a former software entrepreneur, a farmer and restaurant owner who has stepped in several times with the needed financial backing to keep Palm Drive Hospital from closing.

A few months ago, Palm Drive Chief Executive James Russell and board President Dan Smith were working together to bring the publicly owned Sebastopol hospital out of bankruptcy.

Now the two men are opponents in a battle over Palm Drive’s management and oversight.

Smith, creator of a popular software program for building contractors, was one of three board members who voted in closed session late last month to put Russell on paid administrative leave pending an investigation into allegations of granting expensive contracts without board approval at a critical time in the hospital’s finances.

Russell, in turn, has hired attorneys, expressed confidence he will retain his job and accused Smith of continuing “the one-man rule that has prevailed these many years” at the hospital.

Officials have suggested that at their next meeting they may attempt to get past the controversy. However, as of Thursday afternoon, no meeting date had been set.

Their backgrounds provide insight into their successes — and tenacity.

Russell, 64, holds a commercial pilot’s license and flew an F-4E Phantom for the Air Force in the skies over Vietnam.

His three decades in hospitals includes six years as chief financial officer at the former Sonoma County-owned Community Hospital, now Sutter Medical Center in Santa Rosa. Russell began as Palm Drive’s executive in May 2008.

Supporters describe him as a dependable and capable manager who has improved the hospital’s financial position.

“He is also very principled and not one who would easily bend on issues of integrity,” said Art DeNio, a hospital administrator in Fairfield who has known Russell for more than 25 years.

As evidence of staff support, some note the three top Palm Drive administrators who joined Russell in signing a letter claiming that certain board members violated the state meeting law and acted “to cover up” security violations involving patient records and other information.

Smith, 63, was a general contractor and Sonoma State University dropout who founded a company that developed the Master Builder software program. Intuit bought the company in 2001 for $42 million.

He and his wife, Joan Marler, own a 30-acre farm that supplies organic produce for their Sebastopol restaurant, the French Garden.

The couple jointly received the Citizens of the Year Award in 2008 from the Sebastopol Chamber of Commerce for their community efforts, especially helping to keep the hospital open. To date his financial contributions to Palm Drive total $1.2 million.

Even some critics concede Palm Drive might have closed its doors without Smith’s help. But they also point out this is the second time he has gotten involved in sharp controversy at the hospital.

In 2007, shortly after the hospital entered bankruptcy protection, Smith demanded the resignation of then-board President Naomi Fuchs. At the time Smith was a key benefactor and fund-raiser.

Fuchs, CEO for the Southwest Community Clinic in Santa Rosa, resigned, but not before she complained that Smith had “created an atmosphere of divisiveness.”

Supporters counter that Smith needed to step in two years ago or the floundering hospital would have closed.

“The previous board put this ship on the rocks,” said Jack Stuppin, who with Smith was one of 35 original supporters who banded together to help purchase the hospital from Columbia/HCA in 1999.

Similarly, Stuppin said, Smith this spring had to deal with unapproved contracts that threatened Palm Drive’s bottom line in order to ensure that the hospital soon can sell bonds, a necessary step to exiting bankruptcy.

“It’s the worst possible time to jeopardize your cash position,” Stuppin said.

Russell earns $225,000 as chief administrator.

Under his contract, he can be fired without a severance package for one of many specified failings, including “abandonment of duties, theft, fraud, habitual intoxication” or “serious misconduct constituting a felony or crime of moral turpitude.”

However, the board can terminate his contract without cause by giving him 30 days notice and paying him a severance of $112,500.

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@ pressdemocrat.com.