Nonprofit, Its CEO and Board Members Dabble in Real Estate; Ventures Raise Question of Potential Conflict of Interest; THE BUSINESS OF BODY PARTS

Article excerpt

Mid-America Transplant Services, the regions largest provider of donated human organs, moved into its gleaming new headquarters in 2008 in the Highlands at Forest Park off Highway 40.

Highlands Plaza Three was the product of a joint venture between Mid-America and Balke Brown Associates, a St. Louis-based development firm. But it is just one piece of an extensive relationship among Balke Brown, Mid-America and one of Mid-Americas for-profit subsidiaries: MTS Partners LLC.

Those business ties include ongoing real estate deals involving the investments of Mid-America, its chief executive, Dean Kappel, and two board members a commingling of corporate and personal investments that raises potential conflicts of interest.

In these transactions, Kappel appears to juggle various financial interests as Mid-Americas chief executive who directs the nonprofit organizations multi-million-dollar business dealings with Balke Brown and as an individual investor in one of Balke Browns nearby office-and-retail buildings, Highlands Plaza Two. Kappel invested $75,000 in Highlands Two through MTS Partners.

Kappel said that Mid-Americas chairman, the Rev. Richard Ellerbrake, and vice chairman, Dr. Robert Saylor the director of ethics for Mercy Hospital Springfield also invested personal funds in Highlands Plaza Two.

Im not quite sure how that could be a conflict of interest, Kappel said. Balke Brown brought in a number of individual investors. I dont think we got any sweetheart deal. ...We were committed to the Highlands Plaza area and thought frankly it was a good investment.

Mid-America also invested $375,000 in MTS partners and has a direct controlling interest of 47 percent in the subsidiary, according to a 2010 tax filing.

Such an array of intermingled corporate and personal investments all under the control of the chief executive and the board appears to potentially violate Mid-Americas own conflict of interest policy. The policy dictates that interested persons such as officers, directors and managers shall refrain from engaging in private or professional relationships where there is an existent or potential conflict of interest or where there would appear to be a conflict between the interested persons private or business interest and the interest of MTS.

A conflict of interest, the policy states, arises when an interested person may benefit personally from a decision he or she could make.

The policy requires board scrutiny of an ownership interest in any entity in which Mid-America has business dealings, or an investment interest in an entity with which the nonprofit is negotiating a transaction or arrangement. It also requires disclosure of potential conflicts of interest to the companys board of directors.

Dr. Will Ross, an associate dean at Washington University School of Medicine, said that he has served on Mid-Americas board since 1999 and was unaware that Kappel and two board members had invested personal funds in Highlands Plaza Two.

I dont know if those investments would be improper, he said. Were committed to operational efficiencies. I can assure you that everything here is above board.

Kappel said he believed that the boards executive members were made aware of these personal investments, but could not recall any board discussion as to whether the investments presented conflicts.

At stake are multimillion-dollar deals involving the sale and lease of two office buildings and apartments in the 26-acre Highlands at Forest Park development project, the former site of the St. Louis Arena/Checkerdome.

Scott Harshbarger, a former Massachusetts attorney general, said it was important that nonprofit boards of directors had effective strategies to identify such issues and to make sure that nothing hinders the nonprofits ability to make sound business decisions and negotiate arms-length transactions. …