Apparent conflict of interest lingers over investment company hired by MCHD
Marion County Hospital District Offices located at 2547 E Silver Springs Blvd, Ocala, FL 34470
Editor’s Note: This article is the first of a series of articles that will be published leading up to the 10th anniversary of MCHD leasing the hospital.
Marion County Hospital District’s recent annual audit reflected a $47 million investment slide, bringing its holdings back to near 2018 values.
MCHD Trustee Teresa Stephens, who serves as the board’s investment chair, echoed their professional investment manager’s opinion that the 2021-22-year losses were due to market conditions. She assured the “Gazette” that the trustees maintain a long-term outlook and that the asset drop will not impact the public’s interest.
The funds had experienced a steady climb in value since 2016, according to previous audits, and have again tipped up by approximately $20 million, according to quarterly reports this year.
However, an apparent conflict of interest between the district’s longtime trustee Rich Bianculli and one investment firm entrusted with a third of the district’s investment, Berman Capital, raises unanswered questions.
MCHD investments, totaling $275,661,698 at the last reporting period, are broken up equally among investment companies: Cresset Berman, Graystone, and Truist.
MCHD started investing approximately $213 million in 2014 when the county, with approval from Marion County voters, decided to lease the county hospital, Munroe Regional Medical Center, to a private healthcare company. The hospital lease has changed hands a few times since then and is now held by AdventhHealth.
The money from the lease came to the MCHD trustees to be used to meet the health needs of Marion County residents.
The three investment companies are overseen by an investment consultant, Park Place, which advises the trustee board. Cresset Berman, formerly known as Berman Capital Advisors, and Truist, formerly known as SunTrust, have continually invested money for the MCHD since the hospital was leased. Graystone replaced another investment company, Simon Quick, formerly known as Massey Quick, in 2022.
Berman’s entry into an arrangement holding roughly $88 million of MCHD investments raises some transparency concerns. When the lease money was received, Bianculli, chair of the investment committee, suggested that the board allocate the investments among three companies: Goldman Sachs, Massey Quick, and SunTrust.
It’s not mentioned in the 2014 meeting minutes, however, that Massey Quick’s contract with MCHD includes an extra party, Berman Capital. Under the investment agreement with MCHD, Berman Capital and Massey are independent and serve as “co-advisors” to MCHD.
Berman Capital was approximately three years old at the time and was considered a “boutique” investment firm serving wealthy individual investors. It had no institutional clients. Disclosures filed by Berman as late as 2021 reflected MCHD being the only institutional client in the firm’s portfolio.
During the July 2014 meetings, Bianculli, as the investment chair, failed to disclose to the trustees that he was on the advisory board of Berman Capital. But according to archived internet records from the company’s website before and after he made the motion to approve the contracts, he is listed as an advisory board member of Berman Capital.
John Kurtz, who was executive director of MCHD at the time, told the “Gazette” in a recent interview he had asked Bianculli if he had any relationship with Berman Capital at the time. Bianculli, he said, told him that he did not.
A prior trustee, attorney Randy Klein, told the “Gazette” he had no independent recollection of Berman Capital being mentioned and would rely on what the meeting minutes reflected.
The MCHD’s previous attorney, Jonathan Dean, told the “Gazette” in a recent interview that he had no independent recollection of a conversation about Berman Capital.
Reporters for the “Ocala Star-Banner’’ who attended initial meetings did not include Berman Capital in their reports, let alone any relationship between Bianculli and the company in 2014.
John Garri, Marion County’s CFO under then-Clerk of Court David Ellspermann, who attended initial investment meetings to help get the district organized for state compliance reporting when they received the lease funds, told the “Gazette” he did not remember Berman Capital being mentioned but felt sure that he would have remembered if Bianculli would have mentioned any business relationship with any of the investment companies being considered.
Despite repeated attempts by phone, text and email, Bianculli has not responded to requests for comment from the “Gazette.”
The 2014 contract acknowledges that Berman Capital connected MCHD with Massey Quick. However, it was Berman who was “exclusively responsible for: (I) assisting the Client [MCHD] in determining the initial and ongoing suitability of MQ’s recommendations for the Client’s investment portfolios and/or strategies.”
Fast forward to 2017. The hospital district trustees decided that Goldman Sachs was not yielding the returns they expected, so they fired Goldman Sachs and entered into separate agreements with Berman and Massey Quick to each have a third of the available investment funds, along with SunTrust, which would eventually be renamed as Truist.
The decision to give Berman a third of the investment funds was made by the trustees without sending out a request for proposals, or RFP, to other investment firms.
Bianculli was the district’s investment chair when the 2014 and 2017 decisions were made. However, in the 2017 vote, Bianculli recused himself from the vote to approve Berman’s contract. Minutes of hospital board meetings and at least one witness in attendance indicate there was no conversation about why he recused himself.
A conflict-of-interest form filed by Bianculli and obtained by the “Gazette” indicates that the reason for the recusal was that his son was an intern at the Berman investment firm and that Bianculli himself had investments at the firm.
The conflict-of-interest form, however, is not attached to the Aug. 28, 2017 meeting minutes, according to the MCHD website. There also is no indication in the meeting minutes that the conflict was stated on the record.
Bianculli became the chair of the MCHD at the next meeting and has remained the chair for almost six years.
According to Bianculli’s son Maximilian Bianculli’s LinkedIn page, within days of Berman receiving the $80 million MCHD investment contract in 2017, while still an undergrad student, he transitioned from being an intern to having a paid part-time position with Berman where he worked until he graduated from college in 2019, when he went full time. Currently, his LinkedIn page says he works as an Investment Reporting Analyst for Berman.
As chairman of MCHD since 2017, Bianculli has continued to make decisions related to Berman, and no other conflict-of-interest form has ever been filed.
Neither Justin Berman, principal for Cresset Berman, nor Maximilian Bianculli have responded to inquiries by the “Gazette.”
While Bianculli has served as chair, term limits for trustees have been renegotiated. Historically, MCHD trustees only served two four-year terms. Now, they can serve unlimited terms if appointed by the commissioners.
It should be noted that Bianculli is also a significant campaign and PAC contributor, including supporting some of the county commissioners.
At the beginning of the year, Bianculli suggested, to the objection of the trustees’ new investment chair Teresa Stephens, that the trustees put out an RFP for a new investment advisor, in a move to possibly replace Park Place, which oversees the three funds. Stephens asked Bianculli to explain his reasoning, but no answer was given, and the RFP was issued.
An RFP was not put out when Goldman Sachs was dismissed, and Berman picked up the investment money. However, later in 2021, when Graystone replaced Massey Quick, an RFP went out.
Under the bylaws of the MCHD, conflicts of interest must be disclosed to the board and the board has a duty to investigate those conflicts of interest. Joseph Hanratty, attorney and spokesperson for MCHD, maintained that Bianculli has not violated Fla. Stat. 112.3143 as it relates to voting conflicts, but he declined to explain his conclusion.
There was no explanation provided for why Bianculli failed to disclose that he was a “business associate” with Berman when he made the motion to approve a contract with Massey Quick and Berman in 2014; nor to disclose the nature of his Berman conflict to the other trustees in 2017 or since then when making decisions related to their relationship with Berman.
In a recent email, Hanratty wrote the “Gazette” that “no public official is under any obligation to answer your inquiries.”
The district’s trustees are appointed and may be removed by the Marion County Board of Commissioners. Otherwise, the MCHD is its own special taxing district and does not answer to county commissioners.
The board is subject to the state’s open government, or Sunshine Laws, which means their meetings are publicly noticed, although members of the public rarely attend the meetings. The records are public, and trustees are not to discuss district business outside of a regularly noticed meeting.
Currently, the trustees are Bianculli, who has served as a trustee continually since the lease inception and served as the chair of the board since 2017; Ken Marino, Ram Vasudevan and David Cope. In the past two years, three new trustees have been added to the board: Teresa Stephens, Rusty Branson and Harvey Vandeven.