Groundbreaking trial of DaVita, ex-CEO Kent Thiry opens in Denver

Whether DaVita Inc.’s former CEO Kent Thiry violated federal antitrust law when he agreed with three competitors not to recruit each other’s workers was hotly debated Monday during the first day of an unprecedented criminal conspiracy trial in U.S. District Court for the District of Colorado.

Prosecutors argued during opening statements that Thiry and DaVita’s agreements were criminal and stymied competition, limiting DaVita employees’ ability to land new jobs and advance their careers. Defense attorneys admitted the agreements existed but said they were not illegal, did not limit the free market and in some cases increased competitive opportunities for DaVita employees.

The closely-watched criminal conspiracy trial is the first time a CEO and company have been criminally charged for non-poaching agreements under the 132-year-old Sherman Anti-Trust Act, and the proceedings and outcome are expected to reverberate nationally.

“This is a big deal case,” Senior Judge R. Brooke Jackson told jurors Monday.

DaVita and Thiry were indicted last year on three conspiracy counts. The indictment alleges DaVita and three other companies agreed not to actively recruit each other’s employees at various times between 2012 and 2019. One agreement, between DaVita and Surgical Care Affiliates, focused on top-level employees, while the other two agreements included all employees across the companies.

Thiry moved the headquarters of DaVita, one of the country’s largest providers of kidney dialysis services, from El Segundo, California, to Denver in 2009 and rapidly grew the company’s network of dialysis centers before stepping down as CEO in 2019 after two decades at the helm.

If convicted, DaVita faces a maximum penalty of $100 million per count, while Thiry could be sentenced to pay up to a $1 million fine per count and serve up to 10 years in prison.

On Monday, Megan Lewis, a prosecutor with the U.S. Department of Justice’s antitrust division, told the jury that Thiry had “an obsessive focus” on keeping employees at DaVita, and found it “personally embarrassing” when senior-level employees left DaVita to work with competitors. She said the agreements he forged “crossed a line.”

“This is a case about a corporate CEO who wanted control over his employees,” she said. “Not just control over how they did their jobs, but control over what job opportunities they got and how they were allowed to leave their company.”

She said Thiry leveraged both his personal relationships with the CEOs of competing companies and his significant sway in the health care market to secure the non-poaching agreements, which were put in place between DaVita and competitors Surgical Care Affiliates, Hazel Health and Radiology Partners, all companies headed by former DaVita executives. Surgical Care Affiliates is facing its own criminal case as a co-conspirator.

“It was better to be Kent Thiry’s friend than his foe,” she said.

But John Dodds, an attorney for DaVita, countered during his opening statement that the agreements were legitimate business transactions built on mutual respect between Thiry and his former colleagues and friends, and that they were never intended to and never did stifle competition.

He conceded that Thiry expected loyalty and was angered when former DaVita executives whom he’d mentored were recruited from DaVita’s ranks and left the company.

“You may very well not like Kent Thiry,” Dodds said. “You may see reason in the evidence to feel that way. But what you won’t see in any of the evidence is the only thing that would make any of this a crime: a market allocation agreement.”

He said the arrangements between DaVita and three competitors did not stifle competition because the employees had opportunities at hundreds of other companies. Dodds told jurors DaVita hired more than 500 senior-level employees from 400 other companies during the time the agreements were in place, and about 500 senior-level employees at DaVita left for jobs at about 300 other companies during the same time period.

Dodds also said an agreed-on rule that DaVita employees had to tell their supervisors that they were looking for a new job before they could be recruited by Surgical Care Affiliates, Hazel Health and Radiology Partners actually increased opportunities for the workers because it prompted DaVita to offer raises and promotions in order to keep the employees from leaving.

Lewis dismissed that argument, saying Thiry intended the rule as just another hurdle to leaving DaVita, which he referred to as “The Village.”

“He called himself the mayor of The Village, and he demanded loyalty to The Village,” she said.

Some witnesses who will testify for the prosecution were granted immunity in exchange for their cooperation, Lewis said, an arrangement Dodds suggested meant they were pressured into bending their testimony to fit the prosecution’s case.

The trial continues at 9 a.m. Tuesday and is expected to last two to three weeks.

Source: Read Full Article