A man wheels a cart loaded with documents that Las Vegas police seized on Tuesday from University Medical Center. The public hospital's CEO, Lacy Thomas, was fired after police revealed he is under criminal investigation and auditors reported troubling losses. Photo by John Gurzinski. University Medical Center Chief Executive Officer Lacy Thomas, right, and Chief Financial Officer Richard Powell discuss UMC's financial losses with the County Commission on Tuesday. Thomas went before the board to report that auditing firm Ernst & Young found losses for the year ending June 30 hit $34.3 million, about $18.8 million more than previously reported.. "Why weren't there any red flags being raised. There's a perception that we weren't told something you knew." RORY REID CLARK COUNTY COMMISSIONER, ADDRESSING OUSTED UMC CEO LACY THOMAS

University Medical Center CEO Lacy Thomas was fired Tuesday shortly after police revealed he is under criminal investigation and outside auditors reported that the public hospital lost $34.3 million last year, nearly twice the figure he'd given Clark County commissioners in November.

Police searched UMC's executive offices Tuesday morning for evidence that Thomas guided millions of dollars in public money from the hospital to close friends through lucrative consulting contracts that yielded no services, according to a 27-page affidavit police filed to obtain a search warrant.

County Manager Virginia Valentine said that even though the theft, fraud and criminal misconduct allegations against Thomas are still under investigation, she decided to terminate his tenure heading UMC because he repeatedly misled county officials about the fiscal health of the hospital, which has hemorrhaged some $50 million during the past two years.

"I had concerns about his lack of transparency regarding the hospital's financial situation," Valentine said moments after presenting the hospital's CEO with notice of his firing. "I've decided it's not in the best interests of Clark County for Lacy Thomas to continue running University Medical Center."

Thomas left the County Commission meeting at which he was dismissed through a back door of the Clark County Government Center, evading a throng of reporters seeking comment on his firing and the criminal probe.

He did not return to the hospital Tuesday, UMC spokeswoman Cheryl Persinger said. Efforts to reach him for comment later were unsuccessful.

But Thomas' friend Bill Taylor, owner of one of the Chicago companies whose contracts with UMC police are investigating, opined that Thomas is the victim of a racial vendetta.

"If this man was white, this wouldn't be happening," Taylor said. "He's an African-American in a redneck state. They hated his guts the day he walked in there. ... There's a lot of racist folks that don't want him there, and they'll do anything to get him out of there, including lying."

County officials stressed that having a much bigger loss than the $18.8 million deficit Thomas reported to them in November would not affect patient care or the hospital's abilities to meet its payroll obligations.

However, they acknowledged for the first time Tuesday that taxpayers will be on the hook for a subsidy to reduce the red ink spilling from UMC.

"There will be a bailout," said George Stevens, the county's chief financial officer. "The reality is the hospital has lost $50 million in two years."

Thomas, 50, joined UMC three years ago after leaving his job as director of John H. Stroger Jr. Hospital of Cook County, formerly Cook County Hospital, in Chicago.

One of four finalists recruited by a national head-hunting firm, Thomas was approved as UMC's chief with a recommendation from then-County Manager Thom Reilly.

Authorities are investigating Thomas' ties to several other Chicagoans, according to the affidavit detectives filed seeking permission to search UMC on Tuesday.

Besides Thomas' office, police searched the offices of Chief Financial Officer Richard Powell and Marlo Hodges, the hospital's chief operations officer.

The affidavit states that police suspect that Powell and Hodges, both former employees of Thomas from Chicago's public hospital, had knowledge of suspected fraudulent contracts Thomas arranged for friends "and even assisted in the crimes."

FORMER EXECUTIVES AID PROBE

Before Tuesday's search of UMC, police had gathered much of their information from two former UMC executives ousted by Thomas.

Former COO Blaine Claypool and former CFO Mike Walsh told police that Thomas bypassed them and awarded hospital contracts "to businesses of his friends from the Chicago area." The contracts were all "professional services" contracts not subject to a competitive process in which public agencies must publicize a job offer and accept the lowest bid for the work.

Several of the companies did not have business licenses in Nevada or Illinois, the affidavit states.

Claypool, Walsh and other UMC officials told police no work product ever resulted from the contracts, but five of the Chicago-based vendors received anywhere from $22,575 to $673,268 for services rendered.

Claypool told police that Thomas was a close friend of ACS Senior Vice President Bob Mills and was flown to the Virgin Islands to observe consulting work the company was performing at a hospital on St. Thomas.

Upon Thomas' return, he drafted a contract with ACS to take over collecting bills, handling patient admitting and record-keeping at UMC.

"Claypool indicated that he and Walsh told Thomas numerous times that the contract was not in the best interests of UMC and that due to the wording in the contract, (ACS) would receive money for basically doing nothing," the affidavit states. "Thomas ignored his objections."

CONTRACTS ON CONSENT AGENDA

The County Commission subsequently approved the ACS contract Thomas recommended to them as part of a consent agenda, during which commissioners approve numerous routine items without discussion.

A county audit revealing the results of that contract prompted the police probe. County Auditor Jeremiah Carroll found the contract Thomas recommended with ACS Consulting -- designed to bolster the hospital's bottom line -- actually led to a $6 million fall in revenue during its first year in place.

Carroll's staff also found flaws in the ACS agreement that allowed the company to collect more than $1 million in fees even though the firm was supposedly working on a pay-for-performance basis. ACS also received a lucrative commission by arranging the sale of UMC's bad debt for a fraction of its worth, a bungled transaction criticized in the audit.

The Review-Journal published a story about Carroll's findings on Nov. 18. Assistant Sheriff Mike McClary said police opened their investigation on Nov. 20 at the request of Clark County District Attorney David Roger, both law enforcement officials said in interviews.

Claypool and Walsh also told police Thomas was friends with owners or key employees of other Chicago businesses with whom he arranged contracts.

For instance, Claypool told police that Thomas was a former fraternity brother of the president of Frasier Systems Group, Gregory Boone. The company was awarded a contract to evaluate how to speed up UMC's business office.

Boone briefly visited UMC, but Claypool never saw a completed work product from the company, the affidavit said. A source inside UMC told police detectives the company has been paid $673,268 from UMC coffers. The company could not be reached for comment Tuesday.

Police also investigated the contract Thomas arranged with Chicago's Taylor Consulting Services, hired to examine Medicaid eligibility issues.

Taylor, owner of Taylor Consulting, which is operated out of a single-family home in Chicago, was paid nearly $43,000 by UMC.

Reached Tuesday evening, Taylor, 76, said he is an expert in Medicaid eligibility and came out of retirement to help Thomas, a friend since their days working together at Stroger. Taylor charged less than his usual consulting rate because of that friendship, he said.

He said he visited Las Vegas every month for about a year to review UMC's Medicaid eligibility department and processes. He gave a written report to Thomas each time, he said.

"I'm not a crook. He's not a crook," Taylor said. "I didn't steal from no taxpayers. Never had. Never will."

Claypool and Walsh told police Thomas, Powell and Hodges instructed hospital employees to pay these Chicago-based companies' bills within days of being invoiced despite the hospital being months behind paying scores of other vendors' bills.

FINANCIAL REPORTS ENDED IN MAY

Meanwhile, Tuesday saw the culmination of concerns that commissioners, who serve as UMC's board of trustees, began raising in November about the lack of information they were receiving on the hospital's finances.

While Thomas, a certified public accountant, gave them private assurances everything was OK, he stopped delivering mandated monthly reports on the hospital's balance sheet in May.

Asked for a public report, Thomas told commissioners two months ago that the hospital had lost an estimated $18.8 million in the fiscal year that ended June 30, and assured them that the hospital was in good shape.

The hospital had been budgeted to lose $12 million.

But the hospital's outside auditors disagreed with his figures in a preliminary annual audit presented to commissioners Tuesday.

Accountants from Ernst & Young told commissioners they began meeting with UMC officials in November to discuss adjusting their $18.8 million to a larger figure.

Tom Roche, an Ernst & Young partner, told commissioners the private firm had a different opinion than did UMC's administrators about the hospital's chances of collecting on some of the debt owed by patients.

However, UMC administrators did not reveal the possibility of higher losses to commissioners when appearing before them in November and December, when Commission Chairman Rory Reid repeatedly asked about UMC's finances.

Reid asked Thomas and Chief Financial Officer Powell on Tuesday why they had not told commissioners during finance reports over the past two months that their outside auditor was discussing raising their annual loss figure by millions of dollars.

"Why weren't there any red flags being raised," Reid asked. "There's a perception that we weren't told something you knew."

Thomas responded that he did not know the extent of Ernst & Young's planned adjustment in December.

"Accounting is an art, not a science," said Thomas, who has blamed UMC's losses on the rising number of uninsured and indigent patients the hospital treats.

REID CITES LACK OF INFORMATION

Reid said in an interview that commissioners were not asleep at the wheel regarding the hospital's finances, but they weren't given enough information.

"We didn't understand what was happening," he said.

After Thomas' dismissal, Valentine appointed Kathryn Silver as UMC's acting CEO. Silver most recently served as the hospital's associate administrator of managed care, business development and planning. Valentine made Stevens the hospital's acting chief administrative officer.

The two are charged with assessing UMC's management team and financial situation and making recommendations to Valentine and the commission.

Dr. James Lenhart, vice dean of the School of Medicine which has 110 physicians under contract to provide medical services at UMC, said he was concerned by Tuesday's firing of Thomas and the criminal probe.

He said the School of Medicine will want to know about the hospital's new leadership and whether the county can find a quality replacement for Thomas given the recent problems.

Said Lenhart: "It would appear, with everything that has transpired, we may have hired the wrong person."

Review-Journal writers Brian Haynes and Annette Wells contributed to this report.