A trail of legal complaints dogging Aspen Valley Hospital treasurer John Jellinek appears to have cast a cloud over the financial oversight of the cherished institution.
A months-long review by the Aspen Daily News uncovered 17 lawsuits, plus two more that his business partners drafted but never filed, accusing 63-year-old Jellinek of a multitude of financial improprieties including conversion, fraud, theft, unjust enrichment, negligence and repeated breaches of contracts, loan guarantees, leases and fiduciary duties.
All but two of the lawsuits — chronicled in court systems in and around Aspen, Chicago and Cincinnati — have been filed within the last few years. In at least four of them, judges ruled against Jellinek for sums of six and seven figures. He currently owes banks and investors millions of dollars. He insists it will eventually be repaid.
“Everybody in business has problems and I’ve had my share of them, but it has no effect on Aspen Valley Hospital,” Jellinek said in one of a series of recent interviews.
But Jellinek’s financial woes have impacted hospital politics.
Jellinek stands accused of suggesting that the hospital might move its money between banks in exchange for personal banking favors.
“There is no question that what John did was wrong,” said a bank executive who asked not to be named.
In May’s hospital board election, Pamela Levy e-mailed 350 voters urging them not to vote for two candidates with ties to Jellinek: David Missner and Deborah Hutchinson. Missner is Jellinek’s lawyer and business partner. Hutchinson, a hospital paramedic, walks Jellinek’s dogs for a fee and he once loaned her $20,000, which she paid back, for home down payment.
Levy’s e-mail included an exchange between her husband, Rick Crandall, and hospital ethics and compliance officer Elaine Gerson. Crandall perceived Missner’s and Hutchinson’s relationships with Jellinek as undisclosed conflict of interests.
“The hospital is a crucial institution to our local community and it deserves a Board that has all independent Directors who consider all issues presented to it without consideration of inter-member relationships and compensation,” Crandall wrote to Gerson. “I spoke with Chairman (John) Sarpa about this, but to his knowledge there is no procedure required of Board candidates to be disqualified for candidacy due to conflict of interest until they are actually elected and only then do they need to declare themselves to the Chairman. That seems to make a mockery of the election process. ... The last thing we need is a 3 out of 5 Board member Jellinek cartel at our Hospital.”
Crandall is a high-tech venture capitalist with a history of business dealings with Jellinek. One of those dealings, involving a company called Jelco XX, led Crandall and his business partners to accuse Jellinek of diverting more than $240,000 from Jelco XX to himself through Jelco Ventures Inc., a local company controlled by Jellinek and his wife, Jane, president of the Aspen Writers’ Foundation.
“The books indicated that the funds were used for Jellinek’s personal needs, including funding his airplane through a next-day transfer to its legal entity at the time, Roaring Fork Partners LLC,” read a 2007 lawsuit that Jelco XX drafted in a bid to get the money returned. The suit was never filed because the partners got their money back.
Gerson wrote back that “there are no such policy statements requiring individuals that sit on the board of directors (or other employees of AVH internally) that may have financial relationships with each other (in transactions not involving AVH) to disclose such relationships.” She noted that Crandall had the right to inform the public of any perceived conflicts of interest if he so chose.
Crandall said he and his wife received about 50 e-mails thanking them for bringing the issue to light. Even more feedback came at social events.
When the election came, both Missner and Hutchinson were defeated. Missner finished last, garnering just 49 votes out of 1,235. Hutchinson finished fourth with 320 votes.
Jellinek, responding to the Jelco XX allegations, insists he did nothing wrong.
“It was straightened out and everybody got paid,” he said in an interview. “Fraud is a willing intent to defraud somebody. There was no willing intent to defraud anybody. I am not a criminal.”
Jellinek said the money ended up in the wrong account due to a series of “mistakes.”
When asked why he signed at least one notarized statement indicating that Jelco XX had been paid the $240,000 when it had actually gone into an account that he and his wife control, Jellinek responded: “I didn’t check into it. I didn’t do my homework. I thought they were paid.”
He blamed a transfer of the Jelco XX funds to his airplane on an inexperienced office assistant.
That wasn’t the first time Jellinek had been accused of misappropriating funds.
In another dispute originating in Aspen, Jellinek was accused of fraud when $200,000 that Aspen resident Leo Edelstein had given to him allegedly didn’t reach its intended destination. That lawsuit was eventually resolved when Edelstein was repaid.
And just weeks ago another investor, Daniel Asher of Chicago, dismissed a lawsuit accusing Jellinek of diverting $650,000 intended for a telecommunications investment.
Crandall and a group of Aspen investors had another run-in with Jellinek when they invested in Labor Source, a Basalt-based temporary employment agency. They said Jellinek asked an accounting clerk for $71,000 in Labor Source funds without the consent of the other members of the company’s board. Jellinek wrote a promissory note guaranteeing he would pay the money back but defaulted on it, according to the draft of a 2006 lawsuit that eventually coaxed the money’s return.
“The bottom line is that all that was allegedly owed to Labor Source at the time of the complaint was paid in full,” said Missner.
Not everyone, however, has been paid in full.
Aspen resident Ken Gutner is owed $350,000 plus interest from a judgment that came down against Jellinek in a Chicago court earlier this year. He hasn’t been paid a penny.
Jellinek and Missner said Gutner is just one of a handful of parties owed money from two business deals — Swingles Furniture Rental and K2 Industrial Services of Illinois — that failed earlier this decade. They say some $3 million in judgments against Jellinek will be satisfied — if stock in a third company appreciates and sells.
Getting money from Jellinek can be an exercise in patience.
In the Swingles deal, Jellinek and a group of investors secured a loan from JP Morgan Chase Bank. The furniture rental company went bankrupt, leaving all of the investors out millions. When JP Morgan called its note, the other investors — Aspen residents Harris Cahn, Thomas Van Straaten, and Gutner — began making payments to the bank but Jellinek could not. The bank sued all four of them in a Chicago court.
Jellinek had pledged his art collection as collateral, so JP Morgan sold the collection’s most valuable asset, a Christo painting, to recover more debt. Once all its debt was satisfied, JP Morgan turned over the rights to the rest of Jellinek’s art collection to Cahn, Van Straaten and Gutner. Crandall claimed that Jellinek’s partners threatened to sell off the collection at a downtown Aspen art gallery in order to get their money back.
Missner said he doesn’t remember any mention of an Aspen sale of Jellinek’s art.
“I got phone calls saying we’re going to do this or we’re going to do that all the time,” Missner said. “But they weren’t interested in embarrassing John. That wasn’t the cause of the payment.”
Both hospital CEO David Ressler and board chairman John Sarpa said they looked into Missner and Hutchinson’s potential conflict of interests and concluded no disclosure was necessary.
“We all talked about it. We were satisfied there were no prohibitions against financial relationships between candidates so there was nothing we could do,” Sarpa said.
Ressler added that the large field of candidates — including eventual winners Dr. Barry Mink and Dr. Mindy Nagle — made it unlikely that both Hutchinson and Missner would win a seat on the board.
As for Jellinek’s financial problems, Ressler and Sarpa said they had heard “rumors” about some of them. They said they addressed his financial issues in a meeting with Jellinek.
“We talked to John about his business problems,” Sarpa said. “We just told him that on many levels it’s not our business but if it became a serious problem, that he let us know. He said he would.”
hoop@aspendailynews.com