‘Financial Irregularities’ Found at U.S. Pain Foundation

By Pat Anson, PNN Editor

The U.S. Pain Foundation released a statement late today accusing former CEO Paul Gileno of misusing funds and other unspecified “financial irregularities.” Gileno resigned at the request of the non-profit’s board of directors in May.

U.S. Pain is a 501 (c) (3) non-profit that claims to be the leading advocacy group representing chronic pain patients. Founded by Gileno in 2011, U.S. Pain has received several million dollars in grants and donations to raise awareness about chronic pain.

Until now, no explanation was ever made to U.S. Pain’s members, volunteers or donors about the reasons behind Gileno’s forced departure. The statement admitting funds were misused was released only after weeks of questioning by Pain News Network about Gileno’s resignation and the long delay in filing U.S. Pain’s 2016-2017 tax returns.

“As a result of an internal audit, we were dismayed to discover financial irregularities involving the former CEO of U.S. Pain Foundation. The Board of Directors immediately hired an independent attorney and a forensic accountant to investigate,” Nicole Hemmenway, interim CEO and chair of the board, said in the statement.

“The findings were clear that this individual had misused funds from the U.S. Pain Foundation. The Board concluded that the former CEO repeatedly misled and concealed information from the Board of Directors and staff. The Board demanded and received the former CEO’s immediate resignation.”

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U.S. Pain’s statement – which notably doesn’t even use Gileno’s name – offered no specifics about how funds were misused or the amount of money involved.

Gileno said in an email to PNN that he, not the board, hired an attorney and accountant to review the organization’s financial records. His email did not specifically address the allegation of misusing funds.

(Update: In an email sent to his former colleagues three months ago, Gileno admitted embezzling funds from U.S. Pain. See “Ex-CEO Admits ‘I Took Money From U.S. Pain’)

“I am the one who hired the attorney and accountant back in February 2017. The board did not. I hired them to fix any issues we may have had so we can grow,” Gileno wrote. “They are trying to cover their asses for being (an) inadequate board I guess.

“Also, I never misled them. They were part of U.S. Pain for over 10 years and I talked with them daily. Nicole and I were close like a brother and sister and I never hid one thing. I feel bad they are trying to use me as an excuse.” 

Missing Tax Returns

U.S. Pain’s failure to file tax returns for 2016 and 2017 could potentially put its tax-exempt status at risk. Under IRS rules, a non-profit that does not file returns for three consecutive years automatically loses its tax exemption. U.S. Pain’s 2015 tax return was filed in October 2017, over a year overdue.

“Because of the inaccurate and incomplete information provided by the former CEO, it has taken a significant amount of time to compile accurate books and records,” Hemmenway said in an email to PNN. “The organization has been working diligently with its new team to prepare the 2016 and 2017 returns, with the goal of filing them by the end of the year.”

Tax returns open a window into how much money a non-profit has raised and how it was spent. Non-profit organizations like U.S. Pain are not required by law to disclose who their donors are or the size of their donations, but their tax returns need to provide a detailed account of what was spent on salaries, travel, office supplies, accounting and other expenses.   

According to U.S. Pain’s 2015 tax return, Gileno was paid a salary of $403,000, a hefty share of the $1.35 million in revenue the non-profit reported that year. Gileno says part of his salary was “back pay” for prior years when he was paid little or nothing at all.

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paul gileno

The missing returns from 2016-2017 cover what appears to have been the most successful fundraising period in the non-profit’s history, when it received millions of dollars in donations, primarily from healthcare companies. The money funded a variety of U.S. Pain programs such as the Invisible Project, which raises awareness about chronic pain, and the Advocacy Network, which helps volunteers become patient advocates.

Insys Co-Pay Program

One program caught the attention of congressional investigators. “Gain Against Pain” was a $2.5 million prescription drug co-pay program funded by Insys Therapeutics, an Arizona drug maker that faces racketeering, fraud and other criminal charges over its marketing of Subsys, an expensive and potent fentanyl spray. Although Subsys is only approved for cancer patients in severe pain, Insys allegedly bribed doctors to prescribe it off-label for back pain and other chronic pain conditions, which resulted in the overdose deaths of hundreds of patients.

“It’s appalling that this organization partnered with Insys, which has a history of criminal behavior,” says Adriane Fugh-Berman, director of PharmedOUT, which seeks to expose unethical healthcare marketing. “It seems to fly in the face of their stated mission and seems like a betrayal of the patients they claim to represent.”

A report released by Sen. Clair McCaskill (D-MO) in February portrayed Insys donations to U.S. Pain and other non-profits as little more than marketing and public relations schemes aimed at getting more Subsys prescribed.

“These financial relationships were insidious, lacked transparency, and are one of the many factors that have resulted in arguably the most deadly drug epidemic in American history,” the McCaskill report found.

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Gileno defended U.S. Pain’s acceptance of money from Insys. "This funding, like any funding we receive, does not influence our values,” he said in a statement in response to the McCaskill report.

Three months later, Gileno was gone from U.S. Pain and the organization moved quickly to disassociate itself from Insys. The co-pay program was shut down and U.S. Pain said it would no longer accept funding from Insys.

The first reports about the aggressive marketing and off-label use of Subsys began in 2014. By 2015, overdoses were so common that the Southern Investigative Reporting Foundation referred to Insys as “Murder Incorporated.”

When PNN asked Hemmenway if the board of directors was aware of the criminal investigation of Insys at the time the co-pay program was established in late 2016, she claimed the board was “misled” about the program and never adequately infomed. “The Board was not aware of this program before it started, nor did the Board approve it,” Hemmenway wrote in an email.

Gileno disagrees, saying Hemmenway and the board were kept informed.

“Nicole and board knew in December 2016. Not sure why they are lying. Everyone who worked at U.S. Pain knew about it. Nicole certainly has emails from me about it. I don't know what games they are playing but of course they knew,” Gileno said. “The board of directors have always been a part of every decision and (was) excited about having a co pay program to help people with pain.” 

“It seems highly unlikely that a board would be unaware of a $2.5 million dollar program or that a president would be able to okay something like that without informing the board,” says Fugh-Berman, who co-authored an article critical of U.S. Pain’s “cozy relationship with its funders.”  

“Where did that money go? And the fact that it was used to make it easier for patients to get a highly addictive fentanyl drug that was made by the sponsor of that program is highly unethical.”

A non-profit expert told PNN it is unusual for a board to be unaware of a major program. 

“If a president initiates a program without the board’s approval, that’s a major problem. The board must decide what kind of program an organization conducts. It’s a board’s fiduciary responsibility and it’s important that the board meets its responsibility,” said Seth Perlman, an attorney who has represented non-profits for 30 years.

U.S. Pain board member Ellen Lenox Smith declined a request to comment for this story. Board member Wendy Foster did not respond to a request for comment.

‘Help Clean Up This Mess’

Some insight into how U.S. Pain and its board operate is provided in a blog post by former board member Suzanne Stewart, who resigned in September. In her partially redacted resignation letter, Stewart said she initially felt “it was my duty to stick by Nicole & the other Board members & our legal team, to help clean up this mess.”

But Stewart grew frustrated because she was “kept in the dark about many things” and decided it was time to leave.   

“I don’t feel safe being involved with voting on big decisions yet being left in the dark much of the time. I don’t really know where money is going or where it comes from in all honesty,” wrote Stewart, who also declined to comment for this story.

“It's sad to see the organization I started from nothing, in my bed on my lap top change so much and almost seem not to care about people with pain,” says Gileno. “I can’t believe after all of the things I have done and all of the work I have done to help the pain community I am being vilified.”

“We are determined not to let the actions of one individual interfere with or diminish our efforts to serve people with pain,” said Hemmenway. “As the new leader, I am heading up a review and revision of our governance and transparency policies. Due to our leadership changes over the past year, we feel this is an important step for the organization’s continued growth.”

One such “revision” was to significantly downsize U.S. Pain’s membership, from 90,000 to 15,000 members. More about that next week.