Audit Details Misuse of Funds at U.S. Pain Foundation

By Pat Anson, PNN Editor

It’s been over a year since serious “financial irregularities” were uncovered at the U.S. Pain Foundation and former CEO Paul Gileno was forced to resign under pressure. But the Connecticut based non-profit is still dealing with legal and financial fallout from years of nepotism, self-dealing and lax oversight by its management and board of directors under Gileno’s leadership.

A newly released audit of U.S. Pain and its 2018 tax return indicate that Gileno misappropriated over $2,055,000 from the charity from 2016 to 2018. The board did not discover the financial irregularities until April 2018, when it hired an auditor and attorney to investigate.

‘The findings were clear that the former president had engaged in unauthorized transactions involving the misuse of assets of the organization. The Board demanded and received the former CEO’s immediate resignation on May 29, 2018, and shortly thereafter reported the matter to federal authorities,” the audit states. “The criminal investigation is still ongoing into the former president’s activities.”

In addition to the federal investigation, PNN has learned that the Connecticut Attorney General’s office is planning to seek a court order to prohibit Gileno from ever handling charitable funds again.

U.S. Pain is providing few details on how Gileno was able to misappropriate over $2 million from the charity over a three year period. The misused funds were reported to the IRS as “excess benefit transactions,” a broad category that includes unauthorized compensation, reimbursement for Gileno’s personal expenses, and payments to Gileno’s family members for unspecified work.

In addition to the $32,537 that Gileno received in wages for roughly five months of work in 2018, he collected over $166,000 in excess benefits last year. The latter amount includes a $36,000 payment to an unidentified company owned by Gileno. It is not clear what the payment was for.

PAUL GILENO

PAUL GILENO

Gileno’s wife, sister and step-daughter were also on the charity’s payroll, collecting nearly $71,000 in wages in 2018. It is not clear what work they did. Gileno’s sister also received an unspecified amount of severance pay and maternity leave, according to the tax return.

The auditor also reported that U.S. Pain has been unable to recover any money from a $100,000 investment in SMJ Homes, a real estate business owned by Gileno’s brothers. A promissory note from the company was due in February 2019, but has not be repaid.  

Poor Business Decisions

In addition to the questionable payments to Gileno and his family, the audit and tax return show that U.S. Pain entered into a series of poor business decisions.

In 2016, U.S. Pain launched an “unrelated bakery business” that Gileno, a former caterer, established to “further the general mission” of the charity. Nothing in U.S. Pain’s mission statement says anything about a bakery.

The bakery was unprofitable from the start, reporting a net loss of nearly $70,000 in 2017. The board voted to liquidate the business last year at a cost of over $72,000 and recently agreed to pay another $23,900 to settle lease obligations for the bakery. In all, over $165,000 in charitable funds were wasted on the failed enterprise.

After Gileno’s departure, the board agreed to forfeit a non-refundable deposit of $50,000 that Gileno authorized in a failed attempt to purchase PainPathways magazine.

The board also scrapped a $2.5 million prescription co-pay program with Insys Therapeutics, a controversial drug maker whose founder and four former executives were recently convicted of racketeering. U.S. Pain said it would no longer accept funding from Insys, but rather than return leftover funds the board has kept $200,000 from the company in an escrow account.

Dealing with all of these legal and financial issues has been costly. According to its tax return, U.S. Pain paid nearly $514,000 for legal services, accounting and penalties in 2018 — nearly a quarter of its revenue for the year.

Gileno: “I Never Misled Them”

How could the self-dealing and financial irregularities go undetected for so long? Interim CEO and board chair Nicole Hemmenway said in a statement last December that Gileno “repeatedly misled and concealed information from the Board of Directors and staff.”

But Gileno, who has admitted taking money from U.S. Pain for his own personal use, maintains that he kept the board informed. “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,” Gileno told PNN last year. 

Gileno did not respond to a request for comment for this story. Neither did Hemmenway. A spokesperson for U.S. Pain said in an email the tax return and audit “constitutes our public statements on these matters.”

The charity’s 2018 tax return was filed on time, but its 2016 and 2017 returns were delinquent and filed late in 2018. They indicate there was no real oversight of Gileno by the board until last year.

“The former President/CEO controlled the board process. The records maintained under his leadership list the officers and directors… but contain no evidence that election of officers and directors occurred,” the tax returns said.

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The audit indicates that U.S Pain “rents its main office from the father in law of an employee” who is not identified. Public records for the city of Middletown, CT indicate the building is owned by Ottavio Monarca, who is the father-in-law of Lori Monarca, U.S. Pain’s Executive Office Manager. Rent of $25,000 was paid for the office in 2018 and the lease continues until 2020.

Hemmenway was paid a salary of $71,750 in 2018. The other two board members, Wendy Foster and Ellen Lenox Smith, a former PNN columnist, did not receive any compensation. Smith’s daughter-in-law, Shaina Smith, was paid a salary of $76,700 in 2018 as Director of State Advocacy for U.S. Pain.

Despite all of these expenses and business losses, U.S. Pain appears to be in fairly good financial shape compared to other charities. It received over $1.8 million in donations and grants in 2018, and ended the year with over $454,000 in cash — an enviable position for most non-profits, which often struggle to raise money.

Major corporate donors to U.S. Pain include Abbvie, Amgen, Lilly, Sanofi, Novartis, Teva, Abbott, Pfizer and other pharmaceutical companies.   

Sen. Ron Wyden (D-OR), the ranking member of the U.S. Senate Finance Committee, sent a letter last December to Hemmenway asking a series of detailed questions about the charity’s relationship with Insys  and other drug makers. According to the senator’s office, Wyden has still not received a full response.  

“A substantial amount of information that Senator Wyden requested from the U.S. Pain Foundation remains outstanding. Staff continues to communicate with the foundation in order to fully understand the financial relationship and contacts it has had with pharmaceutical manufacturers, including Insys, and its compliance with applicable federal laws,” a Wyden spokesman said in a statement to PNN.

Sen. Wyden Wants to Censor Pain Experts’ Opinions

By Lynn Webster, MD, Guest Columnist

In 2016, the Comprehensive Addiction and Recovery Act (CARA) created an advisory panel called the Pain Management Best Practices Inter-Agency Task Force and charged it to “develop a set of best practices for chronic and acute pain management and prescribing pain medication.”

The task force has just released its first draft report that makes several recommendations. One is to update the scientific evidence on which the Centers for Disease Control and Prevention’s controversial 2016 Guideline for Prescribing Opioids for Chronic Pain was based. Another goal is to expand areas already included in the guideline.

On December 18, 2018, just before the report was published, Oregon Senator Ron Wyden (D) wrote a letter to Alex Azar, Secretary of Health and Human Services (HHS). In it, he questioned the ability of several experts to serve impartially on the task force because of their alleged connections to the pharmaceutical industry. Specifically, Sen. Wyden worried that opioid manufacturers could exert “financial influence” on those task force members.

Wyden’s concerns about the HHS’s vetting practices would be understandable if the individuals who had been appointed to the advisory panel actually were receiving funds directly from industry. However, that is not the case.

Wyden’s letter specifically mentions Dr. Jianguo Cheng, president of the American Academy of Pain Medicine (AAPM), and Dr. Rollin Gallagher, editor-in-chief of the journal Pain Medicine.

In his letter, Wyden opposes Drs. Cheng and Gallagher’s participation primarily because of their association with AAPM, a professional medical organization that has registered concerns about the impact of the CDC’s opioid prescribing guideline on people in chronic pain.

Dr. Josh Bloom, the American Council on Science and Health’s Director of Chemical and Pharmaceutical Sciences, recently shared written communications from Drs. Cheng and Gallagher that make it difficult to see any logical reason to object to their participation on the panel.

SEN. RON WYDEN (D-OR)

SEN. RON WYDEN (D-OR)

Since he became president-elect of the AAPM at the end of 2016, Dr. Cheng has had no financial ties to the pharmaceutical industry. Similarly, to ensure Pain Medicine’s editorial independence, Dr. Gallagher voluntarily ended his relationships — consulting or advisory— with the industry when he became editor-in-chief more than 10 years ago.

Ironically, the AAPM has long advocated for alternatives to opioids and generally supported the CDC guideline. However, they did have concerns about lack of evidence for some of the CDC’s recommendations. Other organizations, including the American Medical Association (AMA), have also criticized components of the CDC guideline.

Wyden has previously lodged a similar complaint with the National Academies of Sciences, Engineering, and Medicine, also challenging members selected for an FDA advisory panel because of a perceived conflict of interest. Following his complaint, Dr. Mary Lynn McPherson, professor at Maryland University School of Medicine, and Dr. Gregory Terman, who was the president of the American Pain Society, were removed from the panel. Here again, neither Dr. McPherson nor Dr. Terman personally received funds from Pharma. The University of Maryland and the American Pain Society, with which they were associated, did.

If Wyden’s reasoning were taken to its logical conclusion, no member of the AMA or any professional organization of pain experts critical of the CDC opioid guideline would be an acceptable member of the advisory panel. Also, most university faculty members would be disqualified because their universities accept funding, in one form or another, from industry.

Some people assume that any association with industry must create bias and cause conflicts of interest. Perhaps so, but that does not apply to the people Wyden is trying to silence. Further, membership in a professional association or serving as a faculty member of a university that receives industry support should not necessarily disqualify an individual to make an important contribution to committees. The goal should be to seek out the most qualified individuals.

There is danger associated with Wyden’s persistent efforts to purge advisory panels of members who have expressed views he doesn’t share. In essence, eliminating people with differing views from advisory panels stacks the deck. It creates a special-interest group that is empowered to influence policy without having to consider differing opinions. The irony is that this very attempt to limit bias creates bias.

Prohibiting experts with no direct connections to industries, like Drs. Cheng, Gallagher, McPherson and Teman, from participating on advisory panels seems to be a punitive gesture. Physicians and researchers, such as these four individuals, who actually care for patients are uniquely equipped to help advisory committees set best practices for pain management. And these panels cannot afford to lose the expertise that these individuals can provide.

If the vetting process includes removing all potential conflicts of interest, then it should also flag anyone who has ties to insurance, including Medicare. Clearly, insurance companies have a financial interest in which treatments are recommended.

Today, Wyden and others are calling to ban anyone with direct or indirect ties to Pharma from serving as a government adviser. Tomorrow, another industry could be targeted. For example, people who work in energy or university researchers who receive industry grants to study the weather might not be permitted to advise the government on climate change. This would likely mean the committees would be comprised of the least knowledgeable individuals.

Hopefully, the HHS and other governmental bodies will consider viewpoints from a broad swath of qualified experts and not just those whose perspectives they endorse. A functioning democracy must value and listen to all views.  

Lynn Webster.jpg

Lynn Webster, MD, is a senior editor at Pain Medicine. He is also a vice president of scientific affairs for PRA Health Sciences and consults with pharmaceutical companies. Webster is a former president of the American Academy of Pain Medicine and author of “The Painful Truth: What Chronic Pain Is Really Like and Why It Matters to Each of Us.”

You can find him on Twitter: @LynnRWebsterMD. 

The information in this column should not be considered as professional medical advice, diagnosis or treatment. It is for informational purposes only and represent the author’s opinions alone. It does not inherently express or reflect the views, opinions and/or positions of Pain News Network.

U.S. Pain Foundation Suspends Fundraising

By Pat Anson, PNN Editor

The U.S. Pain Foundation, which is under investigation for financial irregularities and the misuse of funds by its former CEO, has stopped soliciting donations.

In a statement posted on U.S. Pain’s website, interim CEO Nicole Hemmenway said the Connecticut-based non-profit has “ceased soliciting funds.” For many charities this is a key time of year for fundraising, but as PNN has reported, U.S. Pain’s registration with the Connecticut Department of Consumer Protection, which regulates charities in the state, has expired. Without an active registration, U.S. Pain cannot legally solicit donations in Connecticut.

(Update: U.S. Pain’s charitable solicitation registration was renewed by the Connecticut Department of Consumer Protection on January 4, 2019) 

In her statement, Hemmenway said U.S. Pain would renew its registration once its delinquent tax returns – known as 990 Returns – for 2016 and 2017 are filed.  She blamed former CEO Paul Gileno for the long delay in filing them.

“The delay in filing the 2016 and 2017 Returns can be attributed to inaccurate and incomplete financial records maintained by the former CEO. The delayed preparation of the 990 Returns in turn delayed the renewal of our charitable solicitation registration in the state of Connecticut, which expired as of November 30,” she said.

“We are cooperating with the Connecticut Department of Consumer Protection, which has not opened a formal investigation into U.S. Pain. Once the 990 Returns are available, we anticipate the registration will be renewed. In the interim, we have ceased soliciting funds. In addition to working with the Department of Consumer Protection, we initiated a meeting regarding the former CEO’s actions with the Office of the Connecticut Attorney General.”

NICOLE HEMMENWAY

NICOLE HEMMENWAY

To be clear, Hemmenway and U.S. Pain’s board of directors did not contact Connecticut Attorney General George Jepsen’s office until this month, when they became aware that PNN was planning to publish stories about the foundation’s delinquent tax returns and other questionable activities.

Hemmenway and the board have been aware of Gileno’s alleged embezzlement for some time. An internal audit found evidence of “financial irregularities” and possible criminal acts several months ago. The board requested and received Gileno’s resignation on May 29.

On September 5th, Gileno confessed in an email that he “took money from US Pain for my personal use.” The email was sent to over a dozen key leaders at U.S. Pain, including board members Ellen Lenox Smith, Wendy Foster and Suzanne Stewart. Stewart resigned from the board soon afterward, saying she felt “kept in the dark about many things.”

Only recently has any of this been brought to the attention of law enforcement, or U.S. Pain’s members, volunteers and donors.

(Update: In a December 20 press release, U.S. Pain said the financial irregularities were discovered in April and that “appropriate authorities” were notified in early June. Hemmenway has not responded to a request to identify who or what agency was contacted. PNN has been unable to verify any contact between U.S. Pain and law enforcement until early December.)

“It does seem like they will blame it all on me which makes me sad but I guess their legal counsel thought it was the best route for them to take no responsibility and to ignore all of the good I have done and the lives I have changed,” Gileno said in an email to PNN.

“I guess they don’t want to discuss that they all were part of US Pain for over 8 years and Nicole was Vice President since we changed from CT Pain Foundation to US Pain Foundation in January 2011. I took responsibility for any mistakes and worked to rectify it ASAP so the organization I created and founded could continue to help others. I did not hide this and it seems they only brought this out because you discovered it and pressed them.” 

PAUL GILENO

PAUL GILENO

PNN has asked Hemmenway if the audit found evidence that others besides Gileno misused donated funds. She has not responded to that and other questions, such as how much money was misappropriated, what it was spent on, and for how long the misuse occurred.

“We did not previously comment on these matters on the advice of counsel, due to the ongoing investigation,” Hemmenway said in her statement.

U.S. Senator Wants Audit Details

U.S. Senator Ron Wyden (D-OR), the ranking member of the Senate Finance Committee, also wants to know if others are involved.

In a letter sent to Hemmenway yesterday,  Wyden asked for a copy of the audit and a detailed accounting of whether “any other employees, contractors, board members, volunteers or people otherwise associated with the foundation (have) been implicated in the misuse of funds.”

Wyden also asked for an explanation of why U.S. Pain’s membership was grossly inflated and how a $2.5 million donation from Insys Therapeutics, a controversial drug maker under criminal investigation, was spent on a prescription co-pay program called Gain Against Pain. As PNN has reported, Gileno and Hemmenway — who is board chair — disagree on whether the board even authorized the co-pay program.

“There are conflicting accounts of when the foundation’s board of directors was made aware of Gain Against Pain. Please clarify when the foundation’s board learned of the program’s existence, and when it learned of funding from Insys,” Wyden asked. “Were there any conditions connected to any of the donations from Insys to the foundation or the Gain Against Pain program?”

As Stat News has reported, Wyden and other senators have questioned the relationship that Insys and other drug makers have with patient advocacy groups, saying their donations present a conflict of interest. Over the years healthcare companies have donated several million dollars to U.S. Pain.

In a letter sent yesterday to Health and Human Services Secretary Alex Azar, Wyden suggested that it may be inappropriate for Cindy Steinberg, U.S. Pain’s National Director of Policy and Advocacy, to continue serving on a federal pain management advisory board because of “the legal and financial control issues faced by the U.S. Pain Foundation.”

As PNN has reported, Wyden himself has accepted donations from industries that he helps regulate. According to OpenSecrets, Wyden has received over $2.5 million in campaign donations over the last five years from individuals or PACs affiliated with healthcare and insurance companies.