Questions and answers: Jerry Foxhoven's wrongful termination claim

Former Iowa Department of Human Services director Jerry Foxhoven revealed more details about his wrongful termination claim on August 1. He asserts that he was fired after expressing concern about the DHS continuing to pay a large share of the salary for the governor’s deputy chief of staff, Paige Thorson.

As Bleeding Heartland reported last week, Thorson worked extensively on Medicaid-related issues for some time, but she became less involved with the DHS this spring, as Governor Kim Reynolds brought on a new health policy adviser.

Foxhoven and his attorney Tom Duff released a written statement and answered many follow-up questions during a 45-minute news conference. Radio Iowa posted the full audio. The questions and answers below are not a transcript from the conference, but rather my effort to put information about Foxhoven’s case in context for readers.

How can the former director sue for wrongful termination when he resigned?

Foxhoven did not intend to quit on June 17. During a meeting with Reynolds’ chief of staff Sara Craig Gongol and legal counsel Sam Langholz, he was presented with a letter of resignation to sign. Even the governor’s staff admit the DHS director was forced out.

Under long-established case law, a person can sue under such circumstances “if the evidence is clear you would have been fired had you not resigned,” an experienced employment attorney told Bleeding Heartland.

State agency directors are at-will employees who serve at the pleasure of the governor. Doesn’t that mean Reynolds was entitled to fire Foxhoven at any time for any reason?

Duff explained to the assembled reporters,

There are exceptions to the at-will doctrine, and one would be terminating someone in violation of public policy. And firing someone because they are about to blow the whistle, or because they refuse to engage in illegal conduct violates the public policy of the state of Iowa, and that is an exception to the at-will doctrine.

Duff was one of the plaintiff’s attorneys on a case that helped establish a precedent in this area. Michael Manahl was fired from a senior position in the Iowa Department of Agriculture and Land Stewardship in 2013, before his probationary period was up. (After six months on the job, he would have become a merit-based employee who could be sacked only for cause.) He sued under the Iowa Code section on whistleblowers and claimed “wrongful termination in violation of public policy.”

An Iowa Court of Appeals panel ruled unanimously that Manahl was entitled to a trial on his wrongful termination claim. Even though the state asserted he was fired for other reasons, a “steady drumbeat of industry pressure for some kind of action concerning the weights and measures bureau–coinciding with Manahl’s termination […]–creates a genuine issue of material fact” concerning whether he was fired for investigating potentially fraudulent fuel pricing practices.

Similarly, Foxhoven will claim he was fired to prevent him from seeking a legal opinion about using DHS funds to pay a staffer doing unrelated work. The state will claim the governor decided to “go in a different direction” for various other reasons.

Did Foxhoven ever mention his concerns about salary payments to Reynolds?

No. Foxhoven told reporters, “I hadn’t had much communication with the governor, frankly,” and hadn’t met individually with Reynolds since the November 2018 election. Prior to the election, he had had “fairly regular” meetings with her, perhaps every month or two.

Months before he was fired, Foxhoven said, he sent the governor a text asking for a short meeting. “I never even got a response to it.”

What transpired in his conversations with the governor’s chief of staff?

Early in the 2019 legislative session, Foxhoven suggested to Gongol that since Thorson was doing less work related to the DHS, the governor’s office should ask the legislature for additional funding to cover her position. Republican lawmakers later approved an extra $200,000 for the governor’s office, supposedly for health and tax policy analysts. “When they got the appropriation for it, I thought, frankly, that was going to solve the problem, that we wouldn’t be paying any of Paige Thorson’s salary anymore at that point,” Foxhoven said.

As the new fiscal year approached, Foxhoven reached out to Gongol to confirm his agency would no longer be on the hook for 69 percent of Thorson’s salary. The chief of staff indicated the governor’s office expected DHS to keep paying.

It was pretty clear they were not open to it being a discussion, and that’s when I said, then I need to get a legal opinion. And frankly, I made a reference to the [State] Auditor’s office. And I said, at some point, the auditor’s going to come in–that’s what they do–they’re going to come in and audit us. And I do not need the auditor to come in and say Jerry Foxhoven misappropriated or diverted moneys from his budget.

And so I said, if that’s the case, and the AG’s [Attorney General’s] office has told me they think it’s legal, then I’m alright with it. I can show that to the auditor and say, hey, I reached out and got an opinion for it.

Foxhoven says he told Gongol he would accept an opinion from the governor’s legal counsel Langholz, but Gongol rebuffed the idea. So he said he would e-mail the assistant attorneys general who work with DHS on June 18 to seek their input.

Some days after that conversation, Gongol reached out to set up a meeting, initially planned for June 14 and eventually held on June 17. “They knew I was going to be sending an e-mail to the Attorney General’s office on Tuesday,” Foxhoven said. So on that Monday, they told him, “Your position is over. Give me your key card and cell phone, don’t go back to your office.”

Reynolds and her staff have repeatedly denied Foxhoven ever questioned the legality of continuing agency payments to support Thorson. Most recently, the governor said in a written statement released on August 1,

As I have consistently shared with Iowans, many factors went into my decision to ask for Jerry Foxhoven’s resignation. Foxhoven never raised concerns with me or my staff about the salary agreements in question, and he never asked my staff for a legal opinion or said he would be reaching out to the Attorney General’s office for one. I would never ask anyone to do something they thought was illegal. My focus remains on the many Iowans that DHS serves, and I am committed to selecting a new director who will take this agency to the next level.

At some point, a jury will have to decide whose testimony is more credible.

Why didn’t Foxhoven contact the assistant attorneys general before June 18?

During the first half of June, the DHS attorneys were tied up with a federal lawsuit related to disciplinary practices at the agency’s State Boys School in Eldora. As a former trial attorney himself, Foxhoven knew “the last thing a lawyer needs when he’s in the middle of a big trial” is to get an e-mail on an unrelated matter. “We were winding down that trial,” and he expected proceedings to be over by June 18.

“I really didn’t think it was going to be a problem,” he added. The assistant AGs would either say it’s legal or not legal to keep paying Thorson’s salary, and he would act accordingly. But “they terminated me before I could send that e-mail.”

Foxhoven confirmed he would not have objected to paying $100,000 a year to support Thorson’s salary if legal experts determined it was allowable. But in case the state auditor later found the practice to be improper, he wanted a letter from the Attorney General’s office. “There might be a difference of opinion between the auditor and the AG’s office, but it isn’t a matter of Foxhoven diverting funds.”

The governor’s office says Foxhoven never spoke to their chief of staff or anyone else about Thorson’s salary payments. How does he explain that?

“She’s not telling the truth about it,” he said of Gongol. “The bottom line is, I had a phone conversation with her, and I made it very clear that I questioned whether it was legal or not.”

Does Foxhoven think Reynolds is lying?

“I have no idea. I always have to try to assume the best of everybody. All I know is that, if Sara’s saying I never said that, she’s not telling the truth.”

Why did he sign previous salary-sharing agreements for Thorson?

As Governor Terry Branstad’s administration moved toward privatizing Medicaid, Branstad’s legal counsel Michael Bousselot did a lot of research on managed care in other states, Foxhoven explained. “It made a lot of sense” for the DHS (then led by Chuck Palmer) to agree to pay part of Bousselot’s salary.

When Foxhoven came into the job, his expertise was in child welfare policy, not Medicaid. The governor’s office suggested that a health policy person could help with the Medicaid transition, “and it made sense,” so he signed a memorandum of understanding on paying 69 percent of Thorson’s salary during the 2018 fiscal year.

By the time the next fiscal year started in July 2018, the DHS had hired Mike Randol to run Medicaid. He asked what Thorson’s role would be, and the governor’s office said Randol didn’t know Iowa providers or hospital systems, and Thorson could help with that. So Foxhoven agreed to have the agency continue to cover 69 percent of her salary through June 2019. But approaching the current fiscal year, Foxhoven didn’t “see the value” of paying Thorson, especially since Liz Matney left a senior position within Iowa Medicaid to work directly for the governor.

Duff commented that the governor’s staff and allies have highlighted the past salary-sharing agreements “as a way to confuse people.”

Does Foxhoven have any notes, written correspondence, or a memo corroborating his concerns about Thorson’s salary?

“Frankly, I didn’t think I needed to do that, to be honest with you.” He thought he and the governor’s chief of staff were having a discussion, and he’d decide based on the attorney’s opinion. He remembers “grousing” about the matter to a few people but isn’t sure whether written records exist.

At the same time, Foxhoven argued, “it’s not just a he said/she said” situation.

The facts are, they backed off the salaries for Paige for the last–for May and June, right? I mean, that’s exactly what I was complaining about. That we shouldn’t have been paying those salaries at the end of this–by the end of this fiscal year and beginning of the new fiscal year, that she was not doing work for Medicaid, and it was inappropriate to be paying that. And then now, surprise surprise, less than a month after I leave, they back that off.

Foxhoven was alluding to financial records that show an order on July 15 to reverse two $7,876.22 payments to cover Thorson’s salary for April and May.

Those records “totally verify exactly what I was saying. They wouldn’t have backed that off if they didn’t recognize there’s a problem with it.”

DHS staff have told other news organizations a “clerical error” resulted in double payments to the governor’s office for Thorson’s salary, which explains the reversal order.

“I don’t believe that,” Foxhoven commented. Speaking a short while later to a smaller group of reporters, he elaborated,

I think it’s awfully suspicious that on July 15, you know, less than a month after you laid me off because I said we shouldn’t be paying a salary, that you would then reverse the payment for the salary for the last two months. I mean it’s just, at some point the facts speak for themselves.

Editor’s note: The DHS provided new information to Bleeding Heartland on August 5. See update below.

What happened during his meeting with the governor’s staff on June 17?

“It was pretty short.” Only three people were in the room: himself, Gongol, and Langholz. Gongol said the governor’s decided to go in a different direction, asked for his ID and cell phone, and told him not to go back to his office. Langholz pulled out a short resignation letter and asked him to sign it.

He doesn’t remember saying much during the meeting, because “I was absolutely shocked. […] I was completely caught unawares, to be honest with you. I had never been given any impression from the governor and her staff that we weren’t moving in the right direction.”

Did anyone from the governor’s office ever come to him with negative feedback about his work?

“No. No, everything that I got from them was positive, that they liked the direction we were going, that they thought that we were making a difference, that we’re moving the needle.” He got lots of compliments from Reynolds on his work advocating for legislation on mental health care.

Foxhoven said it “seems a little disingenuous” for the governor to say she had many reasons for wanting to replace him. He had never heard the governor criticize his work, publicly or privately.

Furthermore, if you wanted to move in a different direction, “I’m not sure you would say, ‘Don’t go back to your office.’” He noted that Reynolds “moved in a different direction” by hiring him two years ago, yet Chuck Palmer wasn’t told not to go back to his office. He continued to show up at the DHS for weeks during the transition period.

Why didn’t the governor’s staff want Foxhoven to go back to his office on June 17?

“Because I think they were concerned that I’d get on a computer and send an e-mail.” He would have contacted an assistant attorney general requesting a meeting to discuss whether it was legal to keep paying Thorson’s salary when she wasn’t doing anything for Medicaid.

Taking his government-issued phone served the same purpose, Foxhoven said, because he could have used the phone to send that e-mail.

Without written documentation, isn’t Foxhoven’s claim going to be hard to prove?

Duff handled this one.

Most of these cases are built on circumstantial evidence, which would include the sudden, abrupt termination, the fact that Jerry had a good work record, that he had righted the ship, and then all of a sudden, he gets fired after he threatens to go to the attorney general. The fact that now they’re saying he didn’t have a good work record, which I don’t think they’re going to be able to prove.

Which means the reasons, we think that the reasons that they’re giving now, and I assume will give in the course of the lawsuit, are pretextual. In other words, they’re made up. And the jury is allowed to assume or presume that when you give a made-up reason, that the real reason was an illegal one. And that’s how a lot of these cases proceed.

What about Foxhoven’s recent conversations with the state auditor and the Office of the Inspector General of the U.S. Health and Human Services Department?

He didn’t reach out to the auditor. Sand reached out to him.

Likewise, he didn’t request an interview with the federal agency’s inspector general. A man “knocked on my door and showed me a badge and said I’d like to ask you some questions.”

Foxhoven said he told Sand and the federal investigator the same thing he’s telling the public now: “I was concerned that we were not getting any value to Medicaid out of Paige’s salary anymore, and so it was inappropriate for us to pay that salary.”

Was federal funding used to pay part of Thorson’s salary?

“I believe it was.” But Foxhoven didn’t view that as a problem before this year.

I didn’t question the legality of using Medicaid funds to pay Paige’s salary when she was doing something of value to Medicaid. It’s when it started looking like now she’s really only the deputy chief of staff, and she’s not doing anything to really add value to Medicaid that it didn’t make any more sense.

Did he discuss Matney’s salary with Reynolds’ chief of staff?

“Everybody’s making a big deal of the Liz Matney thing,” but it “didn’t come up in the conversation.” He didn’t anticipate that would be an issue for the DHS, because the governor’s office had received an appropriation for a health policy analyst.

On a related note, Foxhoven confirmed the governor’s staff never presented him with Matney’s salary-sharing agreement, covering the last six weeks of the 2019 fiscal year. The governor’s office has told reporters that since July 1, they have paid Matney out of their own budget.

Was Foxhoven’s ouster related to the DHS contract talks with the private companies managing Medicaid?

The timing of Foxhoven’s forced departure prompted speculation that he may have disagreed with terms being negotiated with the for-profit companies that manage care for about 600,000 Iowans on Medicaid. State officials signed new contracts shortly after the current fiscal year began on July 1.

Foxhoven doesn’t think his ouster had anything to do with that angle. He led contract talks in 2017 but was “not very” involved this year, as Randol handled that task.

Why didn’t Foxhoven speak out sooner after getting fired?

“You know, I think part of it was initially I just wanted to move on, just get out and move on. And then I think there was all this innuendo from the governor’s office and so forth that made it look like I did something wrong.”

What are the next steps in his case?

Foxhoven’s attorney will file a complaint sometime next week with the state of Iowa’s appeal board. Duff said he typically drafts that document like the claim he will later file in court. There’s no hearing before the board; they only consider written records submitted.

They have to leave the claim with that board for six months before they can withdraw and file a lawsuit in Polk County, where they intend to seek a jury trial.

Duff estimated that it may take a year and a half to two years to get to trial. In his experience litigating these cases, the state never offers to settle during the appeal board phase or after a lawsuit is filed. “That’s fine,” he added. “I’m happy to go to trial with Jerry.”

They haven’t settled on an amount for any monetary claim. They can ask for lost wages, if Foxhoven doesn’t find other employment or if he takes a new job at a lower salary than the $154,000 he was making as DHS director. He’ll also be seeking damages for emotional distress and damage to his reputation.

What’s Foxhoven’s end goal?

“It’s about clearing up my name, and again, it is the message I want to send to those 4,000 people [working at DHS], that I’m exactly what I told them I was, and what I expected them to be. And that is, I’m going to follow the rules and do what’s right.”

UPDATE: After ignoring numerous inquiries, DHS spokesperson Highland provided the following chart on August 5, showing that on July 26, the governor’s office returned two payments of $7,876.22 to the agency. Highland commented via e-mail, “To be clear, Paige Thorson’s salary was partially funded by the Department of Human Services (DHS) for the full 12 months of SFY19. The Department identified a clerical error of two duplicate payments for April and May. Consistent with standard practice, these were identified and have now been reversed.”

Highland did not immediately respond to a follow-up question on why the agency transferred $12,755.45 on July 25 to cover Thorson’s salary for June. Perhaps the deputy chief of staff received a large raise during the final month of the fiscal year. The memorandum of understanding contains the following clause: “Should any change in compensation and benefit cost occur after July 1, 2018, the Department will continue to be invoiced 69% of the cost of salary and benefits.”

LATER UPDATE: Highland wrote back, “The June payment is higher because it includes one extra pay period plus one day, which was paid out in July for work done in June for the final period of fiscal year 2019.” I’m seeking additional explanation, because if two pay periods leads to a monthly payment of $7,876.22, then DHS would be paying $3,938.11 per pay period. Three of those would be $11,814.33. I don’t understand how DHS arrived at $12,755.45 for June by tacking on one day. Perhaps Thorson got a raise or year-end bonus.

Top image: Jerry Foxhoven (left) with attorney Tom Duff at an August 1 news conference.

  • It's such a shame...

    Thanks for this. Well researched and written as usual. After a day laying here with no comments, I thought, somebody somewhere, likely brighter than me, would surely weigh in with a comment or insight or simple thanks. Anyway, here is a simple thanks from someone.
    “It’s such a shame,” and “It’s such a beautiful day,” were a couple of the comments spoken by Marge Gunderson in Fargo while driving the finally captured Gaear Grimsrud; comments I presume that were simple musings about the general state of stupidity that resides innate in our species, giving rise to all manner of bad behavior that in the end, benefits no one.
    “It’s such a shame,” is so appropriate to so many of the actions of Republicans in power in these times. They do these things because they can. And in the end, they benefit no one.
    I had been under the general impression (well before any of this) that Foxhoven was a (getting rarer all the time) Republican who at least in general would try to do the right thing. And now he’s gone, too. It’s such a shame.

    • Thank you for your simple thanks

      I usually want to express appreciation after reading one of the very good posts on BH, but don’t want to say the same thing over and over. Thank you for your creativity in expressing thanks, and also for reminding me of how much I liked Marge Gunderson, the sane good person in the middle of awful insanity.

    • to my knowledge

      Jerry Foxhoven was not a Republican. I’m not sure about his current voter registration status, but state and federal databases show he has donated to both GOP and Democratic candidates.

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