Former USPI CFO alleges he was fired for blowing the whistle on Tenet's 'improper financial reporting'

The former CFO of United Surgical Partners International alleges he was fired in retaliation for reporting potential securities law violations, according to a lawsuit filed June 24 in the U.S. District Court for the Northern District of Texas.

The plaintiff, Jason Cagle, began working for USPI in 2001 as outside counsel. He went on to guide USPI through its initial public offering, serve as senior vice president of acquisitions, and in January 2013, assume the role of CFO.

During his 18-year tenure, Mr. Cagle helped Addison, Texas-based USPI increase its portfolio by 500 percent, from 44 facilities in 2001 to 260 in 2015, when the company was acquired by Dallas-based Tenet Healthcare. Because Tenet was experiencing "serious financial losses" at the time, USPI leaders said they would only sell to Tenet if it agreed to an equity plan providing USPI's management team and about 100 employees with 10 percent of the upside in USPI's earnings over a seven-year period.

Tenet agreed to the compensation plan, which was based exclusively on USPI's performance, and by 2018 it had acquired 95 percent of USPI's stock.

Mr. Cagle says he was granted more than 750,000 stock options under the plan, which would be worth upward of $50 million in December 2022. Other executives and employees' stock options were worth more than $500 million, Mr. Cagle's lawsuit states.

In late 2018, Mr. Cagle "reported that this significant liability was not being appropriately reported on "the books," according to the lawsuit. Given its market capitalization, Mr. Cagle alleged Tenet had an obligation under the Sarbanes Oxley Act and other securities laws to make this material disclosure.

Mr. Cagle brought his concerns to USPI's then-CEO, Bill Wilcox, as well as Tenet's CFO. Afterward, Tenet disclosed the book value of the USPI compensation plan in its 2018 10-K but allegedly failed to disclose the amounts it would actually have to pay, as Mr. Cagle had advised.

In April 2019, Mr. Cagle again accused Tenet of improper financial reporting during a meeting with high-level executives, court documents say. Less than two weeks later, on May 3, CEO Brett Brodnax told Mr. Cagle that he could either voluntarily resign and receive a severance package with the same terms as a "not for cause" termination, or he could await a vote on his termination by the board of directors.

The board voted to terminate Mr. Cagle for "cause" May 9, and USPI's termination letter said Mr. Cagle was fired for failure to perform his material duties. However, there was no history of written warnings, bad reviews or performance improvement plans to support that reasoning, Mr. Cagle's attorneys say, and USPI won't disclose the minutes of the meeting that led to his termination.

Mr. Cagle alleges his stock option agreements with USPI were "valid and enforceable contracts" that USPI breached by terminating him, which prevented him from exercising his options.

Mr. Cagle claims he is entitled to recover damages, as well as to reinstatement at the same seniority status he would have had if he hadn't been fired. He is requesting a trial by jury.

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