Nonprofits battle for disability dollars, alleging theft, slander and espionage

By: - January 4, 2022 4:09 pm

(Photo by Getty Images)

A long-simmering legal fight over the revenue tied to services for disabled Iowans has been settled out of court amid allegations of theft, slander and corporate espionage.

The litigation sheds new light on the fierce competition for taxpayer dollars that can exist among nonprofit agencies set up to serve Iowans in need. It involves two Carroll County nonprofits located a half-mile apart: Caring Hearts of West Central Iowa and the Family Resource Center. Each provides so-called “Medicaid-waiver services,” such as personal assistance and respite care, that enable disadvantaged people to live as independently as possible within their community, near family and friends.

The legal battle between the two nonprofits began 13 months ago when the Family Resource Center, or FRC, sued one of its former employees, Dusty Stork, and the newly formed Caring Hearts.

The lawsuit claims that after Stork was fired in May 2020 from FRC for alleged theft, she launched Caring Hearts to provide the same sort of services to disabled Iowans that FRC was already providing.

According to the lawsuit, Stork sent an email to three other past employees of FRC, and attached to it a confidential list of 439 disabled clients of FRC. The lawsuit claims the list included protected health information related to FRC’s clients and was sent for the purpose of having the recipients contact the clients and solicit their business.

FRC sued both Stork and Caring Hearts, alleging trade-secret violations, fraudulent misrepresentation, breach of contract and interference with contracts. In court papers, FRC alleged it had lost $447,000 in revenue as a result of Caring Hearts’ actions.

In response, Stork countersued, claiming she had never worked for Caring Hearts “for compensation,” and that the company was formed not by her, but by her mother, LouAnn Mowrey, who had also once worked for FRC.

Stork also accused FRC’s then-executive director, Tim Nichols, of defamation, libel and slander, accusing him of sending a memo to the FRC staff calling Caring Hearts “a bad faith actor” that had “done tremendous damage to a significant number of our members through their blatant theft and dissemination of their protected health information.”

A judge eventually granted FRC’s request for an injunction that barred Stork from soliciting FRC clients and from divulging any of FRC’s confidential client information. The injunction also barred both Stork and Caring Hearts from using any of FRC’s confidential information or trade secrets.

FRC then filed with the court sworn affidavits from the relatives and guardians of disabled Iowans about Caring Hearts’ solicitations.

An FRC board member, Fran Satterlee, stated in an affidavit that her grandson, who lives independently, had received a letter from Caring Hearts about switching his services from FRC to Caring Hearts. “Someone had to inform Caring Hearts that he received Medicare waiver services, and provide Caring Hearts with my grandson’s address,” Satterlee stated.

An FRC service manager, Eleisca Clayton, stated in an affidavit that one of her clients, who could only express himself in one or two words, had said he was “sad” to be moving from a home where he received FRC services to a location where Caring Hearts would serve his needs. Another disabled Iowan did not want to switch to Caring Hearts, Clayton stated, but was overruled by her guardian, “uprooting” the disabled woman and disrupting the consistency of the services she received.

Last summer, with the FRC’s lawsuit and Stork’s counterclaims still pending, another member of the Stork family, Lori L. Stork, was fired from FRC. State unemployment records indicate she had worked at FRC as part of the nursing support staff when she was terminated in July.

According to state records, FRC accused her of spying on the company and then relaying information to Caring Hearts, where her sister in-law had an ownership stake in the business. FRC claimed Stork had sent Caring Hearts computer screenshots and documents from FRC, and then, after she was fired, she allegedly went to work for Caring Hearts.

Lori Stork subsequently applied for unemployment benefits, which were granted, but that decision was recently overturned by Administrative Law Judge Darrin T. Hamilton.

“During recent depositions, two of the deposed witnesses testified that (Lori Stork) was the one supplying the internal information coming from her employer,” Hamilton noted in his ruling, adding that Lori Stork’s “testimony of not recalling whether she did this or not because she has a bad memory is incredible. Committing repeated acts of corporate espionage to assist your family in litigation is not something one’s bad memory prevents one to recall.”

Hamilton ordered Lori Stork to repay the $3,382 in jobless benefits she had already collected, ruling that they “were received due to fraud or willful misrepresentation” by Lori Stork when she concealed the true reason for her termination.

On Dec. 30, three weeks after Hamilton issued that ruling, the lawsuits between FRC and Caring Hearts were settled out of the court and all of the claims were dismissed.

Jill Hawkinson, FRC’s new chief executive officer, declined to comment on the matter when contacted Tuesday.

Mowrey, at Caring Hearts, could not be reached for comment.

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Clark Kauffman
Clark Kauffman

Deputy Editor Clark Kauffman has worked during the past 30 years as both an investigative reporter and editorial writer at two of Iowa’s largest newspapers, the Des Moines Register and the Quad-City Times. He has won numerous state and national awards for reporting and editorial writing. His 2004 series on prosecutorial misconduct in Iowa was named a finalist for the Pulitzer Prize for Investigative Reporting. From October 2018 through November 2019, Kauffman was an assistant ombudsman for the Iowa Office of Ombudsman, an agency that investigates citizens’ complaints of wrongdoing within state and local government agencies.