All the Governor's Men

But the 63-year-old Kanell knows his limitations; he almost exclusively performs arthroscopic surgeries. When a serious knee injury befalls a Dolphins star or a world-class pitcher like World Series MVP Josh Beckett, the athlete usually sees an out-of-town specialist.

Like Lwin, the practice hired the right men to secure the district deal: Blosser and Sayfie. And Caldwell, whose father is a former Republican state legislator and right-hand man to Rep. Shaw, is well-connected in his own right, counting Scherer among his patients (as well as NBHD Commissioner Steven Berrard). Caldwell also happens to live just a few blocks from Scherer and Lwin on Ponce de Leon Drive in Rio Vista.

The Kanell deal was first aired publicly on April 15, 2003, at a meeting of the district's Legal Review Committee. To justify the doctors' exorbitant salaries, officials submitted a one-page sheet, called a pro forma, that lists all projected revenues and expenses. Today, that document is shrouded in mystery. No district officials, including Scherer or Kanell, have taken credit for it.

That might be due to the fact that the pro forma heavily inflates the Kanell practice's projected revenues and suggests that the district violated federal law that forbids doctors from receiving remuneration for referrals of patients and medical services to health care providers like NBHD.

The first number on the pro forma is the revenue projection for the three doctors: $2,491,451. This correlates with industry averages -- but it represents a vast exaggeration of what Kanell and his partners made in past years.

Before signing with the district, Kanell, Caldwell, and Yoldas worked for the private Holy Cross Hospital in Fort Lauderdale. Holy Cross officials wouldn't discuss Kanell's work there, but one former hospital board member, who demanded anonymity, claims the doctors were unproductive and cost the hospital hundreds of thousands of dollars between 1998 and 2003. Those shortfalls prompted Holy Cross leadership to force them out of their jobs last year, the source alleges. Kanell, however, insists he and his partners left of their own volition.

The doctors' Holy Cross revenues aren't a matter of public record, but the hospital apparently has a leak. Someone sent the 2001 Holy Cross orthopedic report to Dr. Reilly. It indicates that Kanell and his partners collected only $1,288,406 -- or about half the district's projection.

Kanell insists those numbers are low but doesn't dispute that they came from Holy Cross. He admits he doesn't know how much his practice actually earned. "Holy Cross came back with three different sets of numbers at three different times," Kanell complains. "They have a totally inaccurate accounting system over there. They can't come up with the right numbers."

But it seems apparent that the district figures were inflated to justify the lucrative salaries negotiated by Sayfie, who also says he can't pinpoint the district's revenues. "What isn't being taken into the equation is the MRIs we bring [to the district] and other things, like x-rays and physical therapy," Kanell elaborates. "Our numbers are more than just our services."

Kanell is basically confessing that the district is paying his practice for referrals. The problem with that explanation is that such compensation may violate federal anti-kickback legislation. Those laws are in place because such payments may be viewed as an inducement to defraud Medicaid by referring patients for unnecessary medical procedures.

The NBHD pro forma even seems to formalize illegal kickbacks -- it includes $788,837 for "ancillary revenue" -- or money generated from MRIs, x-rays, and other procedures picked up by the district, and $500,000 that would go to the district for "rehab revenue."

Fort Lauderdale health lawyer Gabe Imperato says the federal anti-kickback law, which is a felony punishable by up to five years in prison and parallel civil legislation, known as Stark laws, have numerous exceptions. One of the "safe harbors" for doctors is in cases of a "bona fide employer-employee relationship," so long as the compensation falls under fair market value.

Imperato, who received the details of the Kanell contract without the names of the doctors mentioned, says a case might be made that the terms don't constitute fair market value and are therefore unlawful. He added that a prosecutor could also argue that the contract is so flawed that there is nothing "bona fide" about the relationship between the district and the practice.

Basically, any blatant violation of the law, whether there is an exception or not, could lead to prosecution, he says. "I would never recommend to my clients to abuse the exceptions, because at some point, somebody is going to get annoyed by it and decide you are using them as an abusive way to pay referrals," the lawyer explains.

At the heart of any case would be the pro forma. Scherer insists through his public relations firm that he never had any involvement with the Kanell deal from the beginning. He claims to have recused himself because, as a patient of Caldwell's, he had a conflict of interest. Other officials say Scherer, because of his conflict of interest with Blosser, tries to stay away from all deals involving the lobbyist.

But the facts show that Scherer was, in fact, deeply involved in the Kanell hire.