Between Sanford Health and T. Denny Sanford, deep ties

$600 million in donations isn’t the only string attaching Sanford Health to its major benefactor, T. Denny Sanford.

Sanford, left, and  Krabbenhoft

T. Denny Sanford, left, and Sanford Health CEO Kelby Krabbenhoft.

Photo: Carson Walker, Associated Press

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Since 2007, T. Denny Sanford has donated more than $600 million to the South Dakota health care company that now bears his name, helping it quadruple in size and pursue an ambitious acquisition strategy.

So when Sanford Health emerged in March as a suitor for Fairview Health Services and the University of Minnesota’s flagship hospital, Minnesota Attorney General Lori Swanson wanted to know more about the relationship between the sprawling health system and its billionaire benefactor.

David Link, a Sanford Health executive, acknowledged at a public hearing last month that the company gives business to Denny Sanford’s companies. But, he said, such work is not believed to be a “material part” of their business.

“Denny is a pure donor to us,” is the way Sanford Health CEO Kelby Krabbenhoft has described the relationship.

Public documents and interviews reveal a more complicated picture — a web of connections showing that Sanford’s companies have multiple and beneficial ties to the nonprofit health care network he endowed. And while Sanford Health has dropped its bid for Fairview, Swanson’s office continues to scrutinize the relationship because outstate Minnesota is already home to extensive Sanford Health operations, including clinics or hospitals in more than 30 communities from Bemidji to Worthington.

The Star Tribune has found:

• Sanford Health employs Rushmore Service Center, a company owned by Denny Sanford, for a portion of its debt-collection business, and uses First Premier Bank and Premier Bankcard, also owned by Sanford, for banking, check processing and a “limited number” of corporate credit cards, the company said.

• Sanford Health has committed millions of dollars for naming rights at civic arenas that promote Sanford’s name and bank brand, and millions more to buy a Sioux Falls commercial building from Premier Bankcard, according to documents and company statements.

• Although Denny Sanford holds no board or management positions at Sanford Health, his longtime personal lawyer joined its senior executive team in August 2010. Dave Knudson, a former majority leader in the South Dakota Senate, still works as an attorney for Denny Sanford and is listed as vice chairman at the Denny Sanford Foundation. He also is a director at First Premier Bank and Premier Bankcard, and received $80,000 from Denny Sanford’s political action committee starting in 2007 while running for public office.

In an interview with the Star Tribune, Krabbenhoft said the hospital is proud of its association with a donor of such magnitude and has invested appropriately to honor him. Spending money on athletic facilities and other civic projects is not uncommon in the health care industry, he said, and benefits the company. Such spending accounts for only one-third of 1 percent of the nonprofit’s expenses, he added. Any business dealings with Denny Sanford’s companies are done at arm’s length, the company has said.

“That’s one gentlemen who doesn’t need any favors,” said Krabbenhoft.

Denny Sanford declined to comment for this story.

“I strategize with them in long-term finance, but that’s all,” he told the Star Tribune in an earlier interview.

Whether such ties violate industry norms is a matter of opinion. It’s not uncommon for a major donor to bid for business contracts from a hospital, said Bill McGinly, president of the Association for Healthcare Philanthropy. And nonprofit hospitals often solicit donations from their bigger vendors.

As long as any bidding process is competitive, at market rates, there is nothing improper, McGinly said.

But a former staff attorney for the Minnesota Hospital Association sees potential red flags.

“You are not supposed to use nonprofit resources to benefit private parties,” said attorney David Feinwachs. “That’s a legitimate question that could impact [Sanford Health’s] tax-exempt status.”

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Sanford, left, and  Krabbenhoft