How the world’s richest doctor gave away millions — then steered the cash back to his company


https://www.statnews.com/2017/03/06/soon-shiong-philanthropy-business/

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He was greeted like a star philanthropist.

The world’s richest doctor had just made a $12 million gift to the University of Utah. Members of the university community were urged to come thank him. And so, a crowd gathered.

For months, Dr. Patrick Soon-Shiong would continue to reap praise for his generosity in publicity put out by the university. Not mentioned in any of the tributes: $10 million of his donation would be sent right back to one of his companies. And the contract for his gift was worded in a way that left the University of Utah with no other choice.

The university health system did get free and valuable information for genetics research through the deal. But a STAT investigation has found that Soon-Shiong benefited even more from his charitable donation.

He got reams of patient data to help him build a new commercial product meant to assess patients’ risk of rare and inherited diseases. He got a stream of cash for one of his struggling companies.

And the deal made it possible for his company to inflate, by more than 50 percent, the number of test orders it reported to investors late last year while updating them on interest in a flagship product, a diagnostic tool known as GPS Cancer. Soon-Shiong’s team counted genetic sequencing ordered by the University of Utah in those order numbers — even though the work for the university did not have anything to do with diagnosing or recommending treatments for cancer patients.

Even in the world of academic donations, which the wealthy often use to burnish their image or advance pet causes, the arrangement stands out as highly unusual.

STAT has previously detailed how Soon-Shiong’s high-profile cancer moonshot initiative achieved little scientific progress in its first year, instead functioning primarily as a marketing tool for GPS Cancer.

The University of Utah deal — laid out in contracts obtained by STAT through a public records request — illustrates how Soon-Shiong boosted his business through his philanthropy. He has been accused of doing just that in at least two legal filings, but the Utah contracts offer the first concrete example, spelled out in black and white.

Four tax experts who reviewed the contracts at STAT’s request all agreed that the Utah deal was suspicious. Two said it appeared to violate federal tax rules governing certain charitable donations, amounting to indirect self-dealing by Soon-Shiong and his foundations.

“They’re laundering the funds through the University of Utah,” said Marc Owens, a tax lawyer with Loeb & Loeb. Owens, who said the contracts appeared to violate federal rules, previously spent a decade as head of the Internal Revenue Service’s tax-exempt division.

The other two legal experts said the contracts were cleverly worded in a way that would likely steer clear of self-dealing — but agreed that, at the very least, they raised serious questions about Soon-Shiong’s intent.

“We pretty clearly have an optics problem,” said Morey Ward, a tax lawyer with Ropes & Gray who represents tax-exempt organizations.

Soon-Shiong’s spokeswoman, Jen Hodson, did not answer a list of emailed questions or return calls from STAT. Soon-Shiong has denied STAT’s repeated requests for an interview dating back to last fall.

 

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