SICK OF HOSPITAL BILLS

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Probing Phoebe's IRS tax filings, they found that CEO Joel Wernick was paid $707,000 (including benefits) in Phoebe's 2002 fiscal year and had an interest-free loan from the hospital for $85,300. The filings also showed that Phoebe had more than $300 million in net assets and reported offshore entities in the Cayman Islands worth some $15.5 million. At the same time, Phoebe had sued citizens in the Dougherty County area, one of the nation's poorest, hundreds of times over a five-year span, making the hospital one of the region's most litigious parties. Phoebe garnished the wages of patient Virginia Franklins, 49, even though she made $7 an hour pressing men's dress shirts and had no house or car to her name. After that, Franklins says, "I couldn't afford to pay my bills." She now lives off welfare, caring for a 13-year-old niece as well.

Phoebe says there's nothing improper about its finances or executive compensation. The offshore entities are legal investment and insurance vehicles that have saved the hospital money, officials say. On its website, Phoebe notes that it spends $46.6 million on charity care, and officials stress that patients are informed by hospital signs and other means that they may be eligible for free or discounted care. CEO Wernick, who repaid the loan, calls the class action against Phoebe frivolous. It implies hospitals "are indifferent to the plight of the uninsured," Wernick continues. "That's just not the case."

Bagnato and Rehberg say they are not on a vendetta against Phoebe, though their feud with the hospital took some ugly turns. Aiming to draw attention to what they felt were unscrupulous practices, they sent faxes to local politicians and businesses last fall and winter, including one that showed a cartoon of a fat "Phoebe Exec" puffing on a cigar, with a caption saying, IS THERE REALLY CORRUPTION AT PHOEBE? Around the same time, they say, their office at Albany Surgical was bugged. Rehberg's wife Wanda reports coming home one day and finding the door lock jammed. She saw a phone-company employee outside attempting to install a line that the couple had not requested. Rehberg and Bagnato don't accuse Phoebe of bugging their office or orchestrating other surveillance, and a hospital spokeswoman denies any involvement. But Phoebe slapped Rehberg and "coconspirators" with a defamation suit for sending the faxes, claiming they harmed the hospital's reputation.

Rehberg, meanwhile, says Phoebe tried to intimidate him by sending a couple of private eyes to accost him in a parking lot last month. According to a complaint Rehberg filed with the FBI, the men jumped out of a Jeep, claimed they were former FBI agents, blocked his vehicle and demanded he come with them to sign documents granting him "immunity" from lawsuits in exchange for cooperation. "Think about your wife Wanda and family," Rehberg says he was told, and "keep quiet about all this." A father of 8-year-old twin girls, Rehberg, 44, a former hospital CFO, had never faced anything like this. Phoebe admits it sent the men but denies trying to strong-arm Rehberg.