May 29--When whistleblower Joe Vincoli sent emails to his state representative, he never expected them to be forwarded to officials with Carolinas HealthCare System. After all, Vincoli was responsible for bringing federal investigators to the massive hospital system's door.

Vincoli's emails dealt, in part, with the federal investigation into CHS. N.C. Rep. Donny Lambeth, R-Forsyth, forwarded those emails to officials with CHS and MedCost, a for-profit health benefits company that the Charlotte-based hospital system co-owns.

It so happens that MedCost's other owner -- N.C. Baptist Hospital in Winston Salem -- is Lambeth's former employer. Lambeth served as the hospital's president from 2007 to 2011, before he was elected to the state legislature in 2012.

Vincoli says it appears Lambeth was trying to help former colleagues more than a constituent.

"He betrayed my trust," Vincoli said. "You expect (elected officials) to have a sense of propriety and a respect for confidentiality."

Vincoli fired off a complaint last week to the North Carolina Ethics Commission, alleging that Lambeth violated a state law requiring public servants to make a "diligent effort" to identify and avoid conflicts of interest. The commission investigates allegations of ethical impropriety by public officials.

The episode raises questions about who owns emails sent to public officials -- and how often messages sent in confidence wind up getting channeled to special interests.

Lambeth, who co-chairs the House health committee, told the Observer that he couldn't recall why he forwarded Vincoli's emails to officials at CHS and MedCost.

"I don't know what the intent was," Lambeth said. "I don't think it was a harmful intent, none whatsoever."

Lambeth said he's not aware of any ethical rules that would have prohibited him from forwarding the emails. He said he routinely sends the emails he receives to agencies "to make them aware of certain situations."

"All our emails are public information," Lambeth said. "I certainly didn't intend to betray (Vincoli's) trust. He's been a good friend for many, many years."

Battling the hospitals

To make sense of Vincoli's current complaints, it helps to understand his penchant for keeping an eye on health care dollars.

The 58-year-old Forsyth County resident once worked as director of managed care at N.C. Baptist Hospital, where it was his job to negotiate with insurers. There, he says, he told hospital officials they were being overpaid by the public health insurance plan for state employees. He says a hospital lawyer told him to "let sleeping dogs lie."

But in 2009, two years after he was fired by the hospital, Vincoli reported the problem to the state. That prompted an inquiry by the State Auditor's office, which found that the health plan had paid the hospital about $1.3 million more than its contract had intended.

N.C. Baptist sued Vincoli in early 2011, contending he had provided state officials with "disparaging and/or confidential information." The hospital later dropped the suit.

In 2009, Baptist's employees sued the hospital. They alleged that the hospital's choice of MedCost -- the health plan it co-owned and required its employees to use -- was not serving the best interests of employees.

The hospital ultimately agreed to pay nearly $5.4 million to settle the suit. The federal Labor Department later ruled that Baptist had not demonstrated that it was adequately protecting employees.

In 2010, Vincoli called the federal Labor Department to file a similar complaint about Carolinas HealthCare System, MedCost's other co-owner. The department soon began investigating.

The federal Employee Retirement Income Security Act, known as ERISA, prohibits most employers from using companies they own to provide health benefits for employees -- unless they can show the Labor Department that they're putting employees' interests first. Vincoli questioned whether Carolinas HealthCare's ownership and use of MedCost violated the law.

CHS officials have contended they're not governed by the federal law because of a provision that excludes governmental employers. CHS, one of the nation's largest public hospital systems, is a governmental entity known as a "hospital authority."

The Labor Department's investigation remains open.

'Crackpot'

Vincoli's actions in those cases were central to the the emails that Lambeth forwarded. (CHS provided those emails in response to a public records request filed by Vincoli.)

Vincoli knew Lambeth from his time at Baptist Hospital and lived in his legislative district. He said he regularly copied Lambeth on emails because he trusted him to help correct problems he was finding.

In July 2013, he copied Lambeth on two emails that concerned his efforts to report the overpayment to N.C. Baptist. Using his legislative email account, Lambeth forwarded those emails to MedCost Vice President Joel Groce. He included a note:

"Here is this weeks (sic) email from JV. Pass along to your attorney until I get him set up."

In January 2014, Vincoli copied Lambeth on another string of emails that concerned the federal investigation into CHS.

In those emails, Vincoli asserted that Carolinas HealthCare is not under state control and speculated about what might happen if the federal Labor Department determines it is not a governmental entity. Vincoli also offered to meet with Mecklenburg County Commissioner Bill James, who has contended the public has too little say over CHS.

Lambeth again forwarded the emails from his legislative account, this time to Carolinas HealthCare President Joseph Piemont. "You and Mike may be aware if (sic) the recent efforts by Joe If not I wanted you to be aware," Lambeth wrote.

(The "Mike" mentioned in that email referred to Michael Tarwater, Carolinas HealthCare's CEO, Lambeth said.)

Piemont forwarded Vincoli's email to a lawyer for the system, and to Greg Gombar, the system's chief financial officer. Gombar responded with a single word: "Crackpot."

While saying he couldn't recall his specific reasons for forwarding the emails, Lambeth said:

"I've had relationships with folks at Carolinas HealthCare, folks at Baptist and folks at many agencies for many years."

Lambeth has received thousands of dollars in campaign contributions from employees at N.C. Baptist and other hospitals. But public records don't show any contributions to his campaign from officials at Carolinas HealthCare System.

'Ethically incorrect'

CHS officials did not respond to most of the Observer's questions about the emails, and would not say whether they are considering legal action against Vincoli.

But a spokesperson said, "it's not unusual for our legal team to look into negative and potentially defamatory comments" made about the system.

MedCost officials declined to comment.

Jane Pinsky, director of the N.C. Coalition for Lobbying and Government Reform, said she does not think Lambeth's actions violated state law. Almost all emails to and from state lawmakers are public record, she said, and it would be hard to prove that Lambeth expected to benefit financially from sharing that information.

Still, Pinsky said, she finds Lambeth's actions "ethically incorrect."

"I think he should have said, 'If we're going to continue this discussion, I'm going to share these emails with the other side,' " she said.

Alexander: 704-358-5060

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A Connecticut judge denied a request Tuesday by PHL Variable Insurance Co. policyholders to stop paying premiums while keeping their coverage in force, despite allowing them to intervene in ongoing liquidation proceedings.

Judge Daniel J. Klau granted motions by several policyholders to intervene for a limited purpose but rejected their request for a so-called “premium holiday.” The policyholders had sought permission to suspend premium payments until the case is resolved, without forfeiting their policies.

The liquidation of the financially troubled PHL is expected by the end of 2026, interim Connecticut Insurance Commissioner Joshua Hershman said in a rehabilitator’s report filed two weeks ago.

A group of over-the-cap policyholders, mainly investors entitled to death benefits in excess of $300,000, filed a motion last month to obtain “relief” allowing the group to pursue “certain claims against Nassau Financial Group (and related subsidiaries), Golden Gate Capital and others … for looting PHL at the expense of the” policyholders.

In his Tuesday decision, Klau agreed that the policyholders’ request was "understandable," noting that some are paying millions of dollars annually while facing uncertainty about how much of their policies’ death benefits will ultimately be paid. However, the judge concluded that allowing policyholders to maintain coverage without paying premiums would be inequitable.

“It would be inequitable … to allow the policyholders to maintain coverage without actually paying for it,” he wrote, adding that policyholders must choose between continuing payments with uncertain returns or allowing policies to lapse.

Edward S. Stone represents SWS Holdings, which owns two Phoenix Generations universal life policies worth $18 million in death benefits. The company has paid more than $12 million in premiums to date, court documents say. SWS is among the large policyholders that sought intervenor status.

Absent "any meaningful relief," the ruling doesn't do much for his clients, Stone said Thursday.

To rehabilitate or liquidate?

Connecticut’s insurance office, which is overseeing the proceedings, previously sought to rehabilitate the insurer but announced in late 2025 that a turnaround was no longer feasible. Instead, the commissioner is now pursuing a liquidation strategy, citing insufficient assets to support a rehabilitation plan that would provide greater value than liquidation.

The court agreed that the shift from rehabilitation to liquidation represented a “material change in circumstances,” warranting reconsideration of a prior ruling issued in December 2025. Still, after reconsideration, the judge found that the commissioner’s opposition to the requested relief remained lawful, rational and made in good faith.

Policyholders, including institutional investors such as SWS and BroadRiver Asset Management, had argued that the move to liquidation justified revisiting earlier decisions. They also accused the commissioner of making misleading statements about the viability of a rehabilitation plan. The court rejected those claims, noting the commissioner had previously warned that rehabilitation might not succeed.

In addition to seeking a premium suspension, policyholders proposed placing premium payments into escrow accounts until the outcome of the case is determined. The court also rejected that proposal, reaffirming its earlier conclusion that the commissioner’s decision to decline it was "not arbitrary or capricious."

The ruling further denied policyholders’ requests for expanded access to non-public financial information, including internal analyses and transaction documents. The court said granting such access would undermine the statutory framework governing insurance rehabilitation and liquidation proceedings.

Full status denied

While allowing limited intervention, the court emphasized that policyholders are not entitled to full party status or broad discovery rights in the case.

The proceedings began in May 2024, when the commissioner filed a petition to rehabilitate PHL under Connecticut law. A moratorium was imposed shortly thereafter, restricting certain policyholder transactions while maintaining limited benefits.

The case now moves forward under a liquidation framework, which is expected to trigger state guaranty association protections for policyholders, though coverage is subject to statutory limits.

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