Associated Press

CHARLOTTE — Former leaders of Cardinal Innovations Healthcare Solutions sued the state health department Thursday for taking over the organization and removing its board of directors, saying it lacks the authority to do both.

The counter-lawsuit filed in Mecklenburg County court tries to prevent Department of Health and Human Services Secretary Mandy Cohen from seating new members on a reconstituted board for the regional mental health care agency.

Appointments were being considered during a meeting Thursday in Alamance County.

DHHS temporarily took control of Cardinal on Nov. 27 following audits criticizing Cardinal leadership for excessive spending, compensation for CEO Richard Topping and severance packages. The board fired Topping last month and paid him and three other executives $3.8 million.

Thursday’s complaint was included in a response to a lawsuit DHHS and Cohen filed two days after the takeover. A trial judge then issued a temporary restraining order directing Topping and former board members not to interfere with Cardinal’s finances.

Topping said it’s important issues in the lawsuit get resolved. The lawsuit says Cardinal hasn’t committed financial mismanagement, so DHHS can’t take over its functions.

“We think it’s time to have the courts weigh in and provide clarity and guidance,” Topping told The Charlotte Observer.

In a recent interview, Topping said the conflict between Cardinal and DHHS stems from who controls Medicaid funds that a managed-care entity like Cardinal doesn’t spend on patients for required services because of efficiencies or healthier outcomes. Cardinal receives hundreds of millions of dollars in federal and state funds annually to treat the mentally ill, substance abusers and people with disabilities.

Laura Brewer, a spokeswoman for Attorney General Josh Stein’s office, which is representing DHHS, called Thursday’s counter-lawsuit “meritless.”

“We are extraordinarily disappointed that Cardinal’s former leadership is focused on the past,” Cohen said in a statement. “We remain temporarily in charge of Cardinal, and are focused on rebuilding the public trust and moving the organization forward.”

Cardinal’s complaint Thursday alleges that DHHS reneged on a deal when the Cardinal board told Cohen that it planned to pay severance to executive and repay the amount to the state. It also seeks the release of details of a proposed settlement between the parties discussed in recent days.

Cardinal manages mental health and substance abuse services for a 20-county region, including Rowan, Cabarrus, Davidson and Stanly counties.