Reinstatement of Dr. Everett R. Rhoades as director of the Health and Human Services Department's Indian Health Service was tentatively recommended this week by the top official handling the case, but sources said yesterday that a final decision will be left to Dr. Donald I. Macdonald, the new acting assistant secretary for health.
Rhoades, former professor of medicine at the University of Oklahoma medical center and the first Indian ever to head the IHS, was removed as director June 21 pending an investigation of allegations that he condoned favoritism by subordinates in the award of an IHS Harvard scholarship to Rhoades' daughter Dorothy in 1982, worth $33,254 over two years.
Department sources said that before he stepped down on Wednesday as acting assistant secretary for health, Dr. James O. Mason tentatively recommended that Rhoades be restored to his IHS director position but with a letter of reprimand for showing poor judgment in handling the matter. Sources said Mason recommended action against two Rhoades subordinates.
Secretary Margaret M. Heckler tentatively approved these recommendations. But Mason reportedly later told officials that Macdonald, the new acting assistant secretary, should review the file.
In an Oct. 28 final report, HHS Inspector General Richard P. Kusserow said his investigation had failed to prove that Rhoades "deliberately manipulated" the scholarship program to get grants for his daughter or a distant cousin, Lynda Sauhmaunt. Kusserow said he was advised by an assistant U.S. attorney that "this case does not justify a federal criminal prosecution."
But Kusserow said Rhoades did not move to assure there would be no favoritism toward Dorothy Rhoades even after warnings by several IHS employes that "special procedures" were being used by a subordinate handling her application.
Kusserow's report found that Rhoades' daughter at first failed to win an evaluation rating high enough for a scholarship. He said a subordinate of Rhoades initially sought to lower the cutoff line so she could qualify, then ordered a rating of her application by a new examiner.
In the end, Rhoades' daughter was awarded the scholarship without the help of either of these "special procedures" because it was decided to fund scholarships for everyone with grade averages over 3.0, raising the number of recipients from 25 to 55.
But before this happened, Kusserow's investigation found, Rhoades was specifically warned by several officials that "special procedures" were being used by a subordinate. However, Kusserow said Rhoades did not take any steps to investigate and "relied on assurances" from the man handling the scholarships, Pierre Colombel, "that nothing improper was done in the awards process.