PROVIDENCE, R.I. (WPRI) — Republican gubernatorial candidate Ashley Kalus’s company is slated to begin closed-door mediation proceedings with the R.I. Department of Health this week, kicking off an unusual process tied to a dispute over the firm’s COVID-19 testing contract with the state.

Doctors Test Centers (DTC), which Kalus started with her husband early in the pandemic, won a nearly $8 million testing contract from Rhode Island last July. By January, the relationship between company executives and state health officials had deteriorated, as both sides threatened legal action and law enforcement became involved.

“Whistle blowers do have protection when bringing up issues of waste, fraud, and abuse,” Kalus wrote in a Jan. 14 email to multiple state health officials. “I would suggest that you not erase your phone in preparation for litigation.”

DTC attorney Stephen Del Sesto has since evoked an unusual clause in the company’s state contract that stipulates the parties can take any unresolved disputes to R.I. Superior Court presiding justice Alice Gibney in order to “resolve their claims.”

What those claims comprise, however, isn’t known at this point. Del Sesto said they’ve been told by the court not to share any information publicly at this point.

“The mediation involves things related to the contract that DTC wasn’t happy with the way it proceeded,” Del Sesto told Target 12 on Monday.

Craig Berke, a spokesperson for the state judiciary, confirmed the mediation, saying the process is supposed to begin as early as Tuesday. But none of the underlying information is subject to public inspection, Berke said, since there’s no actual lawsuit filed at this point. (The dispute was first reported by The Providence Journal.)

Mediation is used often in business disputes involving disagreeing parties, such as individuals or businesses. The parties seek an impartial outsider to help resolve the disagreement, which some argue is beneficial because it can be speedier, less expensive and more discreet.

What’s unusual about the DTC contract dispute, however, is that the parties are tapping the Superior Court’s presiding justice to help resolve their disagreement. Mediation is typically dealt with outside of court and handled by retired judges or respected attorneys.

Berke confirmed this type of involvement from the court’s most senior judge isn’t typical, and he couldn’t immediately point to any other example of it happening in recent memory.

Del Sesto said the company and Health Department had already tried to resolve the issues privately, but DTC decided it wanted to involve the presiding justice, as is allowed under the contract. He was bullish the process could help the two parties avoid a future lawsuit — although he didn’t rule out litigation as a possibility.

“I’m always hopeful the parties can avoid litigation,” he said. “That’s what I’m going to try to help DTC and the Department of Health do.”

Gibney has asked retired Superior Court Judge Michael Silverstein to oversee the proceedings on her behalf, and the contract stipulates that “the parties shall share the mediator’s fee and any filing fees equally.”

Silverstein, who retired in 2018, has overseen some of the state’s most complicated civil cases in recent decades, including the fallout from the failed 38 Studios deal. He also helped create the state’s business calendar, a division of Superior Court that focuses entirely on business disputes.

Public records obtained by Target 12 offer a glimpse into some of the friction between DTC and state health officials.

At the heart of the dispute in January was the fact that Health Department leaders wanted DTC to vacate a Westerly testing site about two weeks before the company’s contract officially ended, so another testing company — Med Tech — could take over operations.

Emails obtained through a public-records request show state officials believed they had a written agreement with DTC to transition to Med Tech on Jan. 15. But two days before that, DTC chief operating officer Nick Toscano-McDonald informed state leaders the company had “decided that we will maintain control of our remaining sites until the end of our contract.”

The “direct reason,” according to Toscano-McDonald, was because they believed the new vendor was trying to hire away their employees in advance of the change. (Toscano-McDonald is now working as the scheduler for Kalus’s gubernatorial campaign.)

In response, the state’s COVID chief operating officer Kristine Campagna told Kalus and Toscano-McDonald that DTC no longer had state permission to operate at the testing site in Westerly after Jan. 15. Campagna went on to raise the “possibility of pursuing criminal trespass charges through law enforcement, if DTC fails to clear the property on time and leaving it in good condition.”

A Westerly police report was later filed by then-Lt. Paul Gingerella, who reported DTC officials removed Med Tech supplies from the testing site, including computers, printers and testing supplies. That kicked off a flurry of heated phone conversations and accusations, leading Gingerella — now Westerly police chief — to conclude “the administration of DTC has no idea what is going on in their testing facilities.”

In addition to the trespassing and litigation threats, Kalus has also accused the Health Department’s Campagna of directing her son to “take state property in the form of test kits” and give them to her “to use personally and privately” for her family.

“I have some other concerns about your behavior that was confided in me that makes me uncomfortable with you as our contract manager,” Kalus wrote in an email, suggesting she received the information from Kurt Hinck, who previously served as head of COVID testnig for the state until he left in January.

“Every time I have reported noncompliance or quality concerns, you have retaliated and defamed me,” she wrote.

Asked about the allegations, Wendelken declined to say whether the department had investigated Kalus’s claims. But he said at no time during the pandemic response “have we found anyone at RIDOH inappropriately accessed testing resources.”

“All of the operational decisions we make about our COVID-19 testing and vaccination sites are guided by a commitment to ensuring that Rhode Islanders have optimal healthcare and customer service experiences at those sites,” Wendelken said.

Kalus, who had previously declined to spell out whether she eventually plans to pursue litigation against the state, has since said the dispute shows that she’s a fighter — an image she’s emphasizing to voters in campaign TV ads that have begun running in recent weeks.

Kalus purchased a home in Newport after winning the lucrative state contract last year, and she registered to vote in Rhode Island on Jan. 18 — shortly before she filed to run for governor.

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook.

Ted Nesi contributed to this report.