ANNAPOLIS, Md. (AP) — Self-dealing contracts awarded to board members of a Maryland medical system that resulted in the resignation of Baltimore’s mayor reflected a “pattern by management” of making financial arrangements without full board approval, an independent review released Wednesday said.
The report was conducted by Nygren Consulting, a California company hired by the University of Maryland Medical System to conduct the examination of the scandal that led to the resignation of Mayor Catherine Pugh , a former board member, last month.
“Many of these contracts were not competitively bid, were not declared to be necessary by the Board or senior leaders, and, if vetted, were without full transparency to the entire Board,” the report said.
Pugh resigned amid investigations by state and federal officials. The FBI and IRS agents raided Pugh’s homes and City Hall in April. Pugh has not been charged with a crime.
The report also cited examples of former CEO Robert Chrencik entering into agreements without the board’s consent, particularly in the case of $500,000 in contracts paid to Pugh for her self-published children’s books between 2010 and 2018.
“The CEO agreed to enter an agreement with Ms. Pugh without consent of the Board,” the report said.
In addition, an audit committee was not informed of the book deals until long after the fact. For example, while an entry exists in a March 2018 presentation about UMMS buying 20,000 of Pugh’s “Health Holly” books, board members said they had no awareness of the arrangement.
The report also examined deals with several other board members. Chrencik again was mentioned in the report for entering into a consulting services agreement with former board member Robert Pevenstein, who received more than $100,000 a year. Yet, the report said, “most Board members stated they had little awareness of Mr. Pevenstein’s multiple financial arrangements either directly with UMMS or with entities that did business with UMMS.”
Chrencik also was noted in the report for entering into an agreement with former board member John Dillon, who received a $13,000 monthly retainer for dating back to 2012 for consulting work.
Chrencik had led the system since 2008 before being sent on a leave of absence in late March, after The Baltimore Sun reported on the financial arrangements at the $4 billion hospital system’s volunteer board. About one third of the board’s members received compensation through the network’s murky arrangements with their businesses, ranging from pest control to insurance and management consultation. He resigned in April.
Nygren also made recommendations to the board that UMMS says it already has adopted or will adopt. For example, the board already has adopted a new policy regarding conflicts of interest. The report also is recommending the board redesign its education process related to disclosure and potential conflicts for board members and senior management.
Gov. Larry Hogan signed emergency legislation in April to overhaul the network’s board of directors, which oversees a university-based regional health care system with about 28,000 employees and 4,000 affiliated physicians in more than 150 locations and at 13 hospitals. The new law bars board members from getting contracts without a bidding process and prohibits board members from leveraging their position on the board for personal gain. All board members who were previously appointed must step down by the end of the year, under the law.
On Wednesday, Hogan named 11 new members to the board. Also, new leadership was elected to serve for the rest of the year. James “Chip” DiPaula as chosen to be chairman, while Alexander Williams was selected vice chairman.