Blues told to revoke retirement packages Curran opposes $5.1 million payout

February 25, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

Maryland Attorney General J. Joseph Curran Jr. demanded yesterday that Blue Cross and Blue Shield of Maryland immediately revoke the supplemental retirement and severance packages under which two former executives stand to receive $5.1 million.

The payment is "irreconcilably inconsistent with the nonprofit mission of the company and constitutes an abuse and misuse of the company's powers," Mr. Curran said in a letter sent to Frank A. Gunther Jr., chairman of the Blues, and William Jews, the company's newly named president and chief executive officer.

Mr. Curran took the action late yesterday after learning that Blue Cross' board of directors would review today an analysis by a Washington law firm of whether the insurer could legally refuse to pay the benefits to former chief executive Carl J. Sardegna and former senior vice president Fred M. Gloth Jr.

In January, Maryland Insurance Commissioner John A. Donaho temporarily blocked Blue Cross from making the payments, saying the payouts could cripple the health insurer financially.

The attorney general's letter yesterday attacked the $5.1 million in payments to the two men on another front also, claiming the payouts violated terms of the state charter which says Blue Cross must be operated so that subscribers can obtain health care at a minimum cost.

"They talk about golden parachutes. I think this would be a platinum parachute," Mr. Curran said late yesterday. "I think this is something a non-profit corporation ought not to do."

Under the company's Supplemental Executive Retirement Plan, Mr. Sardegna was to be paid $2 million in cash 30 days after the termination of his employment and Mr. Gloth was to receive roughly $3 million. Mr. Sardegna and Mr. Gloth were the only Blue Cross employees designated for the plan, which was to be paid on top of their other pension and severance benefits.

"As an act of wisdom, the company ought to keep that $5 million for the benefit of Marylanders who need health care,," Mr. Curran said. "They're supposed to keep the premiums low."

Mr. Curran said the state could take formal legal action if the board refused to honor his demand.

Mr. Sardegna resigned in December, three months after a U.S. Senate committee's investigation revealed poor management and extravagant spending by the Blues. Mr. Gloth, a 42-year veteran of the company, retired Feb. 14, though he continues working there "pro bono."

Mr. Gunther could not be reached last night for comment about the attorney general's letter.

But following Mr. Donaho's action in January, Mr. Gunther said the commissioner had been notified about the insurer's plan to examine the retirement packages. He said the company was reluctant to "throw around dollar amounts" until it heard from its lawyers and determined whether it could legally refuse to pay the money.

Mr. Donaho's order barred Blue Cross from paying, or taking steps topay, "any sum" to either Mr. Sardegna or Mr. Gloth until the commissioner "determines that the payment will not have a deleterious effect on the financial condition of the company."

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