Blues director screens candidates Schaefer invites confidant to talk to insurance commissioner finalists

May 14, 1993|By John W. Frece | John W. Frece,Staff Writer 1993, The Baltimore Sun

The finalists to become Maryland's next insurance commissioner were screened this week by a director of Blue Cross and Blue Shield of Maryland -- the biggest health insurer the next commissioner will regulate.

State officials confirmed yesterday that Gov. William Donald Schaefer asked J. Owen Cole, a retired banker and member of the Blue Cross board since 1988, to interview at least two finalists for the job that became vacant last month with the firing of Insurance Commissioner John A. Donaho. The governor's budget secretary also took part in the interviews.

In seeking Mr. Cole's advice, Mr. Schaefer turned to a representative of a company that Mr. Donaho had struggled to regulate during his nearly four years as commissioner. Mr. Donaho frequently complained that top Blue Cross officials exercised inordinate control over legislators and charged that the Blues were working behind the scenes to try to thwart his regulatory efforts.

Mr. Donaho was fired April 8 after threatening to push the Blues into insolvency if legislation to expand his authority to regulate them were to fail. The legislation he sought was passed by the General Assembly after his dismissal.

Mr. Cole, the retired chairman of First Maryland Bancorp, could not be reached yesterday. Governor Schaefer -- who for years has leaned on Mr. Cole for advice and to serve on numerous state boards and commissions -- declined through his press secretary to comment. Blue Cross officials also refused to comment.

But two state legislators who chair committees that deal with insurance issues said they saw no problem with the governor relying on advice from Mr. Cole.

"This commissioner is going to be responsible to regulate a huge insurance industry, one little piece of which is Blue Cross. [And] Owen Cole is perhaps one of the governor's most trusted and long-standing, very close, personal advisers and confidants," said Del. Casper R. Taylor Jr., the Allegany Democrat who is chairman of the House Economic Matters Committee.

It would be "a distortion," he said, to make an issue of Mr. Cole's involvement in the selection process.

State Sen. Thomas P. O'Reilly, a Prince George's Democrat who chairs the Finance Committee, agreed. "Owen Cole is as straight as a string, as honest as the day is long. . . .

"If Owen Cole said a person would do a good job, I don't think that insurance commissioner would owe him anything," Senator O'Reilly said. "And I don't believe Owen Cole would be selecting someone just because he thought he would be friendly to the Blues."

One Schaefer administration official, who asked not to be identified, said it was doubtful that Mr. Cole's affiliation with Blue Cross even occurred to the governor.

The official noted that among other jobs, Mr. Cole has served on the Maryland Transportation Authority, the Maryland Port Commission and a governor's study group looking into the possible privatization of Baltimore-Washington International Airport. He also has joined Mr. Schaefer on economic development missions.

"Whether or not he was on the board of Blue Cross was not even thought of, didn't even come up, wasn't even on the governor's screen," the official said.

State Budget Secretary Charles L. Benton Jr. said he was "very )) familiar with the fact" that Mr. Cole was a member of the Blue Cross board and noted that he himself is a former member.

But Mr. Benton said that Blue Cross was never mentioned during the interviews and that Mr. Cole's participation was not inappropriate because all the two of them were asked to do was recommend who should get the job, not make the final decision.

Administration officials would not say who the finalists were. They are believed to be Dwight K. Bartlett III, a retired chief actuary for the Social Security Administration, and a former insurance agent named Martin Corry.

The governor is expected to announce who will get the job early next week. Sources within the administration indicated that Mr. Bartlett remains the leading candidate.

Mr. Donaho was fired after sending a letter to Blue Cross president William L. Jews suggesting he would force the company into insolvency unless a satisfactory bill to boost regulation of the Blues was enacted. At the time, passage of the bill was in jeopardy.

"I think John was a little rough on Blue Cross, a little rougher than he probably should have been," Mr. Schaefer said the day his administration fired him. The governor's press secretary, Page W. Boinest, added that threatening the viability of a major insurance company was "not an appropriate lobbying tool."

But Mr. Donaho contended that his firing was simply the price he had to pay for being tough.

"What is happening to me is a demonstration of what can happen to people who want proper regulation of the Blues," the 75-year-old commissioner said.

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