Glendening records are subpoenaed Federal grand jury probing Young seeks fund-raising data

Corruption probe widens

Two health care firms with ties to governor, ex-senator involved

March 04, 1998|By Walter F. Roche Jr. and Scott Higham | Walter F. Roche Jr. and Scott Higham,SUN STAFF

A federal grand jury investigating former state Sen. Larry Young has issued a new subpoena to Gov. Parris N. Glendening's office indicating for the first time that the probe will include an examination of the governor's staff and his campaign fund-raising efforts.

The federal subpoena served by FBI agents this week demands that Glendening and his staff produce all fund-raising records relating to Merit Behavioral Care Corp. of New Jersey and PrimeHealth Corp. of Prince George's County -- two firms with substantial business interests in the state.

The subpoena also demands records of meetings and conversations between members of the governor's staff and Young relating to Merit and PrimeHealth, and between Glendening staff members and the two health care companies.

The subpoena was issued amid a wide-ranging public corruption probe of the former West Baltimore senator, who was expelled Jan. 16 from the General Assembly for using his public office to benefit corporations he controls.

Merit and PrimeHealth figure prominently in the Young investigation because they paid consulting and other fees to the former senator and corporations he controls. PrimeHealth and Merit hold health care contracts in Maryland.

Both companies also have close ties to Glendening. While bidding on a state contract two years ago, Merit held a fund-raiser for the governor in Manhattan, flying him to New York on a corporate jet.

PrimeHealth received "extraordinary" help from members of the Glendening administration to win a contract from the state health department -- despite a series of past problems, including allegations of fraud. Bruce Marcus, an attorney for the governor, has performed legal work for PrimeHealth and an affiliated firm. He said he recently severed all ties with the companies.

Andrea Leahy-Fucheck, director of the governor's legal office, refused late yesterday to release a copy of the subpoena or to describe its contents. She did say it was "routine and expected" and similar though not identical to a subpoena from the state prosecutor.

"I can't go into detail," she said.

Second subpoena

The federal subpoena marks the second time the governor's office has received a grand jury demand for documents in the past three weeks.

Last month, a state grand jury investigating Young issued a subpoena to Glendening's office, requesting records relating to the former state senator.

The latest subpoena issued by the federal grand jury goes further, indicating that U.S. prosecutors and FBI and Internal Revenue Service agents are interested in examining what role, if any, members of the governor's staff played in the contract that went to PrimeHealth and Merit's campaign to win work from the administration.

Young, once one of Glendening's closest political allies, played critical roles for both companies and they paid thousands of dollars in fees to companies he controls. As a private consultant, Young collected at least $115,000 in fees and other payments from Merit while serving as the chairman of a powerful health care subcommittee.

Before becoming a consultant for Merit, Young was instrumental in developing a state plan to move Medicaid recipients out of traditional health care and into managed care. He served on a task force that drew up the proposal, and he chaired the subcommittee that approved it.

A key element of the plan was to contract separately for mental health services with companies such as Merit.

To provide the services worth $10.9 million over 18 months, the state solicited bids from Merit and other firms. Merit lost the contract after it became public that the company had arranged the Manhattan fund-raiser for Glendening. Glendening refunded the cost of the trip, and Merit lost the contract to a joint venture between CMG Health Inc. of Owings Mills and Green Spring Health Services Inc. of Columbia.

Merit later purchased CMG and took over the mental health contract. Magellan Health Services Inc., a company that also owns Green Spring, has since purchased Merit.

Lobbyists

At the center of the mental health care contract are two of the state's highest paid and most influential lobbyists -- Ira C. Cooke and Gerard E. Evans.

Cooke was the registered lobbyist for Merit in Maryland. Yesterday, he declined to discuss what role he played in the Merit fund-raiser or in the consulting contract that paid Young as much as $7,000 a month.

"I don't want to answer any questions," Cooke said.

Evans, the highest paid lobbyist in Maryland, represents two of the key players in the mental health field, Green Spring and Magellan. He has since been named in at least one state subpoena served on the state health department, which seeks records relating to Young and nearly two dozen other individuals and corporations.

When asked why he was named by the grand jury, Evans said: "I guess the clients I represent have been involved in this issue." Evans said he has not personally received a subpoena from the federal or state grand juries.

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