Young probe interested in sale of HMO Records subpoenaed from Blue Cross, Total Health Care

Grand jury investigation

Panel wants to know if payments were made to senator

March 18, 1998|By Walter F. Roche Jr. and Scott Higham | Walter F. Roche Jr. and Scott Higham,SUN STAFF

An article about former state Sen. Larry Young i Wednesday's Maryland section incorrectly stated that the University of Maryland's medical school was part of a consortium that purchased Total Health Care last year.

The Sun regrets the errors.

A federal grand jury investigating corruption charges against former state Sen. Larry Young is demanding records of payments that Blue Cross and Blue Shield of Maryland Inc. and a Baltimore health care firm might have made to the then-chairman of an influential Senate health care subcommittee.

The grand jury is seeking records relating to commissions or other fees that might have been paid during the purchase of the HMO business of the Baltimore company, Total Health Care, by a health care consortium that included Blue Cross and the University of Maryland Medical System.


At the time of the acquisition last year, Young was chairman of the Senate Finance Health Subcommittee and was president of a private, for-profit health consulting firm called the LY Group. Young was expelled from the Senate on Jan. 16 for using his public office to benefit his private corporations.

The records subpoenaed from Total Health Care were delivered yesterday to the federal grand jury in Baltimore. Documents subpoenaed from Blue Cross also were due to be delivered yesterday.

Blue Cross spokeswoman Linda Wilfong said yesterday that the company was cooperating with the investigation and "absolutely" did not make payments to Young or the LY Group. She also said Young played no role in the 1997 transaction.

But in a January 1997 article published in the Baltimore Business Journal, Young was quoted as saying that he was actively involved in the discussions, and he praised Blue Cross President William L. Jews as "one of the most exceptional health care administrators in the country."

Yesterday, Young's attorney declined to discuss his client's role in the acquisition and whether he or his LY Group received any payments from Blue Cross or Total Health Care.

"I have no comment," Gregg L. Bernstein said.

A Total Health Care representative who delivered documents to the grand jury yesterday declined to identify himself, and a company representative did not return a call for comment last night.

For years, Young has maintained close ties to Total Health Care. The West Baltimore company paid consulting fees to Young while he served as a legislator in 1989. More recently, the company named its main clinic at 1515 Division St. after the former senator. This year, Young held rallies at the clinic to protest his expulsion from the legislature.

In 1996, Total Health Care was the host of a Nov. 13 health care symposium honoring Young for his accomplishments as a state legislator and "the undisputed leader on the issue of quality health care." Blue Cross was listed in an event program as a "gold" sponsor, along with Ernst and Young, an accounting firm, and Mercy Medical Center. Jews was listed as a symposium participant.

Last year, Total Health Care's HMO business was sold to a new company called CarePartners -- a consortium that includes Blue Cross' FreeState Health Plan, the University of Maryland Medical System, the university's medical school and Mercy Medical Center.

Total Health Care also became a partner in the consortium and agreed to encourage its then-current Medicaid recipients to enroll in Freestate, the Blue Cross HMO. Total Health Care received $6,100,800 for the HMO business, according to records filed with the Maryland Insurance Administration. The company reported that it paid $656,865 in expenses related to the sale, much of it on legal and accounting fees.

In addition, Total Health Care used $1 million from the proceeds of the sale to acquire a one-fifth interest in CarePartners.

Other reports on file with state regulators show that Total Health Care was facing severe financial problems. In fiscal 1996, the company reported a $1.1 million loss. The company blamed part of the debt on a $2.2 million renovation of the Division Street clinic that was later named after Young.

State auditors also noted growing consultant expenses with Ernst and Young, the accounting firm. The company's debts, auditors noted, continued to grow, despite laying off 62 full-time employees in February 1997. Another 372 workers had their salaries cut by as much as 10 percent.

Despite the reported $6.1 million sale price, Total Health Care announced this month that it planned to lay off 28 employees.

In addition to the Total Health Care documents delivered yesterday, the federal grand jury also received records it had subpoenaed from American Ambulance & Oxygen Service. The company is owned by Willie Runyon, one of Young's close friends. Runyon placed Young on his corporate payroll between 1991 and 1995, and he contributed generously to the former senator's campaigns.

Runyon also purchased a Lincoln Town Car EX for Young in 1995. Young claimed the money Runyon paid for the car was a loan, but he never produced records showing he made payments toward the $24,800 purchase price.

lTC Last year, American Ambulance collected $358,000 in state payments.

The grand jury also received records yesterday from Young's accountant, Linwood Jennings. He said he delivered Young's personal tax returns dating to 1994, and returns for the LY Group, the consulting company Young formed in 1996 and ran out of his West Baltimore legislative office.

Pub Date: 3/18/98

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