April 14, 1998|By Walter F. Roche Jr. and Scott Higham | Walter F. Roche Jr. and Scott Higham,SUN STAFF
A grand jury investigating former state Sen. Larry Young took testimony and writing samples yesterday from four employees of a Lanham-based health maintenance organization that has become the focus of allegations of bribery and obstruction of justice.
The four PrimeHealth Corp. employees were questioned during the morning and afternoon sessions of the Anne Arundel County grand jury. The leadoff witness spent nearly two hours testifying. Before being excused, each employee was told to provide a handwriting sample.
The witnesses could not be immediately identified, but they were accompanied by Thurman W. Zollicoffer Jr., a lawyer representing PrimeHealth. He declined to comment yesterday, but said last week that the company planned to respond to the allegations by issuing a statement.
State Prosecutor Stephen Montanarelli and several members of his staff also were present for yesterday's proceedings. They, too, declined to comment.
The grand jury is believed to be trying to determine who might be responsible for erasing initials from PrimeHealth's financial records. Investigators theorize that the alterations were made to cover up alleged payments of as much as $91,175 by PrimeHealth to Young in exchange for helping the company win a state license and a lucrative Medicaid contract.
The bribery and obstruction of justice allegations were outlined in sworn search warrant affidavits filed in courts in Prince George's County and Washington on April 2. The next day, agents raided PrimeHealth's offices in Lanham and Washington.
PrimeHealth was founded two years ago, spun out of a debt-ridden corporation called Diagnostic Health Imaging Systems Inc. Owing the federal and state governments more than $1 million in taxes and facing a series of lawsuits, the radiology firm transferred its assets to PrimeHealth and kept the debts on its financial books.
PrimeHealth then applied to the Maryland Insurance Administration for a license to operate as an HMO, and to the state Department of Health and Mental Hygiene for a contract to treat Medicaid patients under a new program called HealthChoice.
As chairman of a powerful legislative health panel, Young helped create HealthChoice. He then lobbied state officials to delay the start of the program so patients could be enrolled in PrimeHealth, which was facing licensing and contracting problems.
The officials -- including Gov. Parris N. Glendening and Health Secretary Martin P. Wasserman -- resisted the delay at first, but they eventually consented, according to the affidavit.
State investigators said in the affidavit that records subpoenaed by the Anne Arundel County grand jury show that Young received payments totaling $12,000 from DHIS in 1995. They said Young then wrote a check to PrimeHealth for the same amount, but they could not find PrimeHealth records showing the money had been received.
Consulting in question
The investigators also said DHIS issued checks totaling $4,500 to one of Young's political aides, Zachary Powell. Powell said in an interview last week that he worked as a consultant to DHIS. Investigators said DHIS could not document a consulting agreement between Powell and the company.
Before PrimeHealth submitted its formal application to the insurance administration for a license, the company issued four checks made payable to cash. The memo line of each check contained the letters "sly." Investigators said in the affidavit that the letters stood for "Senator Larry Young."
After PrimeHealth submitted its application, the company issued another $500 check.
"This check also bears the notation 'sly' on the memo line," the investigators wrote in the affidavit.
The investigators also said that PrimeHealth issued checks totaling $20,200 to Wayne Clarke, the company's lobbyist. The memo lines of those checks also contained the letters "sly," but investigators said the references had been obliterated on copies provided to the grand jury.
Check registers
They also said that someone had "whited out" references to "sly" on PrimeHealth's check registers, which also were provided to the grand jury. By allegedly altering the records, the investigators said it appears someone might have obstructed justice.
If prosecutors determine who ordered the alterations, they might then be in a position to negotiate a plea deal with PrimeHealth employees in exchange for possible testimony against the corporation's officers and Young.
Young was expelled from the Maryland General Assembly on Jan. 16 for blending his public office with his outside businesses. A federal grand jury in Baltimore is conducting a separate corruption investigation into the West Baltimore Democrat.
Tight legal spot
The claims of altered documents might have placed PrimeHealth in a tight legal spot with the federal grand jury, which has subpoenaed many of the same financial records. If PrimeHealth provides allegedly altered documents to that grand jury, the firm and its officers could face potential federal charges.
Two weeks ago, a PrimeHealth official appeared before the federal grand jury to deliver documents relating to payments made to Young. He carried a single envelope to the grand jury room. Standing outside, Assistant U.S. Attorney Thomas M. DiBiagio said to the official: "That's it? Where are the boxes?"
The company official said there were no boxes. He spent the next hour answering questions before the grand jury. He left the courthouse, visibly shaken and declining to discuss his testimony before the secret panel.
Pub Date: 4/14/98
