HMO is put under state control PrimeHealth agrees to takeover

It admits no wrong

Inquiry centers on tie to ex-Sen. Young

October 03, 1998|By Walter F. Roche Jr. and Scott Higham | Walter F. Roche Jr. and Scott Higham,SUN STAFF

The health care company at the center of a criminal probe of former state Sen. Larry Young has been placed in receivership, putting it under the immediate control of state Insurance Commissioner Steven B. Larsen.

Under a court-approved consent agreement made public yesterday, Larsen will control the day-to-day operations of PrimeHealth Corp. of Lanham, a health maintenance organization that won a license and a lucrative state contract with the help of Young.

The company agreed to the takeover order but did not admit to any wrongdoing. The action apparently marks the first time the state has placed a health maintenance organization in receivership.

The four-page order filed in Baltimore City Circuit Court and approved by Judge Joseph H. H. Kaplan gives Larsen the authority to take possession of the Prince George's County company, along with all of its records and operations.

Larsen said in an interview yesterday that he will appoint a receiver to act as the chief executive officer of the company. He also said he planned to hire a consultant to review and monitor medical-care aspects of the HMO, which serves 12,710 welfare recipients in Maryland.

PrimeHealth's attorney, Warren Weaver, declined to comment, stating that the agreement "speaks for itself."

State Health Secretary Martin P. Wasserman said yesterday he was pleased that PrimeHealth had voluntarily agreed to the receivership, thus avoiding lengthy litigation.

The voluntary receivership is the latest in a series of events to befall the company in the wake of continuing criminal investigations of Young. The West Baltimore Democrat chaired a powerful health care subcommittee until he was expelled from the state Senate Jan. 16 for using his public office to benefit a series of corporations he controlled and ran out of his district office.

Several PrimeHealth officials have testified before state and federal grand juries investigating corruption charges against Young. One of those investigations, headed by State Prosecutor Stephen Montanarelli, appears to be coming to a conclusion. The other probe is being conducted by a federal grand jury.

Montanarelli's staff alleged in one court filing that Young may have been paid as much as $91,000 in bribes for helping PrimeHealth secure a state license and contract.

The affidavit, filed in a Washington court, said that Prime-Health's records showed that someone had attempted to erase or obliterate Young's initials from company checking records.

Young, meanwhile, used his contacts within the Glendening administration to clear the way for PrimeHealth. Records show he met at least three times with top administration officials to lobby on PrimeHealth's behalf.

Wasserman petitioned a legislative committee to change a state rule, enabling PrimeHealth to win a state contract. Young and other members of that committee eventually voted to approve Wasserman's request.

In August, Larsen cited a series of financial irregularities at PrimeHealth, including unexplained cash payments of $675,236,

and petitioned the court to seize the assets of the firm and place it in receivership.

Lawyers for PrimeHealth subsequently filed a response contending that receivership was not necessary because Larsen had already appointed a financial expert to review and monitor the company's expenditures.

Attorneys for the firm also said that the stock held by its majority owner, Christian Chinwuba, had been voluntarily placed in a blind trust and that Chinwuba played no role in the management of the company. State officials had questioned whether Chinwuba was "suitable" under state insurance law to serve a major role in the firm.

Larsen said yesterday that he planned to appoint James Gordon, who has been reviewing the firm's expenditures, to oversee all of Prime-Health's operations.

NTC The commissioner said the receivership order will give his agency more sweeping powers to assess the financial condition of the HMO, and to ultimately determine whether the company can be kept in operation.

The consent order states that the goal of the receivership "is to rehabilitate" PrimeHealth "by establishing procedures and taking such other actions whereby [it] can be restored to a sound business basis and ensure that an ongoing entity will survive."

The agreement gives Larsen the power to hire and fire most PrimeHealth employees, but he will still need court approval to remove any officer or director or to order any owner to divest his or her interest.

Larsen said that because of the agreement, the insurance department will postpone two days of public hearings that had ** been scheduled for next week to examine PrimeHealth's financial condition.

The commissioner said a full financial report will eventually be released, but the receivership agreement eliminates the need for more immediate action.

Pub Date: 10/03/98

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