MAMSI to pay ex-chairman millions for leaving company

Jochum got $730,000 to resign, will receive $5.1 million more

April 06, 1999|By June Arney | June Arney,SUN STAFF

Mid Atlantic Medical Services Inc., a regional managed-care company, agreed to pay its former Chairman and Chief Executive George T. Jochum millions of dollars to leave the company earlier this year.

Under the terms of a settlement agreement, MAMSI paid Jochum $730,000 when he left the company Jan. 8, ending a court suit by five directors to force him out, the company said in a regulatory filing. The insurer also agreed to give Jochum $1.35 million in 26 payments by January 2000, with an additional $250,000 a year in supplemental retirement for the next 15 years.

A search committee has not named a successor to Jochum, MAMSI spokeswoman Elizabeth P. Sammis said yesterday. There is no definite timetable for such an announcement, she said.

"Clearly, not only the payment but also the resignation of Mr. Jochum allows the company to make a fresh start," said David Shove, a Vector Securities International analyst with a "buy" rating on Mid Atlantic.

Late last year, the Rockville-based company said its 13-member board was split in a confidence vote on Jochum. That touched off a dispute as to whether the vote effectively fired Jochum. The five directors then sued to remove him, accusing him of dishonesty in dealings with the board and poor financial management. Jochum opponents also cited poor earnings performance.

After recording a $61.1 million profit in 1995, MAMSI posted a string of losses the next year. Its 1998 earnings were $9 million, including a one-time charge in the third quarter to set aside money for an expected settlement after a federal audit concluded that MAMSI had overcharged for premiums on federal employee health insurance.

Jochum joined MAMSI in 1987 and became chairman in 1991.

His base salary was cut 25 percent in 1997 to $1.38 million, according to the company's proxy statement. In his latest contract, which took effect Jan. 1 and runs through December 2001, Jochum's base salary was trimmed to $1.35 million. He also agreed to an amendment of his employment contract that barred him from receiving a bonus in 1998, according to the company's annual filing with the SEC.

MAMSI covers 1.7 million people in an area reaching from Pennsylvania to North Carolina. Its two HMOs in Maryland are Optimum Choice and MD-IPA. Its shares closed yesterday at $9.50, down 37.5 cents.

While analysts have called MAMSI's earnings disappointing, it is by no means alone.

HMOs have been slow to raise premiums for competitive reasons, but haven't been able to stop the increase in costs for doctors, hospitals and prescription drugs.

Pub Date: 4/06/99

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