William L. Jews, the former chief executive officer of CareFirst BlueCross BlueShield, has sued Maryland's top insurance regulator over its decision to deny him about $9 million in severance and other pay, calling the regulatory move unconstitutional.
The lawsuit, filed in U.S. District Court in Baltimore this week, takes issue with a ruling last month by state Insurance Commissioner Ralph S. Tyler that cut Jews' $18 million severance package in half. Tyler found that CareFirst's board violated a 2003 state law requiring executive pay for the nonprofit to meet a "fair and reasonable" standard.
Jews' lawsuit seeks payment in full from CareFirst, which also is named as a defendant. At the same time, Jews petitioned Baltimore County Circuit Court yesterday for review of Tyler's administrative decision.
Jews' pay drew the ire of state lawmakers several years ago when he attempted to convert CareFirst, the region's largest insurer, to a for-profit entity and sell it to a California company. The deal would have netted Jews millions of dollars in bonuses, a fact that stirred criticism that helped scuttle the transaction. Similarly, Tyler accused Jews of abandoning CareFirst's nonprofit mission and found that his post-termination payout was not commensurate with such a mission.
Karen Barrow, spokeswoman for the state insurance administration, said the agency doesn't believe Jews' legal actions have merit. "We expect the commissioner's decision to be upheld," she said.
While Jews was widely credited with turning CareFirst's finances around, he has said he stepped down in 2006 rather than put the company's board through a fight. In his lawsuit, Jews argues that he is entitled to his post-termination payouts in accordance with his 1998 employment agreement.
Some of that compensation was for work performed before Jews departed, and part of the payout included a continuation of his salary during a two-year period in which he agreed not to join a competitor, according to the lawsuit.
Tyler's decision was "irrational," the lawsuit said. It also noted that during hearings this year on the matter, the commissioner and his office served in "every possible role" - including as the insurance administration's counsel, witness and decision-maker. The payments to Jews are governed by federal law, according to the suit, and efforts to reduce them violate the contract and due process clauses of the Constitution.
"We look forward to a full and fair review of these issues by the federal court," said Andrew Jay Graham, Jews' lawyer.