Consider lawsuit, Blues told Curran cites report faulting ex-officers


Attorney General J. Joseph Curran Jr. urged the directors o Blue Cross and Blue Shield of Maryland yesterday to investigate whether they should sue some former executives of the company for damages.

In an emphatically worded letter to Blues Chairman Frank A. Gunther Jr., the state's top law enforcement official told Blues directors they should study the report of a U.S. Senate subcommittee last fall showing misconduct by company officers see if Blue Cross should sue the former employees.

The report, Mr. Curran wrote, "brought to light strong evidence of improper actions and omissions by former officers and other persons. . . ." The letter did not name any individuals.

He exhorted the directors "to carefully examine such evidence to determine whether BCBS should file suit . . . seeking restitution and damages for the benefit of the corporation."

A Blue Cross spokeswoman, Catherine B. Campbell, said yesterday that the insurer had not yet received the letter and could not comment.

Mr. Curran said he was urging the directors to undertake the review because the corporation itself had the best legal standing to sue if it found that former officers or managers breached their fiduciary duties. He said evidence from the Senate hearings as ++ well as information gathered by private lawyers, who Mr. Curran said were preparing to sue the insurer, could provide grounds for such a suit.

Although Mr. Curran did not give specifics, he said it was his understanding that two lawyers, Stephen J. Nolan and Jon W. Brassel, had notified the insurer that they intend to file suit on behalf of subscribers. Neither Mr. Nolan nor Mr. Brassel could be reached for comment yesterday.

Ralph Tyler, deputy attorney general, said the letter was a required step the attorney general would have to take before filing his own suit for damages.

But Mr. Curran said he has made no decision about bringing a lawsuit. If the company does not act, Mr. Curran said, "then we will get back to that. We'll do what we think we have to do."

"The whole issue involves who has standing," Mr. Curran said. "Weare bringing it to their attention. That probably would be the best solution if they believe there were violations."

At least five top officers, including company President Carl J. Sardegna, left Blue Cross under fire last year after allegations of mismanagement surfaced in the Senate report. The report detailed $120 million in losses of subscriber money on subsidiary businesses as well as excessive executive spending on salaries, travel and other perks.

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