The directors of Blue Cross and Blue Shield of Maryland decided last night to hire outside counsel and appointed three board members to investigate whether to sue former executives for alleged negligence.
The board, after an intense debate, decided to hire the Washington law firm of Kirkpatrick and Lockhart to investigate allegations recently raised in a letter from private attorneys, according to John A. Picciotto, the Blues' senior vice president and general counsel.
Mr. Picciotto said the outside counsel would conduct the investigation on its own and make a recommendation to the directors' committee, which would then decide whether to pursue a lawsuit.
The special committee is made up of Joseph A. Califano, a lawyer and former health secretary in the Lyndon B. Johnson administration; Barry P. Bosworth, an economist with the Brookings Institution, and Dan A. Colussy, chairman of UNC Inc.
The decision to seek damages came just days after Attorney General J. Joseph Curran Jr. urged the directors to sue former executives, saying evidence of gross mismanagement could be found in a U.S. Senate subcommittee report and in documents compiled by two attorneys who also asked Blues directors to sue former executives.
The company lost tens of millions of dollars in the past decade, some of it on poor investments.
A month ago, the Blues board revoked supplemental retirement packages worth $5.1 million for two former top executives -- former President Carl J. Sardegna and former Senior Vice President Fred M. Gloth Jr.
Mr. Picciotto said the insurer expects the former executives to sue in an effort to obtain the retirement packages.
He said he recommended the Kirkpatrick and Lockhart firm because of its recent work for the board in which it recommended against paying the retirement packages. But Mr. Picciotto said the two assignments were independent and concerned different issues.