The health care company at the center of the bribery and extortion case against former state Sen. Larry Young improperly diverted $3.6 million in state and federal funds that were supposed to be used to provide medical care to welfare recipients, state examiners charge.
The alleged diversion by PrimeHealth Corp. of Lanham, along with millions of dollars in other questionable expenditures by the company's executives, are spelled out in an extensive report made public this week by the Maryland Insurance Administration.
The "limited scope" examination of PrimeHealth was one of several developments in the aftermath of the disclosure that Young, a West Baltimore Democrat, was receiving money from health companies that appeared before the legislative committee he chaired. Young was ousted from the Senate on ethics charges about a year ago.
The 63-page report, with hundreds of pages of transcripts of testimony by PrimeHealth executives, concludes that instead of having the minimum fund surplus of $750,000 as required under state law, the health maintenance organization had a deficit of $7.3 million March 31, 1998. The report describes PrimeHealth as insolvent.
Other key allegations include:
The company made $675,235 in cash payments and was unable to provide documentation of where most of that money went.
The company's founder and principal stockholder, Christian E. Chinwuba, failed to disclose nearly $5 million in court judgments against a closely affiliated company and filed a "demonstrably false and misleading" statement relating to those debts.
The company was not paying its bills within the 30-day time limit set in state rules, and had failed to properly record pending medical claims totaling roughly $13 million.
Nearly $300,000 in payments was made to a nonprofit company that was operating rent-free from a PrimeHealth-owned building in Washington, D.C.
Chinwuba angrily disputed the findings yesterday, saying he and his company have been the victims of a race-based vendetta by the chief of the Maryland Insurance Administration, Steven B. Larsen.
Calling the allegations "totally outrageous and inconsistent with the facts," Chinwuba said: "I believe the Maryland Insurance Administration is acting in a Draconian manner. I do not intend on yelling and calling names, but I believe this is being propelled by Mr. Larsen's ambition, and this is because because of my race and because I am from Nigeria."
Chinwuba said he is proud of what PrimeHealth has accomplished, and he disputed "every finding" by the state auditors.
"I think, in the great tradition of this company, PrimeHealth is an example of personal efforts of wanting to do what is fair and what is right, and to deliver services in health care in a way that is somewhat different than the traditional managed-care approach," the radiologist said.
Asked to respond to Chinwuba's comments, Larsen said the examination of the company was a required responsibility of his agency.
"We examined PrimeHealth and the facts showed it was not complying with the law or the regulations. The report speaks for itself," Larsen said.
PrimeHealth, which serves about 14,275 Maryland welfare recipients, is being run by a receiver appointed by Larsen under a court-approved consent agreement.
A spokeswoman for state Health Secretary Martin P. Wasserman said her agency had not had a chance to review the insurance department report, nor had it determined whether the state would move to recoup payments made to the company. As of the date of the audit, March 31, 1998, PrimeHealth had been paid $23.5 million in state and federal funds to treat Medicaid patients in Maryland and Washington, D.C.
A final copy of the audit, with recommendations and responses from PrimeHealth, was released this week in response to a request The Sun made under the Maryland Public Records Law.
The Prince George's County health maintenance organization won the contract to serve welfare recipients in 1997 with the help of Young, who is facing state bribery and extortion charges handed up in December by an Anne Arundel County grand jury.
The indictment charges Young with extorting $72,493 from Chinwuba.
Chinwuba and several other PrimeHealth executives were granted immunity by State Prosecutor Stephen Montanarelli in exchange for their testimony against Young, who is expected to go on trial this spring. The audit makes no mention of Young.
In the report, the insurance department auditors said PrimeHealth did not have adequate funds to meet its obligations, including the payment of medical claims "due, in part, to the company's management diverting $3.6 million of these premiums for purposes other than the intended purposes."
The payments, the auditors said, included a series of cash payments for the renovation of a Washington, D.C., building purchased by PrimeHealth.
In its response, PrimeHealth said it was forced to make payments in cash because contractors and suppliers would not accept checks. Chinwuba labeled the charge that the money could not be accounted for as "false and misleading." He said that if the state wanted proof of how the money was spent, "all they had to do was ask."
Also questioned in the report were PrimeHealth's contracts for radiology and transportation services. The auditors concluded the X-ray contract called for payments at "a grossly inflated and unreasonable rate." The auditors also noted an "overwhelming appearance" that the relationship between PrimeHealth and the transportation firm, Health Quest Foundation, represented a potential conflict of interest.
Chinwuba labeled as "false and misleading" the charge by the state that PrimeHealth funds were used to "gratuitously" pay old debts of Diagnostic Health Imaging Systems Inc., an affiliated company. Chinwuba said PrimeHealth owes money to DHIS.
While state prosecutors prepare to place PrimeHealth at the center of their case against Young, a federal grand jury also has been examining the company and its relationship with the former state senator.
With grants of immunity from state prosecutors, it appears unlikely that any of the PrimeHealth officers could be prosecuted in state court. But federal prosecutors are not bound by those immunity deals, and are free to pursue federal charges.
The head of the FBI in Maryland, David R. Knowlton, declined to say yesterday whether his agents are examining health care fraud claims relating to PrimeHealth. "I can't say anything because of the ongoing [federal] grand jury investigation," he said.
Pub Date: 3/10/99