Unreasonable, the consultant said. Excessive. Illegal.

Nonsense, the board said. We did our job carefully - consulting reputable experts, discussing things at length. We did our legal duty.

The board of CareFirst BlueCross BlueShield failed to meet its legal responsibility when it approved a lucrative bonus and severance package tied to the sale of the nonprofit insurer, a consultant to Maryland's insurance commissioner, said in a report issued this month.

Specifically, the report says the failure occurred when the board approved bonuses, severance pay and tax benefits that would allow top executives to walk away with $119.6 million (including as much as $39.4 million for chief executive William L. Jews) if plans to sell the company go through.

The report's author is Jay Angoff, a lawyer and former Missouri insurance commissioner. He is one of the consultants selected by Maryland Insurance Commissioner Steven B. Larsen to review CareFirst's plan to convert to for-profit operation and be sold to California-based WellPoint Health Networks Inc.

Whether the board fulfilled its legal duties is one of the issues Larsen will consider in deciding if the CareFirst sale should go through.

Even if Larsen finds the board acted improperly, he could still permit the sale, but order CareFirst not to pay some or all of the bonus and severance money. CareFirst has already challenged Angoff's 110-page report with statements issued by board members and in a 26-page legal memorandum. David M. Funk, who is representing CareFirst and WellPoint in the regulatory review, said he also would give Larsen a "very detailed" response to the report next month.

It's not surprising, legal experts say, that Angoff focused on the results of the board's deliberations, while the board and its lawyers, in defending their actions, focus on the process.

A careful process will usually been seen as proof that directors have met their legal responsibilities. However, judges or regulators may overrule directors if they conclude the board acted unreasonably despite a model process.

"The law would usually not beat up on directors after the fact if they were non-self-dealing and made themselves aware of all the relevant facts," said Charles "Hank" Still, a partner in the Houston office of the law firm Fulbright & Jaworski. Still specializes in corporate governance and in mergers and acquisitions, but said he's not expert in the Maryland laws governing nonprofits.

Lisa M. Fairfax, an assistant professor at the University of Maryland law school who teaches courses and does legal research about duties of directors, said, "The general rule of thumb is that the process is almost more important than the substantive decision."

But if the substantive decision is too far out of line, that can change.

And after hearing the size of the bonuses, Still said: "Hmm. Boy. That's going to catch some judge's attention. Although directors have wide discretion, they may have tipped this one over."

Linda O. Smiddy, who teaches business law courses at Vermont Law School, said that if payments are too high "somewhere along the way, it changes from compensation for important employees to misuse of corporate resources."

However it's difficult to say how high is too high, she said. Federal tax code imposes an excise tax on severance payments that are more than three times annual compensation, but that doesn't mean higher payments are necessarily illegal.

"There are not industry standards per se," Smiddy said. "There is not any kind of bright line that says 3-to-1 is OK but 5-to-1 is beyond the pale."

Even when there are industry norms, Fairfax said, there can be exceptions: "You'd pay more for Michael Jordan than you would for other basketball players."

Aside from the insurance issues, it is possible for the state to question the actions of a nonprofit board. The attorney general as overseer of nonprofits could take action if he feels a board has not met its legal duties.

Directors can also be liable for their actions, but legal experts said since the bonuses have not been paid - the deal hasn't happened - it is not clear what remedy could be sought. And, Fairfax said, it is not clear that anyone other than the state has standing to take the board to court (as stockholders could do against a publicly traded company).

The argument over Angoff's report is not purely one in which the consultant cites results and CareFirst cites process.

Angoff also is critical of the process followed by CareFirst's board.

For example, he said, the board's compensation committee sought and received a written legal opinion on whether a company that bought CareFirst could kill the supplemental pension plan for top executives.

But the board did not seek an opinion on whether it was legal for the board to pay the taxes on the severance payments - $30.7 million worth - on top of the payments themselves.

"Thus, the directors did get an opinion of the lawfulness of action that had not yet been taken - and might never be taken - but did not get an opinion of the lawfulness of an action it took at that very meeting," Angoff wrote. "Reasonable directors would have done the opposite."

Jay Smith, head of the corporate securities group at the Baltimore office of Piper Rudnick, the law firm advising the CareFirst board, said not all legal advice comes in the form of written opinions.

The board and its compensation committee had lawyers present throughout their deliberations to answer questions, or to warn them if they were headed for trouble, Smith said.

Whatever the process, Angoff argued, in the end the board came up with unreasonable and excessive compensation.

For example, bonuses to the executives for completing a deal were "unreasonable," Angoff said, in part because they might encourage executives to negotiate a deal not in the best interests of CareFirst or the public.

"The merger bonus creates an incentive for the executives to prefer the bid of a suitor who agreed to pay the bonuses over the bid of a suitor who would not pay them, or who insisted on reducing them," Angoff wrote, "and it creates an incentive for executives to choose consummating a transaction - any transaction - over not consummating a transaction at all, since the executives receive a bonus for any transaction, but receive no bonus for no transaction."

Smith said the bonuses, which were pegged to purchase price, gave incentive to the executives to negotiate the best price possible for CareFirst.

Besides, he said, "the ultimate safety net is that no transaction could be done that was not approved by the board of directors. Management did not have the authority" to make a deal on its own.

Angoff also said the severance payments could be seen as "excessive," among other reasons, because they so far exceeded guidelines that define payment of more than three times annual pay as "excess parachutes" subject to taxation.

Angoff noted that Mark Muedeking, another Piper lawyer who gave a deposition as part of Angoff's study, "acknowledges that he could find neither a nonprofit Blue Cross plan nor a nonprofit corporation of any kind that had ever authorized excess parachute payments, despite his having tried hard to find such a corporation."

Smith said, "Throughout the document, there were a lot of suggestions that the board and its advisers, including Piper, failed to consider nonprofit issues. We dispute that. It was considered and was factored into the board's judgment of what was appropriate."

Besides, Funk wrote in his legal memorandum, "CareFirst competes for business and employees in the commercial marketplace. Therefore, the compensation it must pay to its officers must be compared with and measured against the executive compensation paid by its competitors, all of which are for-profit health insurers."

Larsen will be considering the Angoff report at public hearings next month. His ruling on the CareFirst deal is expected in February.