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University of Maryland Medical System paid $115M to companies tied to 27 board members, state review reveals

A review of the University of Maryland Medical System’s finances uncovered more financial dealings between board members and their organizations than previously known. The interior of the University of Maryland Medical Center, one of the system's hospitals, is shown in this 2006 photo.
A review of the University of Maryland Medical System’s finances uncovered more financial dealings between board members and their organizations than previously known. The interior of the University of Maryland Medical Center, one of the system's hospitals, is shown in this 2006 photo.(Jed Kirschbaum / The Baltimore Sun)

A new review of the University of Maryland Medical System’s finances uncovered more financial dealings between board members and their organizations than previously known ― revealing nearly $115 million in payments to more than two dozen board members and their related businesses in recent years.

The state’s Office of Legislative Audits, which conducted the probe after a corruption scandal rocked the hospital network in 2019, sent the findings of the 100-page review Friday to key lawmakers in Annapolis. The auditors did not identify board members by name ― and said they could not definitively determine any transactions were “improper” ― but did include a detailed list of payments made to board members they called “vendors.”

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“We identified approximately $114.9 million in payments made by UMMS to 27 Board members or their associated businesses between January 1, 2016 and April 18, 2019,” the auditors reported. “Approximately 94 percent ($108.2 million) of these payments were made either directly to a Board member or to an entity with which the Board member (or immediate family member) had a direct financial relationship.”

System officials took issue with some aspects of the review, arguing auditors counted many aboveboard transactions as conflicts, including dues the network paid to a statewide healthcare association; redacted board member and business names unnecessarily; and falsely accused UMMS of being uncooperative.

They acknowledged the hospital system has worked to reform since last year’s scandal and noted it is focused now on fighting the spread of the new coronavirus.

“As evidenced over the last nine months, the reconstituted UMMS Board and new management team have been fully committed to addressing the well-documented historical failings and ensuring the continued adoption of governance best practices,” new UMMS chief of staff Kristin Jones Bryce said. "The System remains focused on its mission of providing world-class health care and will continue to lead during this global pandemic.”

The board has been under intense scrutiny since exactly one year ago when The Baltimore Sun reported a third of its 30 members had deals with the 13-hospital system, some not competitively bid. Under one of the deals, the system paid Democratic Mayor Catherine Pugh of Baltimore $500,000 to produce her “Healthy Holly” children’s books. Those deals, federal prosecutors have said, allowed Pugh to begin a “seven-year scheme to defraud, multiple years of tax evasion, election fraud and attempted cover-ups, including brazen lies to the public.”

After The Sun’s revelations, Pugh resigned from the board and as mayor. The FBI raided her houses and City Hall in late April, she pleaded guilty to conspiracy and tax evasion in November, and was sentenced last month to three years in prison.

The law also mandated several reforms at UMMS, including requiring the resignations of all board members. The auditors’ report noted that regarding board members’ terms in office, UMMS records varied from those kept by the governor’s appointments office. For instance, UMMS listed former state Sen. Francis X. Kelly Jr.'s start date as June 2016; Kelly told auditors he had been a board member since 1984.

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The scandal led to the network’s CEO and four other executives resigning.

Del. Nic Kipke, an Anne Arundel Republican who is House minority leader, said the audit shows more widespread self-dealing than previously known.

“This audit validates the suspicion many of us in the legislature had when we required an independent forensic audit,” Kipke said. “While the report sheds light on new disappointing examples of corruption, I am confident in the new leadership team at UMMS and I believe they are earnestly working to implement industry best ethical standards and procedures. While there is a lot of work ahead for them, I believe UMMS is headed in the right direction.”

Carter said the audit underscores the extent to which the previous UMMS board was “shrouded in secrecy and self-enrichment to the detriment of the patients and population with the greatest health care needs in the country.”

“The new president and board must completely distance itself from that culture of graft and be completely aboveboard and transparent in all their dealings,” Carter said.

Since the scandal, Dr. Mohan Suntha, the system’s new CEO, and James C. “Chip” DiPaula Jr., the new chairman of the board, have sought to assure lawmakers the state’s largest hospital network is undergoing reforms. The organization implemented a new policy to prevent conflicts of interest, froze bonuses for top executives and commissioned several outside investigations.

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But auditors described the organization as less than forthcoming during their review. The auditors wrote “there was a lack of transparency, policies and procedures, and documentation to support the source, nature, and the overall propriety of many of these payments” made to board members.

The review was due in December, but auditors requested an extension until this month, in part based on what they said was interference from UMMS. Legislative Auditor Gregory Hook told lawmakers in November that UMMS “delayed and hindered” his office’s work.

That concern was reflected in the final report, in which auditors said UMMS officials refused to make certain documents or employees readily available — so much so that they did not even consider their review an “audit” under the generally accepted standards of their office. They called their product a “Special Review.”

“Generally accepted government auditing standards require that we plan and perform an audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions,” the auditors wrote. “We believe that the restrictions imposed by UMMS on our access to its employees and records … precluded us from obtaining such evidence.”

In a letter to state officials that accompanied the report, Hook wrote that information not provided to the auditors “was integral” to its work, and that, had the information been provided, it is “possible that additional financial transactions involving Board members might have been identified.”

The report noted a lack of cooperation from UMMS in three areas: access to documents, access to employees and access to emails.

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For every disbursement by UMMS to a board member or a board member’s business, the auditors requested bidding documents, contracts, invoices and other evidence that UMMS received the services or items for which it paid, the auditors wrote. UMMS, however, took months to get back to them on those requests, and even then “could not provide all of the requested documentation for the majority of the transactions.”

That prevented the auditors from determining to what extent the board members were aware of or involved in the deals and payments, the auditors wrote.

Requests to interview employees also were met with delay, the auditors wrote, with UMMS telling the auditors it could not determine which employees had been involved in procurements linked to board members “due to the decentralized nature of its operations.” UMMS said other employees were no longer employed by the system, the auditors wrote.

Emails the auditors requested from five UMMS employees the auditors selected “for their potential involvement in procuring or paying Board members and their associated businesses” also were not forthcoming, the auditors wrote. They said UMMS’ attorneys acknowledged to lawyers representing the state that there were 1.6 million emails responsive to the auditors’ initial request, but that UMMS delivered 14,500 emails, some of which were “heavily redacted.”

And the report said UMMS provided digital images of emails, rather than documents that auditors could search with software for individual words or phrases, further complicating the review.

UMMS said in its response that it “strongly disagrees” with the auditors’ claims that it did not cooperate.

“OLA’s criticism appears to stem from the belief that anything less than completely unfettered access to UMMS’ records and employees is ‘non-cooperation,’” UMMS wrote. “This is unfair and unrealistic.”

It said its review of the emails the auditors requested was “in order to ascertain legal privilege and other confidentiality concerns, such as those involving patient privacy” and was in line with its response to other requests for information, including when it “provided documents subpoenaed by the U.S. Attorney’s Office” in a related investigation. The auditors redacted the name of the target of that investigation, but federal law enforcement investigated Pugh as part of her prosecution.

UMMS also said it sought to provide auditors “with access to available business records and UMMS employees in a timely and orderly manner that respected both the employees’ and UMMS’ legal rights and OLA’s interest in access to information.”

But, it said, businesses “do not responsibly allow third parties, even government agencies, to question their employees without regard for responsible business practices and their legal rights and duties.”

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