The University of Maryland Medical System is seeking to recover hundreds of thousands of dollars paid to disgraced former Baltimore Mayor Catherine Pugh for her “Healthy Holly” books, top officials of the hospital network testified Thursday in Annapolis.
“We have recovered $100,000 of the $500,000,” James C. “Chip” DiPaula Jr., the new chairman of the system’s board, told the House of Delegates’ Health and Government Operations Committee. “We are working with the U.S. prosecutors to recover the balance.”
Pugh, who resigned as mayor last spring as the book scandal unfolded, has since pleaded guilty to conspiracy and tax evasion charges and awaits sentencing Feb. 27. Pugh’s attorney, Steve Silverman, declined to comment Thursday.
DiPaula and Dr. Mohan Suntha, the system’s new CEO, appeared before the House committee Thursday afternoon, seeking to assure lawmakers that the state’s largest hospital network is undergoing reforms after last year’s high-profile self-dealing scandal.
“As president and CEO of the medical system, I am accountable,” Suntha testified before the committee of more than 20 lawmakers.
Suntha, 55, took over the system’s top job Dec. 1. He’s now tasked with trying to right the overall organization after the board of directors scandal that resulted in the resignation of Pugh and others from the board.
The institution has been under fire since March, when The Baltimore Sun reported a third of its 30 board members or their companies had financial deals with the system, some of which were not competitively bid. They included Pugh, a Democrat who made hundreds of thousands of dollars selling her “Healthy Holly” children’s books in a sole-source arrangement with UMMS.
Since then, the organization commissioned a review of its contracting practices, and accepted the resignations of CEO Robert A. Chrencik and four other executives. Sweeping legislation passed in the General Assembly demanded the resignation of the entire board.
DiPaula tried to assure committee members Thursday that there would no more back-room deals. The hospital leaders detailed their reform efforts, including implementing a new policy to prevent conflicts of interest, freezing bonuses for top executives and submitting to several outside investigations.
Suntha said he would count on his “own moral compass to guide me correctly” but also use the “lens of a physician.”
Some of the toughest questions at the hearing came from Del. Terri L. Hill, a Howard County Democrat and medical doctor.
“How did things get to where they got?” asked Hill, who is a candidate for U.S. Congress in Maryland’s 7th District. “Was it a culture problem? Was it a failure of people to be willing to speak up? I’d like to know what your diagnosis is, doctor."
Suntha blamed the self-dealing on a “culture that was bred over long periods of time.”
“The foundational challenge we had was a culture problem,” Suntha said. “This was an accepted approach to doing things.”
He added: “There were policies in place that were not followed.”
Pugh was not the only board member who had deals with the system that benefited themselves or their companies. Seven of nine such deals were entered into without competitive bids and four were not properly disclosed to the board, according to a review of board contracts. Meanwhile, the board member who was in charge of auditing financial dealings himself had a no-bid deal.
An outside review by Nygren Consulting focused its harshest criticism on deals with four board members that hospital officials described as “personal services” contracts: Pugh, who was paid $500,000 for her self-published children’s books; Robert Pevenstein, a consultant who was paid more than $100,000 a year; John W. Dillon, who was paid $892,000 since 2013 for providing “healthcare consulting services”; and Dr. Scott Rifkin, who runs a health care software company.
“We know that good people can do bad things,” DiPaula said Thursday. “It happened outside the University of Maryland Medical System and it happened inside the University of Maryland Medical System.”
Another member of the committee, Del. Katha Szeliga, a Baltimore County Republican who is House Minority Whip, called the testimony she heard a “good step” in the process of reform.
“I feel good that the system is going in the right direction,” she said.
Szeliga pointed out that UMMS and other health care providers paid Pugh for hundreds of thousands of copies of her “Healthy Holly” children’s books, but that the former mayor never printed many copies and double-sold others.
In total, prosecutors allege Pugh sold at least 125,000 copies of her books but printed fewer than 65,000.
Pugh has returned $100,000 to UMMS, but Szeliga asked whether the network would be able to get back more.
“We are working with federal prosecutors to … allow us to recoup whatever we are able to," Suntha said.
Federal prosecutors have said they are seeking to seize $769,688 of Pugh’s profits from illegitimate book sales, as well as her current home in Ashburton, which they allege she bought and renovated with fraudulently obtained funds. A federal judge hearing the case has said both parties have not reached any agreement on what Pugh will have to forfeit, which still may be negotiated or litigated.
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Marcia Murphy, spokeswoman for the Maryland U.S. Attorney’s Office, said Thursday federal prosecutors are seeking “forfeiture and restitution.”
“UMMS officials are cooperating with us and this will all be finalized at sentencing,” she said.
Toward the end of Thursday’s hearing, Szeliga told the hospital executives she was “confident you have procedures in place to allow this to never happen again.”
But Shane Pendergrass, a Howard County Democrat who is the committee’s chairwoman, said she wanted system officials to report back in March after a state-mandated audit is complete.
State auditors tasked with investigating UMMS after the scandal have complained the system “delayed and hindered” their work, requiring an extension of their deadline to produce a report to the General Assembly. UMMS officials have denied that accusation.
“I’m glad you have that much confidence,” Pendergass told Szeliga. “I’m going to wait awhile and see how it goes.”
Baltimore Sun reporter Kevin Rector contributed to this article.