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House speaker introduces reform legislation for University of Maryland Medical System amid 'self-dealing' scandal

UMMS Board of Directors chair Stephen A. Burch and other members of the board met with Governor Larry Hogan and Senate President Miller. (Ulysses Muñoz / Baltimore Sun video)

House Speaker Michael Busch said Wednesday that he will introduce sweeping legislation to reform the University of Maryland Medical System’s board of directors as accusations of “self-dealing” have rocked the hospital network.

Busch’s legislation — which will act as a companion bill with Sen. Jill P. Carter’s legislation in the state Senate — came as top officials from the medical system met with Gov. Larry Hogan and Senate President Thomas V. Mike Miller for an hour in the State House.

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Hogan and Miller grilled medical system leaders over their contracting practices, according to multiple sources. And both men repeatedly pressed system CEO Robert Chrencik on how he could allow the system to award a no-bid book deal worth $500,000 to Baltimore Mayor Catherine Pugh, the sources said.

“UMMS cannot regain the public’s trust without a full accounting,” Busch, who sits on the hospital network’s board of directors, said in a statement. “I’d like to thank Senator Carter for her efforts to bring these ethical lapses and misuse of funds to light. I hope we will work collaboratively, along with the Senate President and the Governor, to quickly address these issues.”

Hogan called the meeting after The Baltimore Sun reported that nine members of the medical system’s board have business deals with the hospital network that are worth hundreds of thousands to millions of dollars each.

Since then, three board members — including Pugh — have resigned. Four others have taken leaves of absence while UMMS conducts what board chairman Stephen A. Burch has called “a comprehensive review” of system contracts.

Busch’s legislation would require an independent audit of financial management at the system by Dec. 31. It would require the governor’s appointees to the board to submit to vetting by the state Senate. And it would prohibit the practice of awarding no-bid contracts to board members.

Busch’s office said he could not attend the meeting with UMMS officials because of a medical appointment related to his 2017 liver transplant.

Miller’s chief of staff, Jake Weissmann, called the meeting “a frank conversation.” Weissmann said the Senate president “hopes the board chair and CEO take his and the governor’s comments to heart. He hopes to see immediate action from the board and expects legislation to pass to address the issue before the Senate adjourns” for the year April 8.

Mike Ricci, a spokesman for Hogan, said the governor “clearly and emphatically expressed his concerns about conflicts of interest on the board of UMMS.”

“He underlined the importance of addressing the public outcry, and the leaders of UMMS expressed their commitment to act,” Ricci said. “We will work closely with the legislature on measures to improve oversight and accountability of the board.”

After the meeting, board chairman Burch described himself as “tired” but said the meeting was productive.

“They’re quite concerned — as we are, too — about all that has transpired,” Burch said. “They had some very strong but positive views on what should happen next.”

He said the board would meet Thursday morning to discuss “what we do to fix this going forward and make sure things like this don’t happen again.”

“We’re more concerned about the institution and its reputation than we are about people on the board or in management,” Burch said.

Burch said he has accepted the resignations of board members John W. Dillon and Robert L. Pevenstein in addition to Pugh.

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Dillon reported in both 2017 and 2018 that his health care consulting firm, Dillon Consulting, generated more than $150,000 a year through a contract with the system for “capital campaign and strategic planning.” He reported the contract was paying his firm $13,000 a month.

Pevenstein, the founder of technology companies, also reported that in 2017 his firms pulled in more than $150,000 through system contracts, including more than $108,000 in pay for himself. In 2018, Pevenstein reported his son made more than $100,000 from the system.

Board members on a leave of absence are August J. Chiasera, Francis X. Kelly, James A. Soltesz and Walter A. Tilley Jr.

Kelly’s company Kelly & Associates Insurance Group generates millions annually from business with the hospitals. Soltesz’s engineering company reported receiving more than $100,000 for services in 2018. Chiasera is an executive at M&T Bank, which receives millions in business each year from the hospital system. Tilley’s Home Paramount Pest Control reported receiving $160,000 last year for pest control services.

Pugh resigned from the system’s board of directors as Baltimore school officials acknowledged that 8,700 copies of the children’s books the medical system purchased from her are sitting unread in a warehouse.

The meeting came as Pugh said Wednesday that she was returning $100,000 from her Healthy Holly LLC to the University of Maryland Medical System.

The mayor said she would not release her taxes, but said she has fully paid them.

“I’m a business,” she said. “I report my income.”

Earlier in the day, the medical system came under fire at a meeting of the state Board of Public Works.

There, Comptroller Peter Franchot noted the hospital system is “largely funded by the taxpayers,” and he blasted Pugh and the medical system over what he called “the $500,000 book deal with a former senator who led the Finance Committee that funded a lot of the operations of UMMS.”

“Everybody is wringing their hands about the self-dealing that was going on,” Franchot said.

The comptroller then called for an independent audit.

“Give us an independent audit that asks who knew what when about this,” Franchot said.

Later, Hogan noted that “state tax dollars” go to the hospital network.

“We are very concerned,” the governor said. “It’s outrageous and appalling, and that’s why I demanded people sever their relationships or get off the board.”

Miller said he wants the General Assembly to “resolve” issues with the University of Maryland Medical System before the legislature adjourns in less than three weeks.

“We want this issue resolved before we leave here, so that during the next nine months, the next 10 months, the public can rest assured that this is being run and run right, run with transparency,” he said. “I want to see people honest, aboveboard. … It’s nice you have experts on your board, but at the same time, the public needs to be assured that they’re getting the very best deal for the dollar and they’re not paying people for no-show jobs.”

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Baltimore Sun reporter Pamela Wood contributed to this article.

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