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Two more University of Maryland Medical System board members resign amid scrutiny over contracting practices

Two more members of the University of Maryland Medical System’s board of directors have resigned amid intense scrutiny over the system’s contracting practices — and as the hospital network announced a “comprehensive review” of its business deals.

Stephen A. Burch, chairman of the University of Maryland Medical System board of directors, said Tuesday that he has accepted the resignations of board members John W. Dillon and Robert L. Pevenstein.

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“I take very seriously the concerns raised regarding Board members that have business relationships with UMMS,” Burch said in a statement. “Addressing this issue is of the highest priority for me and the organization. There is nothing more important than the trust of those who depend on our leadership.”

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, 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 also made more than $100,000 from the system.

Neither Dillon nor Pevenstein responded to a request for comment.

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

The three departures from the board came after The Baltimore Sun reported nine members of the University of Maryland Medical System’s Board of Directors have business deals with the hospital network that are worth hundreds of thousands to millions of dollars each.

The revelation has been met with widespread condemnation. Senate President Thomas V. Mike Miller called the actions a “huge disaster” of “self-dealing.” Gov. Larry Hogan described the contracting practices “unseemly” and “appalling.” And, House of Delegates Speaker Michael Busch, who sits on the medical system’s board, said he and some other board members were never informed of the contracting practices and he was shocked to learn of the deals.

“I cannot remember a scandal of this scale taking place since I’ve been in office,” Busch said Monday.

Board chair Burch said Tuesday he also has asked board members who currently have relationships with the medical system to immediately take a voluntary leave of absence during a review of the system’s governance practices. Those members are: August J. Chiasera, Francis X. Kelly, James A. Soltesz and Walter A. Tilley Jr.

“Let me be abundantly clear, this is not a reflection on any of the affected Board members or their businesses,” Burch said. “Our Board members are incredibly talented professionals who bring invaluable expertise and perspective while advancing Maryland’s own world-class health care system.”

Medical system CEO Robert Chrencik has said some of the contracts went through a competitive bidding process, while others did not. The medical system has thus far declined to release a list detailing which of the deals went through a bidding process.

Kelly’s company Kelly & Associates Insurance Group also generates millions annually from business with the hospitals but has defended the business as aboveboard, some of it won before the hospitals affiliated with the system.

Kelly released a statement Tuesday welcoming the review of contracting practices.

“I fully support the request of Chairman Burch and am taking a voluntary leave of absence while the Board conducts its review. Furthermore, I welcome an independent and competitive review of our business relationship with UMMS,” Kelly said. “Serving our community and helping to make Baltimore and the State of Maryland better is a core value of the Kelly family and of our organization.”

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Soltesz also released a statement defending his work as CEO of The Soltesz Companies. His said his contact with the hospital system was competitively bid, predated his time on the board and is nearly complete. He, too, said he welcomed a review of the system’s contracting practices.

Soltesz said his firm won a contract for engineering work at the hospital in 2013, five years before Hogan named him to the board. His company reported receiving more than $100,000 for those services in 2018.

“Prior to 2018, I had no relationship with the UMMS board whatsoever,” he said. “I have asked for an independent review of these facts, which I think will show that we complied with the highest ethical standards.”

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.

Hogan, Miller and Busch planned to meet with Chrencik and Mark L. Wasserman, a senior vice president with the system.

Miller said he hoped after the meeting he, Hogan and Busch would have a “unified response” to the contracting issues.

“Obviously there needs to be an audit,” Miller said. “There needs to be changes.”

Miller said they would push for more transparency and oversight of the board.

“This practice can’t be allowed to continue,” he said. “Some wrong decisions have taken place that need to be addressed and need to be addressed immediately.”

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News of the resignations came as two lawmakers said they were giving back or giving away campaign contributions they received from Pugh’s book company.

Healthy Holly LLC gave $1,000 through ticket purchases to Baltimore County Executive Johnny Olszewski Jr.’s campaign last year, as well as $1,000 to state Sen. Jill P. Carter’s election committee.

The Olszewski campaign said Tuesday it would return the money, and Carter said she was looking into whether she could donate it to charity.

Carter, a Baltimore Democrat, has legislation pending in the Senate that would make it illegal for board members to profit from contracts with the hospitals they govern.

Pugh’s book company also gave her campaign $5,000. The mayor did not return messages seeking comment about the contributions Tuesday. Under Maryland law, candidates can make unlimited contributions to their own campaigns.

Baltimore Sun reporters Alison Knezevich and Doug Donovan contributed to this article.

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