U. of Maryland medical system report shows how board members pushed for deals to benefit their businesses

There is no evidence that executives at the University of Maryland Medical System read former Baltimore Mayor Catherine Pugh’s Healthy Holly children’s books or evaluated their usefulness before buying them from her for hundreds of thousands of dollars, according to a scathing report released Friday by the massive medical system.

Pugh and other former members of the hospital system board went directly to then-chief executive Robert Chrencik seeking business deals that would benefit them personally, according to the probe, requested by board members appointed in the wake of the scandal.

The 34-page report condemned the board’s effectiveness as an oversight body, noting that some of its members repeatedly lobbied hospital executives on behalf of their businesses. Conflicts of interest were rarely disclosed.

Pugh, who resigned from the board along with others implicated in the self-dealing scandal, pleaded guilty last month to wire fraud and tax evasion.

Her scheme, first reported by the Baltimore Sun, began when she was a state senator. She pitched her books to Chrencik in 2010, saying the hospital system should donate them to Baltimore city schools to support UMMS’s “population health” initiative, the report found.

Investigators found no evidence of the board reviewing Pugh’s deal, which totaled $500,000 from 2010 through 2018. The Sun has reported that thousands of the books were never distributed to schools, libraries, or community centers; their educational value, experts have said, is limited.

Pugh’s attorney, Steve Silverman, declined to comment. Chrencik did not return requests for comment.

Physician Mohan Suntha was tapped last month to lead the $4.4 billion system, which has 13 hospitals in its network and includes the state’s flagship trauma hospital. The majority of board members are new, following a law passed by the Maryland General Assembly that bars board members from having single-source contracts with the system and requiring that the board have all new members by January.

Investigators found that then-board member Robert Pevenstein, who chaired both the financial and audit committees, was “actively pursuing business opportunities with UMMS” on behalf of Profit Recovery Partners and the Optime Group, two companies in which he had a financial interest.

“Senior executives involved in purchasing stated in interviews that it was widely assumed, if not known, that Mr. Pevenstein had financial ties to the companies that he introduced to UMMS,” reads the report.

Pevenstein, who has resigned from the board, did not return requests for comment.

Then-board member John Dillon received $13,000 monthly as a result of a deal he made with Chrencik in 2012 that violated board bylaws and governing law, the probe found. The deal, which was renewed annually through 2019, asked Dillon “to undertake activities that were consistent with the basic expectations of a board member,” the report found, including fund-raising, strategic planning, and community relations.

“Payment for services normally expected of board members would, on its face, violate the bylaws and governing law,” stated the report.

Investigators also found that board members developed strategies to work around their legislatively mandated term limits, which prohibit members from serving more than two consecutive five-year terms. Several former members, including Pugh, Dillon, Pevenstein, and former State Sen. Francis Kelly, whose company also had a lucrative contract with the system, far exceeded those limits.

Pugh served on the volunteer board for 17 years; Pevenstein for 16; Dillon for 13; and Kelly for 33.

“Those long-serving board members were able to exercise disproportionate influence over board policies and ultimately failed to exercise appropriate oversight over those in management who worked to keep them on the board,” read the report. “Many of the longest-serving board members were also ones with the most significant conflicts of interest.”

Emails reviewed as part of the probe show that some board members contacted senior managers at the hospital to refer friends and family for employment positions and request special care for friends and family who were patients.

UMMS employees said they believed it was part of their job to review such resumés and attend to their requests, though they said they did not feel pressure to hire people who were not qualified.

Among the report’s recommendations are requesting that the General Assembly consider reducing the size of the 30-member board, limiting the amount of service to 10 years total, and limiting the amount of time that a member can serve as board or committee chair.

Changes to the board’s conflict of interest policy, including requiring that any potential conflict of interest be competitively bid and disclosed to the full board, have already been put in place.