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, which was 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 members repeatedly lobbied hospital executives on behalf of their businesses. Conflicts of interest were rarely disclosed.
Her scheme, which was 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 reported that thousands of the books were never distributed to schools, libraries or community centers; their educational value, experts have said, is limited.
Steve Silverman, an attorney for Pugh, declined to comment. Chrencik did not return requests for comment.
“All of us find the disclosures troubling,” said James “Chip” DiPaula Jr., the new chairman of the UMMS board. “Yet it confirms much of what was already known, and it’s comforting that we have a much greater handle on the scope of our challenges, which allows us to move forward.”
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 requires that the board have all new members by January.
UMMS established a special committee in September to oversee the audit, which was conducted by Latham & Watkins. It focused on communications between UMMS executives and board members from 2016 through 2019, and it included the review of more than 100,000 communications and interviews with 38 witnesses.
Investigators found that 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 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,” the report says.
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 fundraising, 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 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 senator Francis X. 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 years.
“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 résumés and attend to their requests, though they said they did not feel pressure to hire people who were not qualified.
The report’s recommendations include for the General Assembly to 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.
The report released Friday was more detailed than an independent probe released this summer, and it is separate from a General Assembly-ordered review by Maryland’s Office of Legislative Audits.
State auditors this fall requested an extension of their deadline for that review until March 13, saying UMMS had “delayed or hindered our work by repeatedly failing to make employees available and failing to provide requested information on a timely basis.” The extension was approved by Maryland Senate President Thomas V. Mike Miller Jr. (D-Calvert) and House Speaker Adrienne A. Jones (D-Baltimore County).
“UMMS strongly disagrees with the characterization outlined in the OLA letter. We will continue to be responsive to their body of work,” said DiPaula, the new UMMS board chairman.