Saturday, December 15, 2007

Blue Cross Enters Into a Deferred Prosecution Agreement for Rhode Island Corruption

The on-going corruption probe in Rhode Island -- dubbed Operation Dollar Bill -- snared another non-profit when Blue Cross & Blue Shield of Rhode Island entered into a deferred prosecution agreement with the U.S. Attorney's Office.  The case involves payments by BCBSRI to three members of the state Senate while the insurer was lobbying for favorable legislation.  The illicit payments involved $75,000 to a communications company for a cable television show one senator hosted, $175,500 to a second Senator for 10 million paper bags for a pharmacy promotion by BCBSRI but only 2 million were delivered, and $400,000 in insurance commissions to the president of the state Senate.

The DPA is similar to others we are seeing with increased regularity.  BCBSRI will pay a $20 million fine, which will go to a foundation to be used to provide affordable health services, and must appoint an independent monitor with the U.S. Attorney's approval.  The attorney-client privilege waiver provision is a bit more onerous than I've seen in recent DPAs.  BCBSRI agrees not to assert the attorney-client privilege or work product protection for any factual material generated in its internal investigation, except for communication with counsel about the criminal investigation.  Another provision states that providing the materials does not constitute a waiver of the protections as to third parties, but that may be worthless under the majority rule on selective waiver.

Prior to the disclosure of the DPA, four BCBSRI executives were terminated by the company, and I suspect we will see one or more indicted on corruption charges in the near future.  Two of the state Senators who received money from the company have entered guilty pleas, and Roger Williams Medical Center, a Rhode Island hospital caught up in Operation Dollar Bill, got its own DPA in 2006, one of the first cases involving a non-profit organization. (ph)

Download us_v_bcbsri_deferred_prosecution_agreement_dec_2007.pdf

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