Healthy Holly scandal reveals the failures of UMMS board

In case there was any doubt left that former University of Maryland Medical System executives were aware of the payoff nature to their “Healthy Holly” book transactions with former Baltimore mayor and UMMS board member Catherine Pugh, an internal investigation has cleared the air: No one bothered to read the books before making payments on them worth half a million dollars.

We already know that no one at UMMS oversaw the books’ printing or their distribution to schools (because some were never printed nor distributed), and that Ms. Pugh herself barely gave them any attention, considering their poor quality. But the revelation that no one even reviewed the books before cutting a check (or six) leaves no room for interpretation. The books were solely a vehicle for the payments to a politician, starting when she was a state senator who sat on committees that oversaw health facilities and health care, and continuing after she became mayor.

And that’s not the worst of it. This is: Such transactions were well within the boundaries of UMMS board policies. Board rules “allowed Board members to lobby management on behalf of their financial interests without adequate controls or disclosure,” the investigation report concludes.

“Staff members, including senior management, often felt obligated to review the proposals outside of the normal procurement process even when they knew the business relationship was unlikely to be approved by, or be beneficial to, the Company. In many cases, these potential business arrangements were pursued by Board members without full disclosure in advance of the particular Board member’s relationship to the offering company — though management often assumed that the Board member had a financial interest in the company whose proposal they were reviewing.”

They assumed. It was just business as usual.

A non-profit’s board of directors is its governing body; members are supposed to oversee operations. You don’t need a policy to tell you that it’s not a good idea to pressure someone you oversee into a transaction; common sense should have made that clear.

Perhaps now would be a good time for the state’s other non-profit boards to do a similar deep dive into their own practices — before problems spiral to the UMMS level.

The fallout there has been significant. It includes the mayor’s resignation and subsequent criminal conviction on federal charges (not to mention new state perjury charges filed Wednesday); an overhaul of the UMMS board; and the resignations of its CEO, general counsel, chief administrative officer, chief compliance officer and the chief performance improvement officer.

The details leading to their downfall read like a manual for what not to do in governance. And, painful to read as it is, we applaud UMMS for making what appears to be a good faith effort to get the bottom of its issues and implement changes. A number of policies already have been put in place to give the board a more ethical and accountable framework, and more are coming.

The investigation — conducted by a “special committee” made up of board members appointed post scandal — and its findings build on an earlier report by an outside consultant, and will be followed by review and audit work of Deloitte and, eventually, Maryland’s Office of Legislative Audits. State auditors have asked for an extension to finish their work and report to the General Assembly beyond the original Dec. 15th deadline, claiming UMMS “delayed and hindered” their efforts.

UMMS denies any stalling and new board Chairman James C. “Chip” DiPaula Jr. says it’s “a new day” at UMMS. We certainly hope that’s the case. But we’re not quite willing to give them the benefit of the doubt. They lost that privilege.

This time, they’ll have to prove it.