Obama ‘czar’ earned mil­lions from trou­bled firms

The Washington Times Weekly - - Politics - BY CHUCK NEUBAUER

Nancy-Ann DeParle, one of Pres­i­dent Obama’s chief ad­vo­cates for the health care re­form bill wend­ing its way through Congress, earned more than $6.6 mil­lion as a paid di­rec­tor for health care firms, some of which were tar­geted in gov­ern­ment in­ves­ti­ga­tions or whistle­blower law­suits on sus­pi­cions of billing fraud and other le­gal prob­lems.

Five of the com­pa­nies faced al­le­ga­tions rang­ing from over­charg­ing Medi­care to fail­ing to warn pa­tients of the dan­gers of their prod­ucts, ac­cord­ing to a study by the In­ves­tiga­tive Re­port­ing Work­shop at Amer­i­can Uni­ver­sity and a re­view by The Wash­ing­ton Times of U.S. Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) records and Mrs. DeParle’s fi­nan­cial dis­clo­sure state­ment.

Mrs. DeParle, a for­mer top ad­min­is­tra­tor for the agency that runs Medi­care and Med­i­caid, has re­signed from her cor­po­rate di­rec­tor­ships and said she will re­move her­self from any mat­ters di­rectly in­volv­ing the com­pa­nies. Ac­cord­ing to a hand­writ­ten note at­tached to her fi­nan­cial-dis­clo­sure form by an ethics of­fi­cial in June, she also has di­vested “all con­flict­ing as­sets.”

But a Wash­ing­ton watch­dog group said it plans to mon­i­tor the pend­ing health care re­form leg­is­la­tion to make sure her new job does not con­flict with her prior in­dus­try ties.

“We want to look at it to be sure there was no con­flict,” said Steve El­lis, vice pres­i­dent of Tax- pay­ers for Com­mon Sense. “We need to look at the end to see who wins and who loses.”

Mrs. DeParle, named in March as di­rec­tor of the White House Of­fice of Health Re­form, col­lected at least $6.6 mil­lion from the health care com­pa­nies since 2001, in­clud­ing direc­tors’ fees and the prof­its from sell­ing stock that she ac­quired through op­tions or awards as a di­rec­tor, ac­cord­ing to Amer­i­can Uni­ver­sity’s July study and a sub­se­quent re­view by The Times. Most of the com­pa­nies are pub­licly traded.

Nearly all the com­pa­nies, whether they had le­gal trou­bles or not, have a huge stake in the shape of the pend­ing health care bill. Mrs. DeParle is one of the ad­min­is­tra­tion’s key of­fi­cials help­ing to push through the leg­is­la­tion.

Her spokes­woman, Linda Dou­glass, said there was no con­flict be­tween Mrs. DeParle’s in­volve­ment in health care re­form and her past work as a cor­po­rate di­rec­tor for the health care com­pa­nies, where she was not in­volved in day-to-day op­er­a­tions.

Mrs. Dou­glass de­scribed her boss as a ded­i­cated pub­lic ser­vant who sold some of her stocks at a loss and took a pay cut to ac­cept the $158,500-a-year “health czar” job. She said that as a cor­po­rate di­rec­tor, Mrs. DeParle pushed for the com­pa­nies to com­ply with fed­eral and state reg­u­la­tions and in­ves­ti­ga­tions.

“Through­out her pro­fes­sional life, Nancy-Ann DeParle has been known for her in­tegrity, ex­traor­di­nary hard work and metic­u­lous ad­her­ence to eth­i­cal guide­lines,” Mrs. Dou­glass said. “Now she is fight­ing to im­ple­ment the pres­i­dent’s health in­sur­ance re­form plan.”

David Ax­el­rod, a se­nior Obama ad­viser, also praised what he called Mrs. DeParle’s “hon­esty and in­tegrity,” say­ing that dur­ing health care re­form meet­ings the two at­tended, he never saw her “ad­vo­cate for in­dus­try at all” or “try to set pol­icy.”

Be­fore she went into the pri­vate sec­tor, Mrs. DeParle was a key health care ad­viser to Pres­i­dent Clin­ton, run­ning Medi­care and Med­i­caid as ad­min­is­tra­tor of the Health Care Fi­nanc­ing Ad­min­is­tra­tion (HCFA) from 1997 to 2000. HCFA is now known as the Cen­ters for Medi­care and Med­i­caid Ser­vices.

In March, Mr. Obama named Mrs. DeParle and Health and Hu­man Ser­vices Sec­re­tary Kath­leen Se­be­lius to push his health care plan through Congress af­ter his orig­i­nal choice for both jobs, for­mer Sen. Tom Daschle, South Dakota Demo­crat, with­drew over ques­tions about his in­come taxes and his work for the health care in­dus­try.

Mrs. DeParle did not have to un­dergo the Se­nate con­fir­ma­tion process that Mr. Daschle faced be­cause she is a White House staffer, not a Cab­i­net of­fi­cer. She re­ported $2.3 mil­lion in in­come on her fi­nan­cial dis­clo­sure form

cov­er­ing 2008 and through her May 13, 2009, fil­ing.

The com­pa­nies for which she served as a di­rec­tor in­clude:

DaVita, Inc., a Colorado firm with 1,513 out­pa­tient kid­ney dial­y­sis cen­ters in 43 states and Wash­ing­ton, D.C., with more than 117,000 pa­tients, most on Medi­care. From May 2001 to July 2008, Mrs. DeParle re­ceived more than $1.64 mil­lion in direc­tors’ fees and prof­its from the sale of stock she ac­quired as di­rec­tor through op­tions and awards, SEC records show.

The U.S. at­tor­neys in Texas, New York, Ge­or­gia and Mis­souri have sub­poe­naed records from DaVita since 2004 in civil and crim­i­nal in­ves­ti­ga­tions, some of which in­volved how the com­pany billed Medi­care, ac­cord­ing to the SEC records. The in­spec­tor gen­eral’s of­fice at Health and Hu­man Ser­vices also sub­poe­naed the firm in De­cem­ber 2008 re­gard­ing its billings of Medi­care for drugs.

DaVita said in May that the U.S. at­tor­ney in New York had closed that in­ves­ti­ga­tion without charges, but other in­quiries are still pend­ing, ac­cord­ing to records that the com­pany filed in Novem­ber with the SEC.

“DaVita al­ways co­op­er­ates fully and as­sists the fed­eral gov­ern­ment in all on­go­ing mat­ters,” said com­pany spokesman Craig Hand­z­lik.

While she was a board mem­ber, cam­paign dis­clo­sure records show, Mrs. DeParle gave $15,000 to DaVita’s po­lit­i­cal action com­mit­tee, which bankrolled the com­pany’s po­lit­i­cal friends.

Bos­ton Sci­en­tific, Corp., a de­vel­oper, man­u­fac­turer and mar­keter of med­i­cal equip­ment in­clud­ing heart de­vices such as stints and de­fib­ril­la­tors. Mrs. DeParle served as a di­rec­tor from April 2006 to March 2009, earn­ing more than $174,808 in direc­tors’ fees, ac­cord­ing to SEC records.

Bos­ton Sci­en­tific said in an SEC fil­ing that it re­ceived no­tice in 2008 of seven fed­eral or state in­ves­ti­ga­tions into its prac­tices. In a sep­a­rate in­quiry, the U.S. Army re­quested in­for­ma­tion about the com­pany’s “sales and mar­ket­ing in­ter­ac­tions” with doc­tors at an Army med­i­cal cen­ter in Ta­coma, Wash.

Guidant Corp., a heart de­vice man­u­fac­turer ac­cused of con­ceal­ing flaws in some of its de­vices. Mrs. DeParle served as a di­rec­tor from May 2001 un­til its sale in April 2006 to Bos­ton Sci­en­tific, earn­ing at least $1.19 mil­lion in prof­its from the sale of stock she ac­quired through awards and op­tions, SEC records show. Most of the prof­its came from cash­ing in her Guidant stock op­tions when the com­pany was pur­chased by Bos­ton Sci­en­tific.

In May 2005, Guidant ac­knowl­edged that it had not told doc­tors over a three-year pe­riod that one of its de­fib­ril­la­tors had a flaw caus­ing it to short­cir­cuit in about two dozen cases — in­clud­ing one in which a col­lege stu­dent died. The com­pany later re­called the prod­uct, and in Novem­ber 2005, the New York at­tor­ney gen­eral’s of­fice ac­cused Guidant of con­ceal­ing safety prob­lems with some of its de­fib­ril­la­tors.

In Novem­ber, Bos­ton Sci­en­tific agreed to pay $296 mil­lion to set­tle a Jus­tice Depart­ment in­ves­ti­ga­tion into charges that Guidant failed to prop­erly re­port the prob­lems with its de­fib­ril­la­tors to the U.S. Food and Drug Ad­min­is­tra­tion (FDA).

Al­though she was a di­rec­tor of the com­pany, Mrs. DeParle was “not aware of the de­fib­ril­la­tor is­sue” un­til it was men­tioned in a May 2005 New York Times ar­ti­cle, Mrs. Dou­glass said.

In July 2003, a Guidant sub­sidiary pleaded guilty to felony charges of fail­ing to re­port 2,628 in­ci­dents to the FDA in which one of its car­diac de­vices mal­func­tioned — in­clud­ing a dozen cases in which the pa­tients died. The sub­sidiar y agreed to pay $92 mil­lion to set­tle the case, the largest amount ever paid by a de­fen­dant up to that time in a case in­volv­ing flawed med­i­cal equip­ment.

The to­tal in­cludes a $49 mil­lion pay­ment to Medi­care, Med­i­caid and the Depart­ment of Vet­er­ans Af­fairs to set­tle claims that they had paid for de­fec­tive prod­ucts.

Mrs. DeParle joined the Guidant board in 2001, a few days af­ter the com­pany told the FDA about the mal­func­tions with its car­diac de­vice. She was in­volved as a di­rec­tor in try­ing to set­tle the is­sue, Mrs. Dou­glass said.

Spe­cialty Lab­o­ra­to­ries, Inc., a Cal­i­for­nia-based chain where Mrs. DeParle served as a di­rec­tor from April 2001 to June 2004, earn­ing an es­ti­mated $66,000 in direc­tors’ fees, records show. In 2002, the com­pany was sus­pended for sev­eral months from re­ceiv­ing Medi­care and Med­i­caid re­im­burse­ments for vi­o­lat­ing state and fed­eral law by us­ing un­li­censed per­son­nel in test­ing and as su­per­vi­sors.

The com­pany was cited for sim­i­lar prob­lems in 1999 by HCFA, which was then headed by Mrs. DeParle.


Obama “health czar” Nancy-Ann DeParle — seen here at Au­gust’s South­ern Gov­er­nors As­so­ci­a­tion meet­ing in Vir­ginia — served as a di­rec­tor for sev­eral pri­vate health care com­pa­nies. Be­fore that, she served as head of the Health Care Fi­nanc­ing Ad­min­is­tra­tion from 1997 to 2000.

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