As Anthem Formally Seeks To Buy Cigna, Insurance Commissioner Stays On The Case Despite Ties

Sept. 25--With the Anthem-Cigna merger application in hand, state Insurance Commissioner Katharine L. Wade told Connecticut's top ethics official Thursday that she will take action on the $54 billion deal rather than recuse herself from the case.

That's what Wade had signaled she would likely do, but it's not what her critics wanted to hear, considering that she's a former Cigna vice president, and that her husband still works for the Bloomfield insurer as a lawyer.

Wade made her decision based on a strict reading of the law, as she outlined in a six-page letter to the chief of the Office of State Ethics. In an interview after she filed the document, she added that, in her view, there's no reason why she would be improperly swayed in making a final decision on the merger.

"I was hired to do a job, I have taken extraordinary measures to carry out the duties, and I know I can do my job," Wade said.

Wade spelled out in detail the ways she and her husband, Michael Wade, have eliminated financial conflicts in the case. She sold her Cigna stock in 2014, for example, and she and her husband placed all of their financial assets in a blind trust with an independent fiduciary -- with no Cigna holdings -- after Gov. Dannel P. Malloy appointed her in March.

The open question is whether Wade's decision to rule on the merger application will create the appearance of a conflict. But that's not a legal issue because Connecticut's ethics statute doesn't address appearances -- only conflicts in which an official or a close family member can "derive a direct monetary gain or suffer a direct monetary loss."

The fact that Michael Wade works at Cigna is not a conflict under the law, as Wade took pains to point out in her letter to Carol Carson, executive director of the Office of State Ethics.

Wade left Cigna after 21 years in December 2013, where she was vice president for government affairs, public policy and U.S. compliance, reporting directly to the general counsel. Michael Wade is an associate chief counsel, litigating cases.

Her ethics disclosure form, filed in April, indicates that she owned Cigna shares in 2014, because, she said, she did not divest the holdings until April 15, 2014. But by the time she took office in early April, Wade said Thursday, she and her husband had no Cigna holdings other than unvested stock awards granted to him, which, by definition, he doesn't control.

Wade said there would not be an appearance of a conflict, "because I believe that the law is quite clear in terms of the evaluation that needs to be made."

She added, "I haven't worked there in two years ... My husband is treated just like every other employee."

But critics, including the head of a Washington, D.C., group that said it filed a Connecticut ethics complaint last week against Wade for refusing to recuse herself, say the appearance of a conflict is very real for an official entrusted with the sole power to decide on a corporate merger on behalf of a state.

Connecticut is one of 23 states that will rule on the merger, along with at least two federal agencies, including the Department of Justice.

"The overriding issue is what I would describe as close ties to Cigna," said Michael Whitaker, executive director of an ethics watchdog group, Foundation for Accountability and Civic Trust. "In my mind, just in an abundance of caution, she should recuse to eliminate this appearance of impropriety."

Whitaker sent me a document that appears to be a complaint filed Sept. 16 with the state's ethics office, alleging a violation of the state ethics code by Wade. The document is prominently marked "confidential," and Carson, at the ethics office, would not confirm that it was filed.

Wade said Thursday she was unaware of the complaint. Under state law, it's a violation for a person filing an ethics complaint to talk publicly about that complaint unless it's adjudicated publicly. But that law has never been tested, Carson said, and Whitaker talked about it freely, knowing the law.

The complaint, as supplied by Whitaker, cites Wade's April disclosure, showing she held shares in Cigna, which was the latest public filing on the issue until Thursday. Even without stock ownership, Whitaker said, the facts "raise questions about her motivations to approve or disapprove of this merger, either way."

Wade has previously made clear, and amplified Thursday, that she will not have any role in matters that she handled while at Cigna; clearly, the merger, announced two months ago, was not part of her job. She also re-emphasized that Michael Wade is "formally firewalled" from all matters that might come before the state Insurance Department.

Carson's office signed off on Wade's appointment in February, before it was made public, though that was not related to the merger.

The heart of the appearance-of-conflict issue is one that's familiar to many regulatory agencies. Does Wade, as a former Cigna vice president, have a built-in incentive to help, or to hurt, the company and the industry from whence she came?

Not at all, she argues. Without expertise that can only come from working in an industry, regulators would be weaker. "Having knowledge of how the industry works, it gives you the ability, when you see a foul you can call a foul," she said.

Attorney General George Jepsen, whose wife is a ranking employee at Cigna, though not an officer, did recuse himself, in a June 23 letter to his top deputy, Perry Zinn Rowthorn -- simply because of his wife's employment at Cigna.

Jepsen's office also must sign off on the merger application. He is an elected, constitutional officer and Wade is an appointee, so it may not be fair to make a direct comparison.

And it certainly appears that Wade took all measures, and then some, to eliminate financial conflicts and to follow the law precisely. The fact that the five boxes of documents comprising the merger application were filed by Anthem, not Cigna, does matter, Wade said.

Still, it would have been wiser for her to recuse herself, exercising the full measure of safety. Why not? By her own account, the department is staffed with excellent insurance regulators. By tradition, the commissioner does not preside over hearings in merger cases, and instead acts on the recommendation of the hearing officer and other staff members.

There has been some hand-wringing about the fact that Wade is the daughter-in-law of James Wade, a prominent Democratic fundraiser, lawyer and Malloy supporter. That isn't part of the conflict-of-interest question in her role as commissioner but it amplifies her role as an official with close ties to party power bases.

Wade's mother also worked for Cigna, in marketing and policy, Wade said. The commissioner shies away from none of these political and employment ties. In her office is a black-and-white photograph of workers at the John F. Kennedy Memorial in Hyannis, Mass., which, she said, her father built.

So, do the connections matter? Not in a legal way, and Wade makes a case that her judgment is uncompromised.

She could have ended any speculation about the Cigna deal cleanly. Instead, based on her filing Thursday, unless new facts emerge, we will have to settle for the knowledge that our insurance commissioner is acting correctly under the law.

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