Baltimore Mayor Pugh didn’t disclose seat on Maryland medical system board, as required on city ethics forms

March 14-- Mar. 14--Baltimore Mayor Catherine Pugh has not reported on disclosure forms filed with the city's ethics office that she sits on the board of directors for the University of Maryland Medical System, according to The Baltimore Sun's review of records.

Instructions on the form tell public officials to report any "office, directorship, salaried employment, or similar position with any business entity that was doing business with the city."

Also, the University of Maryland Medical System did not disclose on its federal tax form for the year ending June 30, 2017, that it had entered into a contract with Pugh to buy 20,000 copies of her book, "Healthy Holly: Exercising is Fun," the form shows. A section on the form is reserved for reporting "business transactions involving interested persons" and the system has in the past listed dealings with other board members.

The mayor had reported the deal on a disclosure form board members file with a state healthcare agency. She signed the document, which said she made $100,000 on the deal, which transpired before June 30, 2017.

The medical system has not said when the deal was executed and did not immediately return requests Thursday for comment.

"UMMS purchased 20,000 'Healthy Holly' books and $100,000 was my profit," Pugh wrote on the form filed with the state's Health Services Cost Review Commission. She wrote "Healthy Holly: Exercising is Fun" in 2011, the same year she formed Healthy Holly LLC, according to state incorporation records.

Pugh said she has conformed with legal disclosure requirements.

She said Thursday that the profit she reported was incorrect and that her company netted about $20,000 in each of the years the medical system purchased the books. She did not say how many years the hospital has bought the books.

"That's incredibly concerning," said Damon Effingham, executive director of Common Cause Maryland, a government watchdog organization. "That's certainly something Baltimoreans should know about. If there was transparency there, it would all seem more on the up-and-up. But because it's not, there are more questions about the propriety of her role on the UMMS board."

Disclosure reports that Pugh filed with Baltimore's Board of Ethics covering 2016 and 2017 make no mention of the director seat. She has been on the nonprofit hospital system's board since 2001.

Ethics officials confirmed Pugh should have disclosed the position. To avoid action against her by the city ethics board, she would need to file an amended form.

There is no doubt that the University of Maryland Medical System does business with the city, one of the reasons for reporting membership on the board of an organization.

In 2016, the University of Maryland Medical Center and the Midtown Campus were part of a $60 million decade-long agreement the city struck with 14 nonprofit hospitals to help pay for public safety and other city services. Both facilities are part of UMMS. Most recently, the city's spending board, which Pugh leads, approved Oct. 24 a $100,000 agreement with the medical system for a violence prevention program and a 10-year deal on May 16 for the nonprofit to install and maintain hospital signs on city streets near its West Baltimore campus.

Baltimore City Solicitor Andre M. Davis said in a letter that Pugh has not been required to report her board position because the city did not conduct any business with UMMS until last year. Those two deals in 2018 will require Pugh to list the board seat on the ethics form due April 30, which covers last year.

"UMMS did not have any business relationship with the City of Baltimore" in 2016 and 2017, Davis wrote. "Regardless of whether there are any further business relationships between UMMS and other University of Maryland entities with the City of Baltimore, Mayor Pugh will list her membership on the Board of UMMS going forward in all future financial disclosure statements in the interest of full transparency and disclosure."

But Davis did not mention the 2016 memorandum of understanding that requires the two UMMS facilities to make annual payments to the city through June 30, 2026, according to Board of Estimates documents. The city also entered into a $20,000 contract with the University of Maryland Medical Center to provide smoking prevention services.

The city's ethics board requires public officials to report "other sources of earned income," and Pugh listed Healthy Holly LLC as such a source on her city ethics disclosure. But she is not required to report to the city that the corporation received money from UMMS, ethics officials said.

Editorial: University of Maryland Medical System board's staggering conflicts must be banned »

Still, Effingham said that for transparency, Pugh should have reported the book deal, especially since she sits on the medical system's board.

In her 2016 and 2017 city ethics reports, the mayor does detail she received two fruit basket gifts worth $50 from UMMS CEO Robert Chrencik.

The Sun reported Wednesday that nine members of the medical system's board -- including Pugh -- have business deals with the hospital network that are worth hundreds of thousands of dollars each.

Members of Maryland's business and political elite hold unpaid, voting seats on the nonprofit system's 30-member board. They govern 11 hospitals that bring in more than $2 billion annually from patients.

The state Senate's Finance Committee is scheduled to hear testimony Thursday afternoon on legislation that would make it illegal for board members to profit from contracts with the hospitals they govern.

While the medical system's federal tax forms do not disclose the book deal with Pugh, the documents do cover deals with several other board members' companies, including one with Francis X. Kelly's insurance company and one with M&T Bank. Bank Executive Vice President August Chiasera is on the board.

The American Hospital Association's "Guide for Good Governance for Hospital Boards" addresses the issue of conflicts of interest, which it says are "not rare" for board members.

"A board member is not automatically disqualified from serving on a corporation's board simply because he or she conducts business with the organization," the guide states. "Instead, the duty of loyalty and its prohibition against impermissible conflicts of interest governs how the corporation and its members should act when a director's business or personal dealings conflict with the interests of the corporation."

The guide states that most states permit a medical organization to "conduct business with their board members, so long as certain preconditions are met to make sure that the organization's interests prevail in the board's decision-making." Those include advance notice to the board that an item may present a conflict of interest, disclosure of the board member who may be involved in the potential conflict, and asking that member to leave board meetings when decisions are made related to the member.

The Internal Revenue Service has rules that organizations may follow to prove, if questioned later, that the board acted appropriately, the guide states.

"The IRS has required for many years that boards of tax-exempt entities be composed of a majority of independent, community representatives as a protection against board decision-making that may be tainted by private interest," the American Hospital Association's guide states.

UMMS does state in its tax forms filed with the IRS that it follows a conflict-of-interest policy that requires board members to disclose any potential conflicts, which the system's top lawyer then reviews.

ddonovan@baltsun.com

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