Blue Cross NC CEO Resigns Following DWI, Halted Merger

Sep. 26--The leader of North Carolina's largest health insurer resigned as CEO Wednesday, a move that comes after new information emerged about his June drunken-driving arrest that threatened a merger with an Oregon-based company.

Blue Cross NC CEO Dr. Patrick Conway announced Wednesday night that he will step down from the position -- effective immediately -- after two years on the job. His departure comes amid mounting pressure from insurance regulators who are furious that Blue Cross failed to share details of Conway's arrest while the company negotiated a partnership with Cambia Health.

The Blue Cross Board of Trustees issued a statement Wednesday night to media saying they requested Conway's resignation. Trustees said they were unaware of details that became available earlier in the week, specifically "notes from the arresting officers and contents from their investigative files."

"As a mission-driven organization, BlueCross NC is committed to doing business with honesty, integrity and fairness," the statement said. "The details that recently emerged related to Dr. Conway's arrest depict behavior that falls short of our standards. Despite Dr. Conway's many successes during his tenure at BlueCross NC, we feel that our constituents are best served by naming an interim CEO and beginning a formal search for a permanent replacement."

Conway released a statement Wednesday night as well, in which he apologized for the pain he has caused his family and colleagues.

He noted his efforts to be transparent, saying he "immediately disclosed" the arrest to Blue Cross trustees and stepped down from his duties to focus on completing 30 days of substance use treatment.

"I have never had an incident like this before, and it is not consistent with who I am as a father, husband and community member," Conway said.

"However, I also understand that I must continue to work hard to earn back the trust I've lost based on my actions," Conway continued. "I therefore am resigning my position as CEO of Blue Cross Blue Shield of North Carolina, and will continue to respect and honor the legal process. In time, I look forward to continuing my work ensuring everyone has access to high quality, affordable healthcare."

Trustees appointed Gerald Petkau, the chief operating officer, as the company's interim CEO.

The stakes

Blue Cross NC and Cambia announced in March their intentions to form a partnership that would elevate Conway as CEO of both companies. The deal, if approved by regulators, would allow the companies to collectively cover around 6 million people and raise $16 billion in combined revenue.

But Blue Cross halted merger talks Tuesday after news outlets published new details from Conway's June 22 arrest on charges of driving while impaired and misdemeanor child abuse in Randolph County.

By the end of Tuesday, insurance regulators in North Carolina, Oregon and Washington scolded Blue Cross executives for failing to provide information about the arrest.

On Wednesday morning, NC Insurance Commissioner Mike Causey called on Conway to resign.

Conway, 45, was arrested after the SUV he was driving struck a tractor-trailer on Interstate 85. His two young daughters were in the car with him, according to the police report.

Blue Cross NC trustees previously allowed Conway to stay on as CEO because he attended a 30-day substance abuse treatment program. The company also refrained from communicating details of the arrest to the public "out of respect for the legal process," and Conway's "right to due process," trustees said in a recent letter.

But information released Tuesday put the arrest in a new light.

A video provided to The News & Observer appears to show Conway weaving between lanes for several miles on Interstate 85 before sideswiping a tractor-trailer. A confidential police report says Conway became "belligerent" at the police station and threatened to use political connections against the police.

The report quotes Conway saying: "'You had a choice. You could have let me go. You don't know who I am. I am a doctor, a CO of a company. I'll call Governor Cooper and get you in trouble.'" The governor "was not involved in this incident in any way," Cooper spokesman Ford Porter told the N&O Tuesday.

Regulators angry

The trustees said in their statement Wednesday that after the accident, they began "reviewing and monitoring the situation, with the help of outside counsel and other experts." A special committee reviewed public records and officer affidavits regarding the accident and arrest, the statement said.

The police report containing Conway's comments isn't considered a public record but was obtained by WRAL and Causey, who shared it with the N&O on Wednesday.

The trustees said they were unaware of the arresting officers' notes and gathered Wednesday to "reexamine the situation and determine a course of action."

Washington state Insurance Commissioner Mike Kreidler said Tuesday he was "deeply troubled" by the lack of communication from Blue Cross NC and Cambia around the arrest.

Insurance commissioners in North Carolina and Oregon went a step further on Wednesday, telling the N&O the companies may have failed to provide the amount of information required by their state law.

"They are required to report any material changes within two business days and they did not do that," Causey said, explaining that he learned about the arrest nearly three months later. He added that he believes the arrest would count as "material" under state law.

"It goes to the integrity of the CEO and their leadership ability, the CEO's state of mind and a host of other things," Causey said. "This CEO was slated to lead this combined entity if it ever got approved."

Were other laws broken?

The N.C. Department of Insurance said its attorneys are exploring what possible penalties might be associated with breaking that law -- though Causey said he couldn't speak about what those penalties could be.

Oregon has a similar law, according to Brad Hilliard, a spokesman for Oregon's Division of Financial Regulation and insurance commissioner Andrew Stolfi.

Blue Cross Blue Shield of NC had an obligation to inform Oregon regulators within two business days of Conway's arrest and the allegations against him, Hilliard said in an email. But they weren't notified of the charges until Sept. 19.

The arrest details "constitute a material change in the affiliation application pending before our states and there is no excuse for the failure to inform our offices," Hilliard said. Hilliard also said the division is looking into potential penalties.

Blue Cross NC trustees mentioned regulators Wednesday night when they announced Conway's resignation and Petkau's appointment.

"We are confident that the transition will be smooth, and that Gerald Petkau will continue to lead the fight to improve the quality of health services, lower costs, and deliver an overall exceptional experience for our members," trustees said. "We hope that this action begins to rebuild a trusting relationship with our regulators and customers."

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