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Editorial Advisory Board: UMMS directors must deal with ugly mess

Here we are again. The Maryland legislative auditor wrote on Oct. 31 that the University of Maryland Medical System “delayed and hindered our work by repeatedly failing to make employees available and failing to provide requested information on a timely basis.” This is not entirely surprising, because the audit required by the General Assembly forces UMMS to come clean about the self-interested director transactions that were exposed as a result of former Mayor Catherine Pugh’s criminality in taking money from UMMS (and other entities) in return for her worthless self-published book Healthy Holly.” Probe deeply enough, as the auditor is now doing, and other malfeasances are likely to come to light. If the prior board was lax, or worse, about corporate governance in one area, it probably is a good bet that the mice had a wide playing field.

But why wait, dear board? On March 21, 2019, we opined that the UMMS board had an immediate fiduciary obligation to act to recover waste and examine each self-interested director transaction that was entered into without obeying the UMMS corporate compliance policy. That policy required presentation to the board, recusal of the interested director and a vote by the board after disclosure of the financial interest of the director “and all material facts.” Any contract entered into in violation of the policy should be canceled forthwith and re-let. It should have been canceled and re-let when the scandal broke.

Last March the Baltimore Sun published a list of self-interested director transactions based on its investigation after the Pugh scandal broke into the news. The list includes powerful and wealthy figures in the Maryland business and political communities. The Sun reporting did not reveal whether the policy was followed before any of the self-interested director transactions were entered into. That is something that the board had (and has) a responsibility to disclose, along with any other self-interested director transaction. All this may be very embarrassing to a host of people, in and out of the UMMS system. It may cause harm to the reputation of people high and low in Baltimore, and to the pocketbooks of those same people and the companies in which they serve.

In response, we say: So what? The past and current directors have a fiduciary responsibility that is a superior obligation to protecting reputations or pocketbooks. The hospitals matter; directors and officers who acted wrongfully with funds that were not their own do not. The current directors also have a duty to pursue damages from every available source, including the non-interested officers and directors who enabled wrongdoing, to restore to the hospitals moneys that should never have walked out the door. Healthy Holly is easy. Paying hospital money for those “books” was a waste. Literally. Directors: Sue everyone responsible for this travesty. And don’t stop there. In addition to canceling all contracts let in violation of the policy, go after moneys expended on such of the contracts that violated Maryland corporation law and that the self-interested director or her or his company cannot prove were fair and reasonable to UMMS.

We explained all this back in March. The new directors may think that because the wrongdoing was not committed on their watch, they can sit back and not deal with this ugly mess. They are mistaken. Their fiduciary duty requires them to act in the best interests of UMMS. Right now. And don’t forget, current directors, that your failure to act in the best interests of UMMS now could subject you to litigation later. Yes, you.

Finally, where is the attorney general in all this? We pointed out that Brian Frosh has a duty to protect the donors and intended beneficiaries of charities in Maryland. This is a big charity, with big problems and a silent current board. Open an investigation, Mr. AG, of the current board. Seek an accounting of their actions or, rather, inaction. And do it now: Gore some oxen.

Editorial Advisory Board members Michael Hayes, Ericka N. King and Angela W. Russell did not take part in this editorial.

EDITORIAL ADVISORY BOARD MEMBERS

James B. Astrachan, Chair

James K. Archibald

Arthur F. Fergenson

Nancy Forster

Susan Francis

Michael Hayes

James Haynes

Ericka N. King

Stephen Z. Meehan

C. William Michaels

Angela W. Russell

Debra G. Schubert

H. Mark Stichel

Michael P. Van Alstine

Vanessa Vescio

The Daily Record Editorial Advisory Board is composed of members of the legal profession who serve voluntarily and are independent of The Daily Record. Through their ongoing exchange of views, members of the board attempt to develop consensus on issues of importance to the bench, bar and public. When their minds meet, unsigned opinions will result. When they differ, or if a conflict exists, majority views and the names of members who do not participate will appear. Members of the community are invited to contribute letters to the editor and/or columns about opinions expressed by the Editorial Advisory Board.