He worked on OK for acquisition by group he invested in
THE SAN FRANCISCO CHRONICLE
SACRAMENTO, CA — The state Department of Managed Health Care plans to fire its second-in-command for holding stock in UnitedHealth Group Inc. when he worked on the department’s approval of UnitedHealth‘s acquisition of PacifiCare Health Systems Inc. last year.
Kevin Donahue, the department’s deputy director, is on paid administrative leave from his $110,000-a-year job and will be fired on Nov. 15 unless the appeals process overturns the decision, said Lynne Randolph, spokeswoman for the agency.
“We do have a zero-tolerance policy for ethical violations. This is a clear-cut ethical violation,” said Randolph. He said the department has notified the Fair Political Practices Commission, which has the power to issue administrative fines of up to $5,000 per violation and file civil complaints.
Donahue, who is an attorney, said he plans to challenge his firing because he disclosed his stock holdings in UnitedHealth — which he estimated at about $14,000 — every year since 2000. He said the stock was part of a managed account.
“All I was required to have is disclosure, which I did for four years,” said Donahue, speaking from his Sacramento home.
Donahue, who worked for the agency and the Department of Corporations for 7 1/2 years, said he was asked to assist a colleague who was in charge of the merger-approval process. He said had no influence over whether the state approved the $9.2 billion deal.
The California Medical Association discovered Donahue’s financial connection with UnitedHealth after requesting the financial disclosure documents of those in top positions at the Department of Managed Health Care.
The medical association made the requests of dozens of individuals in Gov. Arnold Schwarzenegger‘s administration because the group says recent regulations adversely affect physicians, said Dr. Jack Lewin, the CMA‘s chief executive officer.
“We just want to know why and how the for-profit insurance companies have gotten so much influence,” Lewin said. The group is particularly upset over efforts by the governor to prohibit doctors from billing patients for services not covered by their insurers.
Jerry Flanagan, of the Foundation for Taxpayers and Consumer Rights, called on the state auditor to review the UnitedHealth-PacifiCare merger in light of the conflict-of-interest charge.
“What this means is that it (the department’s review) was a sham and the outcome had been decided before,” he said.
