New York State Insurance Department Report Reveals ‘Improper’ Spending by HIP

The New York State Insurance Department has released a 26-page report revealing that the Health Insurance Plan of Greater New York, New York City's largest not-for-profit HMO, "improperly provided luxury cars and apartments to senior executives and may have violated state law in helping its doctors distribute political donations," the New York Times reports. According to information culled by insurance regulators, HIP also awarded several million dollars in office cleaning contacts to "friends of the organization's CEO," leaving it "open to criticism and questions regarding conflicts of interest." Spurred by concerns that HIP -- created to provide affordable health insurance to city workers and a coverage provider for many Medicaid and Medicare patients -- was "spending too lavishly" while it fell into financial troubles, insurance regulators began a two-year investigation of the company's expenses. The investigation found that beginning in 1994, the health plan spent over $900,000 to provide two Jaguars and five luxury apartments located in New York and Miami for HIP CEO Anthony Watson. In addition, Watson may have "paid too much" for cleaning work performed on HIP offices, since he awarded millions of dollars in cleaning contracts to his friend Samuel Lewis and a business partner Martin Goodstein, even though they did not offer the lowest bid for the jobs. HIP spokesperson Ronald Maiorana responded that Watson "was not personally involved" in awarding the contracts and would give no further comment. Lewis and Goodstein also did not comment on the issue. The insurance department urged the HIP board to call on Watson to reimburse the company for any "personal use" of a "resort apartment near Miami" or of the cars, and recommended that state tax officials investigate whether Watson should pay additional personal taxes to cover these benefits. In addition to examining Watson's spending habits, insurance regulators also expressed that company Vice President Raymond Vacca "encouraged a political action committee run by some of the company's doctors to make donations to specific candidates and forwarded the checks to their campaigns." State and federal laws bar not-for-profit organizations from donating money to political candidates. The report criticized Vacca's "lack of candor" when questioned under oath about the political donations, and recommended his demotion or dismissal. Vacca would not comment on the issue. Though Maiorana said that the company has "accepted most of the agency's criticisms and agreed to tighten its controls," he "insisted" that the money for the donations did not come from the company and that "nobody at HIP engaged in any activity inconsistent with its not-for-profit status." He also would not comment on whether the company would take action against Vacca (Drew, New York Times, 11/8). However, Insurance Department spokesperson Joanna Rose said that HIP has "agreed to the [report's] recommendations" that call for Vacca's removal and the reimbursement by HIP executives for "excessive perks." Some of the report's findings were given to state tax authorities and the New York attorney general for further investigation, and a law enforcement official said that the attorney general's office has already begun conducting a probe into the situation (Calderone, New York Daily News, 11/5).