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AG to review exit pay for Blue Cross executive

FACING SCRUTINY “Our job,” Attorney General Martha Coakley said, “is to under-stand the thought process of the board” at Blue Cross. FACING SCRUTINY
“Our job,” Attorney General Martha Coakley said, “is to under-stand the thought process of the board” at Blue Cross.
By Robert Weisman
Globe Staff / March 3, 2011

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Massachusetts Attorney General Martha Coakley said yesterday that her office has begun an investigation into the employment contract and severance package given to Cleve L. Killingsworth, former chief executive of Blue Cross Blue Shield of Massachusetts, by the board of the nonprofit health insurer.

The review was launched a day after the state’s largest health plan disclosed that Killingsworth collected $8.6 million in total compensation last year, including $1.4 million in severance pay, after resigning unexpectedly from the top post at the Boston-based insurance carrier.

In addition, he will receive $1.8 million in severance this year and $925,000 next year.

“I understand why the public is upset,’’ Coakley said in an interview.

“This is a CEO of a not-for-profit. Our job is to understand the thought process of the board, what was the diligence that they employed in determining the terms and amounts, and were there appropriate deliberations in terms of their duty as a nonprofit.’’

While it is a large and complex organization that competes in some markets with for-profit businesses, Blue Cross, like most other Massachusetts health plans, is organized and regulated as a nonprofit charity with a public mission.

Blue Cross officials, in explaining Killingsworth’s generous exit package, noted that it was negotiated as part of his employment contract in the summer of 2005, when the economy was much stronger. But in accepting Killingsworth’s resignation last March, after he had served as chief executive for less than five years, the board agreed to give him the same severance benefits he would have received if he had been terminated under the contract.

“We have been very transparent about this issue from the beginning, and we will continue to be transparent,’’ Blue Cross’s senior vice president, Jay McQuaide, said last night. “And of course we would answer any questions that the attorney general’s office has.’’

The inquiry, led by David Spackman, chief of Coakley’s nonprofits and public charities division, will focus on “the actions taken by the board that led to the original contract terms and separation agreement,’’ a statement from the attorney general’s office said.

After looking into $16.4 million in retirement payments granted to Killingsworth’s predecessor, William Van Faasen, the attorney general’s office in 2009 unveiled plans to tighten its oversight of pay and other practices at nonprofit health care companies in Massachusetts. Van Faasen is the insurer’s current chairman. That led to pressure on Blue Cross to separate the jobs of chairman and chief executive, which were both held by Van Faasen and, initially, by Killingsworth.

Robert Weisman can be reached at weisman@globe.com.