Patrick Springer, Published September 13 2009
Audit shows Blues execs flout expense rulesEDITOR'S NOTE: This story originally appeared in The Forum on July 19, 1995.
BISMARCK - An audit of Blue Cross Blue Shield of North Dakota made public Tuesday found that top executives traveled extensively and flouted internal expense guidelines in a "country club mentality."
The examination by state insurance regulators documented a pattern of frequent travel by officers and sloppiness in documenting expenses.
"Their own personal guidelines were ignored routinely," North Dakota Insurance Commissioner Glenn Pomeroy said Tuesday.
Among instances cited in the report:
- The health insurer's former chief executive took 19 trips in 1991, with the Blues paying his wife's expenses on seven trips. Mayo Christianson retired in 1991 after 37 years with the company.
- Christianson was reimbursed $2,790 for a flight to Alaska that year, an expense Christianson repaid after examiners raised questions about the trip. Christianson told Blues officials he could not recall the nature of the trip, for which no business purpose was claimed.
- Mike Unhjem, Christianson's successor, billed expenses for a trip to Hawaii in 1992, including his wife's $909 airline ticket. The trip was to attend a sales agents' convention for Pioneer Mutual Life Insurance Co., a company affiliated with Blue Cross Blue Shield.
- On the Hawaii trip, Unhjem billed the company for an $800 helicopter ride. Unhjem, who repaid the ride expenses, with interest, said spouses were a part of the meeting and he inadvertently overlooked the helicopter tour in separating personal from business expenses.
- Unhjem submitted $655 in bills for a management seminar involving affiliated Pioneer Life, including a $280 taxi bill, a $170 dinner and a $180 hotel room. Unhjem said he has repaid the expenses, with interest. "Because they raised the question, I would prefer to err on the side of caution," he said.
- The Blues' board members were treated to an annual retreat at a comfortable Minnesota resort, at a cost of almost $30,000 in 1992 and more than $35,000 in 1993.
Expenses for the three-day retreat at Grandview Lodge in Nisswa, Minn., included $1,339 for cocktails, beer and wine; $1,260 for green fees and cart rentals; $995 for hors d'oeuvres; $454 for golf accessories, lessons and clothing, and $348 for horseback riding.
- Board members also ran up a heavy tab at a regional conference. Attending the Western Conference of Prepaid Health Care Plans, they incurred bills of $64,398 in 1991 in Las Vegas; $64,786 in 1992 in Portland, Ore., and $55,535 in 1993 in Scottsdale, Ariz.
- Generous perks were provided for the Blues' three top executives during 1991 to 1993. The company -- and ultimately, subscribers -- paid for memberships at the Fargo Country Club, Moorhead Country Club, Oxbow Country Club, Sam's Club, Radisson Executive Club and Kiwanis Club, among others.
Country club charges billed by executives totaled $16,575 in 1991, decreasing to $8,494 in 1993. The Blues eliminated country club memberships and similar perks in 1993, Unhjem said.
Overall, Pomeroy said, the audit reveals "kind of a country club mentality in their approach to their travel. We think that sends the wrong message to the people in this state at a time when we're trying to get a handle on health costs. And it's just inappropriate."
Unhjem agreed that mistakes were made. Steps, including new policies, have been taken to prevent future problems, he said.
"Certainly we apologize to each and every one of our publics for the errors that occurred," Unhjem said. He said some expenses, such as Kiwanis Club memberships, were paid but not reported as required, thus counting as a violation in the examination.
"It was an area where practices had changed and we simply hadn't updated the policy. Also, the Blue Cross Blue Shield board has established an audit committee, adding an auditor to monitor internal spending. That position reports exclusively to the board."
However, Unhjem defended the annual board retreats and attendance at the regional conference. Board members, who meet quarterly in Fargo and Bismarck, are not paid, he said.
The trips are not vacations, but working sessions in which corporate strategy and other business concerns are taken up.
Unhjem also defended payment of expenses for spouses and other family members on the trips. "Those types of spouse or family-related travel are very common" in the industry, he said.
Of the seven trips for which Christianson's wife's expenses were paid, six concerned attendance at meetings in which Christianson was honored by organizations for his long years of service, Unhjem said.