For Immediate Release - September 01, 2010

Attorney General's Office Completes its Review of Actions by Beth Israel Deaconess Medical Center Board of Directors

Actions deemed sufficient; Timeliness of actions questioned

BOSTON - Attorney General Martha Coakley's Non-Profit Organizations/Public Charities Division has completed its review of the actions taken by the Board of Directors of the Beth Israel Deaconess Medical Center (BIDMC) in connection with its investigation and disposition of a complaint made against Chief Executive Officer Paul Levy regarding an inappropriate personal relationship Levy had with an employee of BIDMC.

In April, the BIDMC Board conducted a formal inquiry into the complaint and Levy admitted to the inappropriate relationship. Upon completion of its investigation, the Board chose to retain Levy as its CEO, imposed a $50,000 sanction against him, and issued a public reprimand of his conduct. The board also determined that it would continue to consider Levy's conduct and its impact on BIDMC in future incentive compensation determinations.

On May 13, the BIDMC Board requested that the Attorney General's Office conduct a review of the "appropriateness of the Board's governance and conclusions" in connection with the Board's investigation into the complaint made against Levy. The AG's review did not constitute a de novo investigation of the complaint, but consistent with its oversight of public charities in the Commonwealth, focused on whether the Board's actions were consistent with its fiduciary obligations to BIDMC and the public BIDMC serves.

In an 11-page letter pdf format of Beth Israel Deaconess Medical Center provided today to Stephen Kay, the Board's Chairman, the Attorney General's Office presented its findings. Although the review found no evidence of the misuse of charitable funds, it noted that because of the CEO's actions, the performance reviews and compensation determinations for the employee will always be subject to the perception that they were influenced by the personal relationship with Levy.

The Office also found that the personal relationship between the CEO and the employee, which continued throughout her tenure despite repeated expressions of concern by senior staff and certain Board members, clearly endangered the reputation of the institution and its management. As such, his continued, repeated and acknowledged failure to appreciate and address the situation merited, if not compelled, disciplinary action by the Board.

Upon receipt of the complaint in April 2010, the Board responded and acted consistent with its fiduciary obligations. The Board's investigation was sufficient and left open the possibility of further action if merited.

The Attorney General's review determined that some board members and hospital staff had became aware of the existence of a personal relationship between Levy and the employee as early as 2003-04, with some board members counseling Levy to end the relationship. The AG's office concluded that had the entire Board been informed and taken definitive actions when those concerns were first expressed to Levy, much, if not all, of the damage may have been averted.

"Had (Levy) been called on his failure to act, or had his failure to act been reported to the entire Board, this acknowledged 'lapse of judgment' might never have occurred," the letter stated. "For senior managers who reported to Levy, demanding a response was likely difficult. For Board members, it was their job."

The AG's letter states that the entire incident is a reminder that all boards must maintain a proper level of independence in their oversight of public charities. It makes clear that respect for Levy and his accomplishments may have created a level of deference among some board members that was inconsistent with an appropriate level of independence.

"Oversight of management is a primary duty and responsibility of a governing body and this unfortunate and preventable situation should serve as a stark reminder to all boards of the importance of diligent and independent management oversight," the letter states.

The Attorney General's investigation reviewed numerous records provided by BIDMC, including records and information relating to the Board's investigation of the allegations, the employee's employment records, and relevant BIDMC employee policies and procedures. In addition, the Attorney General's Office conducted lengthy and detailed interviews with eleven individuals including current and former Board members, members of senior management, BIDMC counsel, and the CEO.

A full copy of the letter pdf format of Beth Israel Deaconess Medical Center sent from Business and Labor Chief and Assistant Attorney General Jed Nosal to BIDMC Board Chairman Kay is attached.

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