In all the years I’ve been writing about government, I’ve never been able to answer one question: why are otherwise smart people so blind to their own conflicts of interest?
To find a textbook example, look no farther than Connecticut’s insurance commissioner, Katharine Wade. It’s a long story but until 2013 Wade was vice president of Public Policy, Government Affairs and U.S. Compliance at Cigna, the Bloomfield-based insurance behemoth looking to be acquired by the even larger Anthem, a health insurer based in Indianapolis. For eight years previous to her stint at Cigna, Wade headed a lobbying group for Connecticut’s insurance plans.
Wade’s agency has oversight of the merger, which is a little shocking in itself. But the controversy doesn’t end there. Her husband still works as an attorney for Cigna. That’s right. A state government agency headed by Wade will oversee a proposed merger involving her husband’s employer, which is also her previous employer and a company she used to represent as a lobbyist. Got that?
Wade has thus far refused to recuse herself from involvement in the proposed deal. As you might expect, consumer advocacy and healthcare groups are up in arms. The Connecticut Citizens Action Group emailed to its members last week and Jim Dean, who heads Democracy for America and is the brother of former Vermont Gov. Howard Dean, has called on Gov. Dannel P. Malloy to replace Wade to “end the clear conflict of interest she has in the government’s due diligence process over the Anthem-Cigna merger.”
Both groups have cited a recent story in the International Business Times that raises serious questions about Wade’s relationship with the insurance business. Wade requested a ruling from the State Ethics Citizen Advisory Commission, which — perhaps shockingly — found there was no conflict of interest in her overseeing the proposed merger.
And you know you have a problem when lawmakers in Hartford agree on something. Democratic Speaker of the House Brendan Sharkey and top Republican lawmakers have called on Wade to recuse herself from the merger.
Supported by the general counsel for the Office of State Ethics, Common Cause, a well known public interest group, has petitioned the State Ethics Citizen Advisory Commission to reconsider Wade’s conflicts, which it says “will adversely affect her ability to conduct a review of the merger and take action that is fair or objective.” Well duh. The commission has agreed to conduct the review and will have 60 days to write it.
Wade’s defense for continuing her involvement in the case is flimsy at best. She says the merger application is being filed by Anthem, not Cigna, which really strikes me as a distinction without a difference. Both companies will be profoundly impacted by the merger, no matter which is the applicant.
According to information provided to the State Ethics Commission, Wade further insists that while her husband still works as an attorney for Cigna, neither of them owns a vested share of the company, which sounds like a fancy way of saying they don’t own stock in Cigna that would be impacted by the merger. But the husband still works at Cigna, and presumably would benefit in some way if the company’s stock performs well.
Casting further doubt on Wade’s ability to be open and impartial is the secrecy and lack of transparency in her handling of another recent merger — that of Aetna and Humana. Made without a public hearing, the state Insurance Department’s January determination “that the proposed acquisition would not substantially lessen competition or create a monopoly in Connecticut” was not made public until four months later.
Even if the letter of the state’s flaccid ethics laws permit such conflicts, no self-respecting public official would allow her name to be dragged through the mud through inaction. Perhaps Wade does so because the governor is standing by her, for now. Or maybe she feels she’s worth less to her boss if she washes her hands of the merger.
But Malloy has his own perception problem. As the Courant pointed out in a stiff-lipped editorial earlier this month, Cigna and Anthem give generously to the Democratic Governors Association, which Malloy leads. In 2013-14 the companies gave $825,000.
To be fair, governors and presidents are between a rock and hard place when they go looking for managers to fill these types of positions. For a job like insurance commissioner, you want someone who knows the industry inside and out. And a lot of those candidates are working in the private sector. The same can be said for the Pentagon (lots of former defense contractors work there), the Food and Drug Administration (pharmaceutical executives), the Federal Aviation Administration (airline bigwigs). Heck, when Malloy needed a new labor commissioner in 2012, he turned to Sharon Palmer, a former teachers union boss. And Palmer replaced Glenn Marshall, a longtime construction union leader.
If you hire an insider from the outside, the idea is to find someone whose potential conflicts will be minimal. Malloy has made some good hires over the years (Mark Ojakian comes to mind) but in the case of Wade, Malloy turned to someone whose loyalties are so divided as to be disruptive. Ditto Dan Esty, whose private-sector consulting was troublesome as commissioner of the Department of Energy and Environmental Protection. However, Esty had the good sense to recuse himself in advance from having anything to do with 26 organizations that might have matters before DEEP.
Memo to Wade: give Dan Esty a call.
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