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An investigative report by the former state Inspector General appears to corroborate a number of allegations by doctors concerning the state-operated fund that covers doctors and hospitals against major malpractice claims.
However, one past fund official. former Deputy Director Dianne Merlino, who was named in the report, vigorously denied the allegations.
The report, a copy of which was obtained by the Central Penn Business Journal from a member of the Physicians' Cincinnatus Society, investigated allegations of misconduct, waste and mismanagement in the former administration of the Medical Professional Liability Catastrophic Loss Fund (CAT). Members of the society are challenging the fund in court. Doctors are angry because the fund has $2 billion in claims that the fund has not had the money to pay.
The Aug. 5, 1992, report, which until now has been kept confidential, alleges:
* Employees of the fund attended golf outings and other sports events as guests of insurance companies that received fund contracts. Also, annuity brokers and attorneys who received business from the fund hosted dinners at expensive restaurants for fund employees.
* A life-insurance underwriter told fund staff members that 50 percent of the brokers used by the fund were "restricted to the CAT Fund." "Restricted brokers are generally regarded as substandard in their knowledge of the business and qualifications," according to the report.
* Former administrators manipulated the fund's contractor selection process to benefit affiliates of certain insurance companies. They gave sole-source contracts, meaning competitors could not submit their own proposals.
* One former insurer, Physicians Insurance Co., was chronically late in forwarding doctors' insurance payments to the fund and apparently collected the interest in the interim. PIC stopped writing malpractice insurance in 1997.
* Merlino "flaygrantly violated" rules by engaging in political activity such as campaigning, fund raising, canvassing or poll watching during working hours.
Merlino, CAT Fund Director Joseph Pulcini Jr., and other staff members were found to have received gratuities from people seeking business with the fund.
The report recommended that Pulcini and Merlino "be appropriately disciplined for the misconduct described in this report." The two had been suspended on May 12, 1992, during the course of the investigation.
Merlino denied the allegations, saying of the report, "It really hurt my political career," adding...