Blue Cross and Blue Shield of Mississippi has sued the state's insurance commissioner, George Dale, challenging his decision to disallow $500,000 in legal expenses incurred by the plan in defending three of its executives against various criminal charges.
The plan filed its suit in Hinds County Circuit Court in Jackson, Miss.
The dispute stems from last October's indictment by a federal grand jury of two Blue Cross executives on charges that include extortion and a third executive on a wire fraud charge. All three have pleaded innocent.
Three months later, Mr. Dale also was indicted in the matter. He also has pleaded innocent.
Trials for two of the executives, Aaron Johnston, president, and John A. Neill, Blue Cross's vice chairman, have been scheduled to begin on April 18 in U.S. District Court in Hattiesburg, Miss. Trial dates for Charles Pace, Blue Cross's regulation compliance officer, and Mr. Dale haven't been set.
Mr. Dale has been accused of giving preferential treatment to Blue Cross in return for campaign contributions that were authorized by plan executives and for other favors.
In the dispute over the legal expenses, Mr. Dale refused to allow Blue Cross to deduct the executives' legal costs as administrative expenses, contending the costs shouldn't be passed on to the plan's 600,000 subscribers.
Under a 1972 law, the insurance department has the power to regulate Blue Cross administrative expenses and rates. But the department has never disallowed an administrative expense submitted by Blue Cross since its founding in 1948, said Chris Clarke, a plan spokesman.
Blue Cross also challenged several other decisions by Mr. Dale, including an order barring the plan from making political contributions and another requiring that it record certain personal employment contracts as financial liabilities.
Both orders address issues raised in the indictments of the Blue Cross executives and Mr. Dale.
For example, Mr. Dale was indicted on charges involving $2,500 in campaign contributions he received from Blue Cross through a campaign trust fund. Mr. Dale said he returned the money when he realized it came from Blue Cross, but that only was after the federal grand jury learned of the contributions.
The indictment alleges that Mr. Dale and Mr. Pace took the money in exchange for removing an auditor who was preparing a critical report on Blue Cross. The auditor's investigation included a look at Blue Cross' practice of spending thousands of dollars on trips for its executives and for furnishings. At the time of the audit, Mr. Pace was deputy insurance commissioner.
If convicted, Mr. Dale, 52, could face 55 years in prison and $1.25 million in fines, and he would be barred from holding public office in Mississippi.