AG urges Beth Israel to rethink CEO’s fitness

Swift action found lacking on Levy

Paul Levy, Beth Israel’s CEO, said that he again apologizes for being involved with a female subordinate at the hospital. Paul Levy, Beth Israel’s CEO, said that he again apologizes for being involved with a female subordinate at the hospital. (John Tlumacki/ Globe Staff/ File 2010)
By Liz Kowalczyk
Globe Staff / September 2, 2010

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Massachusetts Attorney General Martha Coakley said yesterday that the board of Beth Israel Deaconess Medical Center should do “some soul-searching’’ about chief executive Paul Levy’s ability to continue leading the hospital, after her office concluded that his longtime personal relationship with a female employee “clearly endangered the reputation of the institution and its management.’’

Coakley’s remarks, made in an interview with the Globe, came as she released results of her office’s four-month investigation into the board’s handling of Levy’s relationship with the woman, who left the organization last fall.

The board’s chairman, Stephen Kay, said the board continually evaluates its chief execu tive, but he rejected any suggestion that Levy’s actions may make him unfit for the job. “The best thing for the Beth Israel is to have Paul Levy lead the institution,’’ Kay said.

The attorney general’s staff found no evidence the hospital misused charitable funds in paying the employee’s salary, travel expenses, or severance — the primary focus of the investigation.

Coakley’s office, which oversees nonprofit organizations like Beth Israel, also found that when the hospital’s board received an anonymous letter in April, complaining about the relationship, it “responded and acted consistent with its fiduciary obligations’’ by conducting a thoughtful and swift investigation.

The board fined Levy $50,000 and issued a public statement of disappointment.

But in an 11-page letter to Kay, Assistant Attorney General Jed Nosal criticized board members and the hospital’s senior management — some of whom knew about the relationship for years and had warned Levy it was inappropriate — saying they shared responsibility for “this unfortunate and preventable situation.’’

Nosal concluded that had the entire board been informed and taken definitive action when those concerns were first expressed to Levy, “much, if not all, of the damage would have been averted.’’

“This relationship was not a secret,’’ Coakley said. “It was widely known. We are saying [the board] should have acted on it in 2003.’’

The letter also said that some past and current board members still are unconvinced that Levy should have been sanctioned, or even investigated. Given this, Nosal wrote that deference to Levy, who is widely perceived as having rescued the hospital from financial turmoil, “may have impaired board independence.’’

Yesterday, Kay agreed that board members and executives who knew about the relationship should have brought it to the full board sooner, and said that “certainly going forward we will be more sensitive.’’

While Nosal wrote that the board had agreed to “monitor and review the impact’’ of the situation on the hospital and Levy’s ability to lead, Kay downplayed the need to reevaluate Levy’s status. “We are having a great year,’’ Kay said. “We have more patients than we’ve ever had before. He’s made some wonderful alliances with some quality places. He has great credibility. He’s a national leader. Are there people who are mad at him? Sure there are, but I don’t think there is a groundswell.’’

Kay sent an e-mail to hospital employees thanking them for standing by the institution and reaffirming the board’s support for Levy.

Levy released a written statement, saying he is “pleased that the board asked the Attorney General to review their actions and to ask for suggestions to improve our governance. I again apologize for my errors of judgment in this matter.’’

In previous discussions with the board and interviews with the Globe, he has declined to describe the exact nature of the relationship with the former employee, only saying that she “is a close personal friend.’’

The health care union 1199SEIU and the National Organization for Women Massachusetts Chapter released a joint statement yesterday saying Levy’s behavior was “unacceptable, inexcusable, and endangered the hospital’s mission and reputation — all while hundreds of other BIDMC workers were laid off or endured significant pay and benefit cuts.’’

The two groups said they planned to convene an emergency meeting today “to determine what next steps we should take to ensure accountability for the many troubling facts and disturbing questions raised by this report.’’

In their investigation, the attorney general’s staff reviewed “numerous records’’ and interviewed 11 current and former board members, senior management, and Levy.

Coakley’s staff said that Levy hired the woman, Farzana Mohamed, in 2002 as a strategic planning analyst at a salary of $52,000, and that he was previously her adviser at MIT. She was not named in Nosal’s letter.

For two years, she worked with managers in various departments, but reported her findings back to Levy, who considered her an important source of information about the workings of the medical center. The arrangement made some managers uncomfortable, the attorney general’s letter said.

In 2004, she became a strategic planner at the hospital’s Needham campus, and eventually became chief of staff. Her annual salary and bonus in 2009 was $104,000.

The attorney general’s staff said that while her salary was always within the average range for her job level, she was the only non-physician director who received a bonus in all four years they reviewed. Her bonuses ranged from $14,000 to $21,000 annually. And, they noted, the positions she held at the two hospitals were newly created for her and not filled after she left.

The letter said the attorney general’s staff found no basis to conclude Mohamed was unqualified for the jobs. But even though she had excellent academic credentials, a good work history, and positive performance reviews, the letter said, her employment “will always be subject to the perception it may have been influenced as much by the personal relationship with Levy as by her own professional performance.’’

And given the power of the chief executive, no decision regarding her employment was “immune from his influence,’’ Coakley’s staff concluded.

Mohamed did not respond to a request for comment.

In the interview, Coakley said she would be “very disappointed’’ if the hospital board moved on without further discussion and essentially said, “OK, we’re done with this, let’s move onto the next thing.’’

“The board still has work to do around this issue,’’ she said. “They are going to have to watch carefully and determine whether his leadership will be successful. There should be heightened scrutiny on his judgment going forward.’’

More broadly, Coakley said, the situation at Beth Israel Deaconess provides an “eminently teachable moment’’ for all nonprofit boards that it is important to maintain their independence from and rigorous oversight of their managers.

Liz Kowalczyk can be reached at

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