CONCORD — When the New Hampshire Local Government Center argued to the state Supreme Court in November that it shouldn’t have to return $17 million in money taken from members of one of its subsidiaries to fund another subsidiary, LGC officials had already secretly reached an agreement months earlier that alters the full repayment.
About two hours after the state Supreme Court announced its ruling that upheld much of an order issued by Secretary of State hearing officer Donald Mitchell compelling LGC to return more than $50 million to its members, HealthTrust and Property-Liability Trust, which were both LGC subsidiaries until a corporate reorganization last year, issued a joint statement and released an agreement saying HealthTrust would assume PLT’s assets and liabilities and manage a “runoff” of PLT’s obligations.
Part of Mitchell’s order, which was upheld by the court, compelled PLT to return $17.1 million to members of HealthTrust. The figure is how much Mitchell ruled was improperly taken from HealthTrust surpluses to float a money-losing workers’ compensation program for about a decade. PLT has only about $12.2 million in unrestricted assets it could use toward the payment, leaving the insurance administrator insolvent, according to the agreement.
HealthTrust Executive Director Peter Bragdon, who is also a state senator, said PLT will go out of business, but will not go through bankruptcy proceedings. He said existing coverage contracts will be honored by HealthTrust, which has hired all of PLT’s 15 or so employees.
The statement said the agreement was reached “in response” to the Supreme Court’s decision, which was announced last Friday. However, the agreement was actually signed on Oct. 28 by HealthTrust Board Chairman Peter Curro and on Oct. 29 by PLT Board Chairman Dennis Pavlicek.
The entire transaction was conducted behind closed doors. Representatives from member communities who attended annual meetings of HealthTrust and PLT on Dec. 10 were not told about it. More than 140 communities signed new or renewed coverage agreements with PLT since Oct. 29. None was told about the agreement before signing on the dotted line, Bragdon said .
“I believe that action, even if it’s not a violation of law, it’s a violation of the spirits of right-to-know in the state of New Hampshire,” said Phillip Wilson, a select board member in North Hampton, which is a member of HealthTrust. “They have learned absolutely nothing and continue to act with total arrogance and disregard for true service to their members.”
Bragdon said the boards of the two entities wanted to have a “contingency plan” in place should the Supreme Court not rule to vacate or alter the PLT repayment. He said the agreement was not made public because it was reached as part of LGC’s litigation in front of the Supreme Court.
“From my view, this is proper business planning in response to litigation, and many aspects of litigation are exempt from right-to- know laws,” he said.
He also said the former LGC entities were hoping the court would void or significantly alter the repayment.
“This, for us, was the worst-case scenario,” he said of the agreement.
The agreement reads that it would be null and void should the court rule in LGC’s favor regarding the $17 million payment.
“We were not expecting to lose,” Bragdon said. The boards wanted a plan in place “if the worst happens, how do we handle it?”
Wilson said he plans to appeal to the Secretary of State’s Office to see if “something” can be done about the agreement.
The North Hampton Select Board adopted a resolution authorizing him to seek out representatives from other towns to join him in asking the Secretary of State’s Office “to take whatever steps” it can about the agreement.
“I believe it was an obvious attempt to circumvent the terms of the Mitchell Order,” he said. “I believe it was a very inappropriate action by these two boards.”
“This is part of proper business planning,” he said. “The goal from HealthTrust’s perspective is to maximize the amount we can return to our members.”
Bragdon said HealthTrust, absent any action taken by its board, will not seek any new contracts from towns for property insurance or workers’ compensation coverage. The runoff, according to the agreement, is scheduled to go through 2016.