A lawyer for the pharmacy giant also says the firm may have inadvertently failed to report commissions received by former Senate President William V. Irons in the 1990s.

08:52 AM EST on Friday, January 16, 2004

BY MIKE STANTON
Journal Staff Writer

For 3 1/2 years, while he sat on and later chaired a legislative committee that regulated the health-care industry, Sen. John A. Celona was also on a $1,000-a-month retainer with CVS, a lawyer for the drugstore chain confirmed yesterday.

Former Attorney General Jeffrey B. Pine, who has been hired by CVS to conduct an internal review of the company's relationships with Celona and Sen. William V. Irons, said that "errors in judgment" were made by CVS officials in hiring Celona, but that no crimes were committed.

Later, Thomas Ryan, the chief executive of CVS, vowed in a letter to the company's Rhode Island employees to tighten corporate policies to "avoid any perception of conflict or impropriety in the future" -- including "a strict prohibition" against any consulting agreements with elected officials.

"As a prominent corporate citizen of this state and a leader in our industry, CVS must hold itself to a higher standard of conduct than that required by law or regulation," Ryan wrote in the letter, which was e-mailed to 5,100 CVS employees in Rhode Island and obtained by the Journal.

Based on the length of Celona's tenure with CVS -- from February 2000 to August 2003 -- the senator would have earned about $40,000, though Pine said he was unaware of the exact amount.

Celona was hired and supervised by two CVS government-relations employees whose duties include dealing with the General Assembly on legislation of interest to the drugstore company -- most notably a controversial pharmacy-choice bill opposed by CVS that died in Celona's Senate committee.

"Some CVS employees made errors in judgment, and their actions, however well-intentioned, created an appearance of impropriety," Pine said.

Pine also said that CVS has discovered "inadvertent omissions" in disclosure forms that it filed with the federal government in the late '90s. People familiar with the situation said that the company did not report the commissions that Irons, an insurance broker, received in 1997 and 1998 for a CVS employee health-insurance policy with Blue Cross & Blue Shield of Rhode Island.

Sen. John A. Celona

Pine declined to reveal the total amount of money that Irons has earned from CVS insurance business, or whether his CVS business goes beyond the health-insurance policy that began in 1997 -- a period when Irons repeatedly killed the pharmacy-choice legislation opposed by CVS and Blue Cross.

The Journal reported on Wednesday that Irons received $70,000 in commissions from Blue Cross between 2000 and 2002 for the CVS policy, covering about 5,700 workers. He stepped down as Senate president earlier this month and announced his intention to resign his seat next month.

Pine, hired by CVS last month after stories in the Journal raised questions about Celona's and Irons' ties to CVS and Blue Cross, said that he has concluded that no CVS officials broke the law in their dealings with the senators.

"I haven't found any violation of any law by a CVS employee, or any violations of any [state] Ethics Commission requirements," Pine said.

Pine declined to say whether he has turned up evidence of any crimes or ethics violations by public officials.

"That's up to the attorney general and the state police," said Pine, who added that CVS is cooperating with the investigation -- providing documents and making company employees available to the state police.

IN FEBRUARY 2000, Ryan wrote in his letter, CVS's government-relations department "entered into a consulting agreement with Senator Celona after he offered his services."

Celona was hired by Vice President Carlos Ortiz and Senior Vice President Jack Kramer, CVS has said.

According to Ryan, Celona's consulting agreement was "the only one of its kind for CVS. We have confirmed that we have never had a consulting agreement with any other elected official."

For his $1,000-a-month retainer, Celona "agreed to consult with CVS on senior citizen health-care concerns and to promote the CVS Charity Golf Classic and the CVS Downtown 5K Road Race on his cable television program," Ryan wrote.

Celona also interviewed Kramer, with whom he served on the Rhode Island Sports Council, on the senator's public-access cable TV show on more than one occasion, Pine said. They would discuss upcoming CVS charity events, Pine said.

Pine declined to comment on whether Celona and his CVS supervisors ever discussed pending legislation, including the pharmacy-choice bill. But Pine said that CVS was not seeking legislative influence when it hired Celona.

At the time, Pine said, CVS officials asked the senator whether his consulting duties would pose a conflict of interest, but Celona assured them that he had received "clearance" from the Rhode Island Ethics Commission.

"They did rely on Celona's representations that he had gotten clearance from the Ethics Commission, which is one reason I concluded that they did not violate any laws," Pine said. "Now, should they have accepted that representation? That's another question. But clearly there was nothing in writing from the Ethics Commission."

Pine declined to say whether Celona produced any reports documenting his meetings with senior citizens.

Celona, a North Providence Democrat first elected to the Senate in 1994, was no stranger to CVS. In the summer of 1999 -- months after the pharmacy-choice bill died in Irons' Corporations Committee -- Celona led a Senate softball team in a charity game against a CVS team in Woonsocket, home of CVS corporate headquarters.

His future bosses at CVS participated -- Ortiz as a player, Kramer as the first-base umpire, recalls another senator who played, Marc Cote, D-Woonsocket.

"Celona played third base -- the hot corner," said Cote.

Pine said that CVS ended its consulting agreement with Celona last August, because "it had run its course."

The Journal disclosed Celona's consulting arrangement last month, including the fact that he had failed to disclose his CVS income on his yearly financial statement to the Ethics Commission. Celona apologized for what he called an oversight, and relinquished the chairmanship of the Commerce Committee pending the outcome of the investigation.

"If there is a perception that I voted a certain way on pharmacy issues because of my relationship with the charitable endeavors of CVS, then I should have recused myself from those matters," Celona said last month.

Celona could not be reached for comment last night.

Ryan wrote in his letter to employees that Irons had served as the broker for CVS health insurance and "was paid a customary brokerage commission by [Blue Cross]."

Ryan did not explain, and Pine would not discuss, the circumstances of how Irons became the broker of record for CVS, or whether Ryan, a longtime friend of Irons, was aware or involved. Although Blue Cross paid Irons the commission, it did so, a Blue Cross spokesman noted, only because someone at CVS authorized it.

A Journal review of federal documents filed for the CVS Life & Health Plan in 2000 and 2001 found that only one of more than 20 policies covering different groups of CVS employees throughout the country paid a commisison to a broker -- to Irons for the Blue Cross-Rhode Island policy. In several other states, Blue Cross affiliates struck insurance deals with CVS without using a broker.

Ryan wrote that although Irons received an ethics advisory opinion allowing him to vote against pharmacy-choice legislation in 1999, "CVS will take the lead in this matter" by requiring any elected official who does business with CVS to "fully disclose the nature of that relationship in writing to the Ethics Commission."

Ryan also said that Pine is reviewing CVS' "existing government relations practices and policies," and that revisions will be "fully implemented" by March 1.

Finally, Ryan responded to reports that Irons traveled with him on the CVS corporate jet, including a Journal story that Irons -- who said he paid his way -- flew in recent months to the World Series in New York and to the Augusta National golf course in Georgia. (Pine would not say whether Irons has taken other trips on the CVS jet.)

Except in "emergency circumstances," Ryan wrote, "no elected official will be permitted to fly on our corporate aircraft."

Ryan wrote employees that "much of what you may have heard . . . is misleading, incomplete or simply untrue. Unfortunately, this misinformation has obscured the debate on the merits of the so-called 'Pharmacy Freedom of Choice' bill.

"In light of the importance of this legislation and its impact on controlling health-care costs, it is imperative that we separate fact from rumor, innuendo and political rhetoric and that we insist on a full and open dialogue on the merits of this legislation."