Conflict of Interest Alleged in UnitedHealth, PacifiCare Acquisition

The Schwarzenegger administration on Wednesday moved to fire a state official for not recusing himself from the review process for UnitedHealth Group's acquisition of PacifiCare Health Systems last year, the Los Angeles Times reports.

Kevin Donohue, deputy director of the Department of Managed Health Care, has been accused of violating conflict-of-interest laws for failing to withdraw from the acquisition approval process due to his UnitedHealth holdings.

According to a Statement of Economic Interest filed in 2005, Donohue reported ownership of stock worth between $10,000 and $100,000 (Lifsher/Girion, Los Angeles Times, 10/26).

UnitedHealth acquired PacifiCare in December 2005 for $9.2 billion (California Healthline, 12/20/05).

Donohue said that he complied with state laws by reporting his holdings in annual filings since 2002. Donohue also said that he was never asked his opinion on the deal and that all major decisions were made by officials ranking above him.

However, DMHC said that Donohue was its "point person" in the final round of negotiations for the acquisition.

Donohue is on paid administrative leave pending a civil service disciplinary hearing (Los Angeles Times, 10/26).

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