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Oxford halts ex-CEO pay
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April 3, 1998: 2:08 p.m. ET
Regulator has 'significant concerns' about Wiggins' $9M severance package
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NEW YORK (CNNfn) - Acting at the behest of New York Governor George Pataki, the state's top insurance regulator has ordered Oxford Health Plans to suspend further payments on a $9 million severance package awarded to Oxford's former chairman, Stephen Wiggins.
Neil Levin, New York's superintendent of insurance, wrote in a letter to Oxford Thursday that the payments raised "significant concerns" given Oxford's "financial, management and systems difficulties."
In a separate statement, the Norwalk, Conn.-based health maintenance organization acknowledged that it will withhold future payments pending discussions with the Department of Insurance.
But Oxford added the cost of the severance package will be paid entirely by the parent company and won't be allocated to the operating subsidiaries.
"Absolutely no member of employer group will bear any of the costs of this package," the company said in its statement.
Levin's letter also noted the managed-care company's recent request to substantially increase rates for its "most vulnerable" New York subscribers.
Oxford has been struggling to regain its fiscal footing since it reported a loss of more than $291 million for 1997 following a computer-systems debacle. In the wake of the foul-up, Wiggins gave up his post, but remained a member of Oxford's board.
Oxford disclosed its severance agreement with Wiggins in a 10-K filing to the Securities and Exchange Commission earlier this week. Specifically, the company said it would pay Wiggins a lump sum of $3.6 million, plus $1.8 million annually over the next three years as compensation for his consulting services.
Levin's letter to Oxford, addressed to the company's chairman, Fred Nazem, said Pataki had serious concerns about the payments to Wiggins, including some "for membership fees at country clubs."
The letter sought "sufficient assurances" that the cost of the payments to Wiggins will not be allocated to Oxford's New York subsidiaries, where some subscribers face steep rate hikes.
Levin also wanted to determine that the subsidiaries "have sufficient capital and surplus to resolve their problems and adequately service their current subscribers."
Shares of Oxford (OXHP) were down 1/4 at 17-1/2 in midday trading Thursday on the Nasdaq.
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Oxford Health Plans
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