Sex clubs, prostitutes offered in attempted bribery at Blue Shield, lawsuit says

A major Blue Shield IT contractor “tried to bribe [a Blue Shield IT executive] with sex clubs and prostitutes,” according to a wrongful termination lawsuit by a former Blue Shield IT executive. The suit, filed in April but unreported until now, is the second in a month alleging waste and corruption in Blue Shield’s IT department.

In this latest suit, a former Blue Shield IT executive says a vice president for Cognizant, a large technology-outsourcing firm, offered to bring the Blue Shield executive to a sex club along with “C-level executives” where he would “supply them women.” The Cognizant VP told the Blue Shield executive to “opt for Cognizant in the Shield Advance Accelerate project and he would really take care of him,” according to the suit.

The former Blue Shield IT executive says he told his boss about the attempted bribery, and that his boss “shrugged his shoulders, and said, ‘I am not surprised.’” The former executive claims he also reported the incident to another Blue Shield IT vice-president, but no action was ever taken. Indeed, Cognizant remains a Blue Shield contractor.

The suit also describes other instances of alleged IT department corruption and waste, including a Blue Shield IT manager’s hiring of unneeded contractors supplied by a firm owned by his friend and the former executive's observation upon joining Blue Shield of “extensive waste and lack of standard tools in the IT organization.”

The lawsuit comes on the heels of another suit filed earlier in April by former Blue Shield Chief Technology Officer Aaron Kaufman charging that the nonprofit insurer was “bilking” California consumers by overpaying favored IT contractors. In a countersuit, Blue Shield claims that Kaufman charged personal expenses to a company credit card, including $17,491 for a Florida vacation.

While the truth of any of the allegations in these suits has yet to be proved, they echo other indications of wasteful IT spending. During the entire 12 years that I worked there I heard constant complaints and jokes about the deficiencies of Blue Shield’s IT systems and the hugely expensive, seemingly never-ending effort to upgrade them.

What I observed is reflected in comments posted by current and former Blue Shield employees at Glassdoor.com, a website that reviews employers. Complaints of incompetence and waste in Blue Shield’s IT operations abound. See examples here, here, here, here, and here.

Clearly, Blue Shield has problems with IT. Given how critical IT is to the basic functions of a health plan and the huge amounts of money devoted to it, these problems could mean big trouble at Blue Shield. But the insurer has kept the public in the dark about that, even though Blue Shield, as a nonprofit social welfare organization, is effectively owned by the public.

Ironically, if Blue Shield were a for-profit company, like Anthem Blue Cross, they would have to publicly report through filings with the Securities and Exchange Commission if IT cost overrides or waste were major problems. But Blue Shield, as a nonprofit, doesn’t file with the SEC, and it doesn’t choose to share such information with the public.

That needs to change. Blue Shield’s duty as a nonprofit is to serve the public good. It owes the public as much transparency as for-profit companies do their shareholders. So tell us, Blue Shield, why are we hearing so much about IT-related waste and corruption? And how is the big upgrade going? How much has been spent so far and what has it bought?