Federal officials approved Obamacare loans totaling $127 million last year to groups led by individuals whose backgrounds included an insider trading conviction and another with a long history of child sexual abuse, The Washington Examiner has learned.
The loans -- which must be repaid at a future date -- are to fund health insurance co-operative startups in Louisiana and Maine. They will compete with private sector health insurance providers under a $2 billion Obamacare initiative to fund 24 co-op startups nationwide.
Both the Maine and Louisiana co-ops are among 13 under investigation by the House Oversight and Government Reform Committee headed by Rep. Darrell Issa, R-Calif.
In the Maine case, federal officials approved a $62 million loan to Maine Community Health Options even though its president had recently committed suicide after state police accused the co-op's president of molesting teenage boys for decades.
Despite extensive media coverage of the scandal, federal officials approved the loan five months before Maine State Police made public a 104-page report detailing the abuse allegations over a 36-year period.
The Louisiana case involves Louisiana Health Cooperative and CEO Terry Shilling. The Securities and Exchange Commission sanctioned Shilling in 1998 for "insider trading" as a health care executive.
The Department of Health and Human Services' Center for Consumer Information and Insurance Oversight manages the loan awards.
In the Maine case, the Rev. Bob Carlson took his life after state police confronted him with the sexual abuse allegations.
Carlson had been widely respected as a civic and religious leader in Maine for many years. He served as a senior pastor at a church, chaplain at a local university and deputy sheriff. He was president of the Maine Primary Care Association and the Maine Community Health Options co-op.
But that image was shattered by the state police report's description of how Carlson took advantage of his positions to approach young boys from ages 11 to 18.
Officials also discovered after his suicide that Carlson had lied on his resume about his credentials, falsely claiming a bachelor's degree from the University of Maryland, as well as being a New York Theological Seminary graduate and having taken theological training at the Episcopal Theological Seminary in Cambridge, Mass.
Kevin Lewis, CEO of the Maine co-op, told The Washington Examiner that he informed federal officials four days after Carlson's suicide. The Maine loan was approved by CCIIO in April 2012, but the police report on Carlson's long history of abusing teenage boys only became public in August of that year.
Lewis said CCIIO did not consider the scandal to be a problem. "It was not really an issue in terms of the standing of our application," he said.
Spokesmen for CCIIO declined to comment.
In the Louisiana case, Schilling was sanctioned for insider trading while working at Georgia-based HealthSource Inc., where he bought 1,900 shares of that company's stock shortly after receiving a "confidential briefing" about an impending merger with CIGNA, according to the SEC.
Schilling was sanctioned and fined $10,000. Shilling left HealthSource prior to the merger, according to a CIGNA spokesman.
Even so, Schilling's group received a $65 million loan.
Neither Schilling nor CCIIO responded to a reporter's multiple telephone calls and emails seeking comment.
Judy Nadler, a government ethics expert and former mayor of Santa Clara, Calif., said the Obamacare co-op loan program needs much more transparency.
"How can individuals who have some negative experiences and scrapes with the law, how is it they could come to the top of the order when it comes to handing out the money?" she asked.
Tom Miller, a federal health expert at the American Enterprise Institute, doubts CCIIO did due diligence reviews. "What is the screening criteria, if any, or on what basis are these awards based?" he asked.
Richard Pollock is a member of The Washington Examiner's Watchdog investigative reporting team. He can be reached at firstname.lastname@example.org.