Entenza-Hatch: Follow the Money

The fascinating front page story in Wednesday's Star Tribune brought forth an admission by Rep. Matt Entenza that he hired a private firm to investigate the visitor's log, contractual relations, and purchasing patterns of the Attorney General's office under Mike Hatch. Given that both are from the same party, and that Entenza is now running to replace Hatch while Hatch moves on to run against Governor Tim Pawlenty, Entenza's motivation for the surreptitious investigation seems on the surface to be a real head-scratcher.

Entenza's explanation--that he wanted to "get a better understanding of how some aspects of the office worked"--was a real howler. Instead of spending hundreds, possibly thousands, of dollars to get a third party to file a Data Practices request, Entenza could have gained first-hand "understanding" of the job simply by asking Hatch directly. When it came to conveying an impression of full disclosure about what he was up to, Entenza may as well have told the Strib that the dog ate his homework.

According to minnesotademocratsexposed (or MDE), the website that back in August of last year first published rumors of Entenza investigating Hatch, Entenza's motivation was to get dirt on Hatch so that he would step aside and let Entenza run for Governor. (Yesterday, the site also pointed out that Entenza previously worked in the AG's office, making his explanation to the Strib all the more specious.) Or, as a Wednesday afternoon story in the online version of the St. Paul Pioneer Press infers, citing another aspect of the original MDE post, it could have been to strong-arm Hatch into anointing Entenza as his successor rather than Minnesota Solicitor General and close Hatch associate Lori Swanson.

But to my knowledge, nobody has yet speculated that what Entenza was really after was a way to get Hatch to stop involving himself in the operation of Medica; specifically pushing to get Medica to sever its management contract with United Health (UHC), the corporation that has made Entenza's wife fabulously wealthy; wealth that in turn has enabled Entenza to exercise enormous political leverage via campaign contributions.

For a more thorough explanation of how Entenza's connection to United Health has benefited him politically, antagonized his relationship with Hatch, and created significant potential conflicts of interst should he be elected AG, see the story I wrote for City Pages back in January. But here's a thumbnail chronology.

In 2001, Attorney General Hatch conducted an audit of Allina/Medica that uncovered exorbitant management contracts that the company had been paying to United, including processing fees that were at least 26 percent higher than the next highest industry standard on a per-claim basis, helping to produce a whopping 35 percent profit margin for United. Hatch's investigation also uncovered notes from Medica's consulting firm from the 1990s saying that, in spite of these high payments, United's "substandard" service cost Medica about $10 million in losses. These revelations, along with juicy details about corporate perqs such as golf club memberships and lavish trips, enabled Hatch to gain the authority to break up Allina and Medica into two separate companies and to hand-pick Medica's board of directors.

Two years later, Medica's board of directors asked the court to remove Hatch's oversight function. Hatch fought the request, claiming that the board was allowing the company to slip back into some old bad habits, and contending that the board needed to recruit more of its membership from the premium-paying members of the nonprofit HMO. Hatch doggedly pursued his claim until a judge resoundingly ruled against him and legally freed the operation of Medica out of his control in August 2005. It was right around the time of the judge's verdict that the MDE website first leaked rumors of Entenza investigating Hatch.

We now know that Entenza hired the investigators in February 2004, almost exactly halfway between the time Medica asked for its independence in early 2003 and the judge granting it in August 2005. The nature of Entenza's search--delving into purchases of artwork and furniture for Hatch's office, and how much Hatch was paying outside contractors--seems very consonant with the kind of investigation Hatch conducted of Medica.

"I have said, and I still believe, that Medica is a front for UHG"--United Health Group--Hatch told me last December. "United literally runs it--they are the guts of the company." The guts of a company that incurred over $45 million more in administrative expenses than any other HMO in the state, according to the last report from the Minnesota Department of Health. Meanwhile, Entenza's wife, Lois Quam, is a United executive who has exercised more than $4 million worth of United stock options over the past three years, and, like her boss, William McGuire, has many millions more in stock and other compensation stemming from her employment at United.

I have no proof that Matt Entenza hired a private firm to dig up dirt on Mike Hatch so that Hatch would back off on his oversight of Medica, enabling Medica to continue a business relationship that has been very lucrative for the corporation that employs Entenza's wife. But it sounds a lot more plausible than the explanation Entenza gave the Star Tribune.