cial reasons, failure to pay providers for care purchased by the affiliate, getting behind in their bills. That was the primary reason for canceling the contracts that were canceled.

Mr. LIGHTFOOT. Were you aware of any tactics that were being used to enroll people that could come under the hard sell category, that seniors were being pushed to join the HMO?

Mr. FOWLER. Yes, sir. I became aware of that shortly after I arrived there. IMC was aware of it and very concerned about it.

The incidences did not reflect the policy of the company, in my opinion, as reflected by any discussions in the management committee. In discussions of this practice in the management committee, it was condemned by the committee. There were written policies to the affiliates to preclude that.

Every allegation of improper marketing practices was investigated by the internal security organization of the company.

The HMO recommended prosecution of some of the salesmen that were engaging in these types of practices, such as forgery of a patient's name or misrepresentation, such as taking a blood pressure reading in a shopping center and indicating that a person was signing something so the salesman could get credit for doing that, when in fact they were signing an application to join the HMO.

IMC took very strong action in several instances against these people. They were invariably fired if the investigation showed that they had acted improperly. But it happened a number of times.

Mr. LIGHTFOOT. I am not trying to put words in your mouth, so correct me if my statement is incorrect-but what I am hearing is that the key to the failure of IMC was financial, that people weren't paying their bills, and that is what caused it to tumble. Is that relatively correct?

Mr. FOWLER. Yes, sir. I think that the reason IMC failed was because of fiscal mismanagement. They entered into a number of contracts that really made them unable to control their own financial destiny.

I don't believe, personally-I know there have been a lot of references here at this hearing throughout the day regarding the type of person that Miguel Recarey is, and that is the reason that IMC failed. It is my opinion the failure was bad management, and nothing more.

Mr. LIGHTFOOT. Well, I guess the thing that troubles me a little about the whole situation-and it is only one facet of this whole operation-but where we find-well, yourself, for example, where you jumped from $67,000 a year to $165,000, and we have got Claire del Real, who went from $66,000 to $130,000 plus fringes. Juan del Real went from a $69,000 job to $357,000. Denise Rodriguez jumped from $49,000 to $75,000 a year, and the list goes on. It looks to me like if you are having financial problems, a good look in a mirror would have been one place to start, and not necessarily lay it off on all the affiliates.

Be that as it may, I guess that the bottom line on the whole situation is that it is our job to see that this sort of thing doesn't happen again, and hopefully we can learn from your experience, as an insider, what you are willing to share with us as to what we could or could not do as a subcommittee that has oversight over these particular issues.

With that, I would close and give you the opportunity to respond as to someone who has had 32 years working for Uncle Sam and moved off with a nice retirement and into a very lucrative job.

No. 1, is that right? And No. 2, if it isn't, what should we do about it? What can we do about it?

Mr. FOWLER. Well, I certainly would have gone to work at IMC for a lot less than the salary that they offered me. But I guess I would have been a fool to, having received a salary offer, to say no, that is too much, I will take less.

I went to work at IMC after I had worked for the Social Security Administration since 1957. I believed in the HMO program, the risk contracting program. I felt that they were in trouble, that they needed some help, and I really went down there thinking that I could make a difference.

Obviously, I didn't make a difference. But I would have gone to work at IMC for a lot less money than they offered me.

I believe that the current ethics rules in Government offer sufficient protection to the Government against any improper actions or conflicts of interest by former employees.

For example, when I was at IMC for 17 months, I never returned to Baltimore or Washington to meet with an agency official on any policy matter, or any other matter.

I had several telephone conversations involving particular problem cases, but nothing involving policy.

The only meetings that I had in the year and a half that I was down there after I left Government were with HCFA staff who were there doing contract reviews would be perhaps or when Mr. Moley came down on a visit to talk with Mr. Recarey or someone else, he would stick his head in the door and say hello. But I wasn't even involved in contract policy meetings onsite there.

When I first went down there, I wrote the ethics officer to make sure that I didn't do anything that would violate the Ethics in Government Act.

And as I understand how this applied to me, I could never become involved with an issue and represent my employer to the agency that I formerly worked for on any issue I had ever been involved in personally. I couldn't discuss any issue with the agency which had been-even though I was not involved with it personally, pending in my office during the 1 year prior to leaving the agency.

Now, I was not at a policymaking level. I was pretty low on the totem pole in Government.

There is even a stricter rule that applied to those people such as Mr. del Real. There is a prohibition of 1 year, I believe, where such people just can't talk to the agency about anything.

It seems to me that if former Government employees wish to abide by the rules and follow those in good faith, as I think most former Federal employees would, that there is adequate protection.

If I might add one thing. I forget which witness earlier I guess it was maybe Mr. Kusserow or maybe someone that followed himhad listed a group of agency employees that then went to work for IMC.

On that list was Mr. William Landress and Mr. Rich Lucibella, and I would like to clarify that.

Mr. Lucibella worked for me for a couple of years after he graduated from Johns Hopkins School of Public Health, and decided then that he wanted to leave Government and go back to school. And he left Government and went to the Wharton School in Philadelphia for 2 years, and then went to work for IMC.

Mr. Bill Landress, who worked for me also, when he retired from Government went to work for another HMO and worked there for over a year, and only when that company sold its HMO to another company did he decide to leave that company, and I asked him to come to work then at IMC from this other company.

So, those two people on that list did not leave Government and go directly to work for IMC.

Mr. LIGHTFOOT. With the information that was given to the committee this morning, so everybody knows where we are coming from here, Mr. Landress left the Government on June 30, 1985, according to our information. He was a GS-14 level, which pays $57,759. He went to work as vice president of government operations for IMC on the 4th month, the 28th day of 1986 at a salary of $80,000 plus a $7,000 car allowance, which really, probably for the job he was doing, fits.

Richard Lucibella was a GS-11 at $23,566. He left the Government the 5th month, 14th day, of 1982, and went to IMC the 7th month, the 1st day, of 1983, as assistant to the president at $40,000 a year, which is an increase but it is not that big, I guess, in my perception of looking at it anyway.

You know, we get headlines all across the country when they want to give us a 4-percent cost-of-living increase around this place. When you see somebody's salary triple, why, it catches your attention.

Thank you, Mr. Fowler. We appreciate it.

Thank you, Mr. Chairman.

Mr. WEISS. Thank you, Mr. Lightfoot.

I have just one final question, Mr. Fowler.

The offer that came to you by letter dated December 5, 1985, from Mr. Recarey outlining the proposal of employment, that was not the first that you heard from Mr. Recarey, was it? Had you had prior discussions or communication?

Mr. FOWLER. That letter followed an interview that week here in Baltimore. He came up to Baltimore and interviewed me for a job and said he would send me a written offer. And that was the result of that. That was the next day or maybe 2 days later.

Mr. WEISS. How was that contact first made? He reached out to you?

Mr. FOWLER. He had called me and asked if he could talk to me about employment.

Mr. WEISS. Well, again, I thank you very much for your testimony. It is important and gives us some inside view as to what happened, certainly during the last 17 months of IMC's existence. And I very much appreciate the cooperation that you have given to the staff of the subcommittee as well as your standing by all day to give your testimony.

Thank you so much.

Our next and, I think, final witness for today is Mr. Arthur W. Goulet.

Mr. Goulet, before you sit down, if you will, raise your right hand.

[Whereupon, Mr. Arthur W. Goulet was duly sworn by the chairman of the subcommittee.]

Mr. WEISS. Thank you very much.

We have a letter that you have submitted to us, and we will enter that into the record in its entirety, and you may proceed in any way that you think most appropriate.

STATEMENT OF ARTHUR W. GOULET, FORMER QUALIFICATIONS
OFFICER, OFFICE OF HEALTH MAINTENANCE ORGANIZATIONS,
U.S. PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND
HUMAN SERVICES, AND FORMER ASSOCIATE EXECUTIVE DI-
RECTOR, INTERNATIONAL MEDICAL CENTERS

Mr. GOULET. Thank you very much, Mr. Chairman.
I will read the letter, most of it anyway.

Mr. WEISS. Fine.

Mr. GOULET. I am very glad that this subcommittee has become concerned about the IMČ affair. Since at least the mid-1970's notoriety has accompanied IMC and its head, Mr. Miguel Recarey. But not until recently did Government entities intervene effectively. In the IMC affair, the procedures of due process that are supposed to protect citizens became some of the chief obstacles to their protection. For years, severe problems at IMC have been obvious. But more than 100,000 south Floridians have continued to be subject to grossly substandard patient and personal care.

In 1980, when I was a qualifications officer with the Federal Office of Health Maintenance Organizations, my review team felt that IMC was a substandard provider of health care, but we were unable to discover any basis under law that could lead to a denial of IMC's application for Federal qualification. For example, we tried repeatedly and unsuccessfully to get the office of the DHHS inspector general-that may be the Office of General Counsel, I am not sure to advise us regarding its investigations of IMC, only to learn on the day that our decision was due that the investigation had been suddenly dropped.

Several months afterward, I went to work for IMC in a genuine effort to improve its health care delivery system from within. As time passed, it gradually became clear that Mr. Recarey did not hire me for whatever I could do to improve patient care operations. Although I had arrived with the title of associate executive director, someone who should have been able to fix things, I was afforded little visibility or authority, and I was furnished no budget and no staff. I was soon told that I would have no access to the company's financial and decisionmaking information. Although I encountered continual horror stories in patient care-back in 1981, by the way-I had virtually no resources available to correct that situation.

Even back in 1981, IMC was a company that had great trouble delivering a coherent product or service. The company's expansion into new business was always of paramount interest to Mr. Recarey. But daily operations were not. Mr. Recarey seemed to know little about his organization, his managers' duties, or about the de

livery of health care in general. Organization charts, titles and committees were always short lived, part of a fast-moving shell game for Government inspectors. Health care providers and staff were paid either very high or very low wages, and they were frequently incompetent. It was always difficult to be sure of what was going on, whom to contact with questions, or how to resolve problems within the organization.

Mr. Recarey was certainly responsible for much of IMC's mess. However, I feel that both the Federal Government's regulatory efforts and the HMO industry itself have contributed to problems such as those surrounding IMC. There has been an overconcern with the business aspects of health care, with insufficient attention paid to the quality of the products and services. Even the HMO Act and regulations that I helped administer at OHMO had few provisions with which to evaluate quality of care. An HMO was entitled to the Federal seal of approval if it were "organized and operated" in the manner prescribed by the law. In practice at OHMO, the issue became almost exclusively the HMO's financial viability.

I respectfully encourage the subcommittee to do all in its power to promote the human aspects of care and the quality of health care delivery fully as much as the business aspects. Fortunatelyand I see this has been echoed by a number of other people-IMC was a real aberration among HMO's. My family and I have continuously been members of HMO's since 1973, and we have been very satisfied with the organizations and with their care.

That ends the prepared statement I had. I have a couple of supplementary narratives that I prepared which are fairly lengthy, and I would be happy to submit them to the committee or to read excerpts.

Mr. WEISS. Well, whatever you desire. We will take them for the record, certainly. If there is any special part of it that you would like to offer at this point, that is all right. It is entirely up to you. Mr. GOULET. Well, I will wait and perhaps your questions will cover it.

Mr. WEISS. Fine. Thank you.

[The prepared statements of Mr. Goulet follow:]