DATE: Thursday, November 20, 1997           TAG: 9711200479

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY MARC DAVIS, STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:   88 lines

TRIGON SETTLES INSURANCE FRAUD SUIT BEACH SCHOOL BOARD CLAIMED $2.8 MILLION LOSS

The School Board settled a $2.8 million fraud claim against Trigon Blue Cross Blue Shield on Wednesday just as the lawsuit against the health-insurance giant was about to go to trial.

How much money the School Board will receive is secret, at least for now.

Circuit Judge Thomas S. Shadrick ordered both sides not to reveal the settlement amount ``for the time being.'' In an interview later, Shadrick said he will rule in about two weeks whether to keep the settlement confidential.

The settlement abruptly ended a Circuit Court trial that was expected to last a week. It was the first time in Virginia that a fraud charge against Trigon - which has been besieged with several fraud lawsuits in recent years - was to be tried by a jury. All previous cases were settled out of court.

For Trigon, this is the latest embarrassment involving a fraud allegation.

In 1995, Trigon paid nearly $6 million in fines and $23 million in restitution to its subscribers after the state attorney general found policyholders were overcharged.

Soon after, several cities, counties and companies sued Trigon, alleging fraud. Several lawsuits have been settled out of court - four for a total of more than $1.4 million and others for undisclosed amounts.

In Virginia Beach, the allegations against Trigon culminated in Wednesday's aborted trial.

The trial began with a fiery opening statement by the School Board's attorney, who accused Trigon of defrauding the school system.

From 1985 to 1993, the period the lawsuit covers, Trigon ran the city's health insurance program, but wasn't the actual insurer. Now Trigon is one of several insurance plans offered to school employees. Because of its size - Trigon insures 1.8 million Virginians - Trigon can negotiate reduced rates for its clients at local hospitals.

The School Board said Trigon promised to pass that savings to the school system. Instead, the board claimed, Trigon kept the money and never told Beach officials.

The School Board says Trigon secretly kept $1.2 million from 1985 to 1993. With interest, the school system lost $2.8 million, the board's attorney argued.

``Trigon kept hundreds of thousands of dollars, contrary to what the School Board had been told. . . and they did it secretly,'' said the board's attorney, Alexander W. Bell of Lynchburg. ``Why? Corporate greed of the worst sort.''

Bell told the jury he would produce internal Trigon documents to prove the scheme, including a memo from Trigon's own auditor warning that the operation was ``nothing but a fraud.''

``You're going to be here when we turn this rock over,'' Bell told the jury.

The trial continued with Trigon's attorney adamantly denying the charge. He said Trigon did exactly what it was entitled to do under its contracts with Virginia Beach.

The lawyer, Gilbert ``Bud'' Schill Jr. of Richmond, said the contracts gave Trigon sole discretion to decide how much of the hospital savings to give the School Board.

Indeed, Schill said, Trigon did pass along the savings in the form of lower prices. In any case, Schill argued, Virginia Beach school officials were bright people who knew exactly what was in the contracts.

``Either they didn't read them, or they didn't care, or they read them and they didn't understand them. That's something for you to decide,'' Schill told the jury.

After a one-hour lunch break, the School Board called its first witness. As the witness was taking the stand, the judge summoned both sides into his office. They emerged 80 minutes later with a settlement.

Both sides had no comment after the announcement, and no hearing has been scheduled on the confidentiality issue.

This is at least the sixth lawsuit that Trigon has settled over the same fraud issue.

In February, Trigon settled three municipal lawsuits for a total of nearly $1.3 million - one with Albemarle County for $624,571, another with Charlottesville for $474,626, a third with Roanoke for $193,951. In April, Trigon settled with the Charlottesville School Board for $138,000.

In each case, the settlement was made public.

Trigon also has settled lawsuits with Lynchburg and the private Colonial Williamsburg Foundation. Those settlements are confidential. ILLUSTRATION: BEACH SETTLEMENT

THE SCHOOL BOARD SETTLED ITS FRAUD LAWSUIT WITH TRIGON BLUE CROSS

BLUE SHIELD, THE HEALTH INSURANCE PROVIDER FOR SCHOOL EMPLOYEES.

OTHER SETTLEMENTS

IN FEBRUARY, TRIGON SETTLED THREE LAWSUITS FOR A TOTAL OF NEARLY

$1.3 MILLION - ONE WITH ALBEMARLE COUNTY FOR $624,571, ANOTHER WITH

CHARLOTTESVILLE FOR $474,626, A THIRD WITH ROANOKE FOR $193,951. KEYWORDS: SETTLEMENT VIRGINIA BEACH SCHOOL BOARD LAWSUIT

Send Suggestions or Comments to webmaster@scholar.lib.vt.edu