Section 29: Violations of Secs. 27 to 29; application for order enjoining violations of Secs. 27 to 29; penalties
Section 29. (a)(1) Whenever it appears to the commissioner that any health maintenance organization or any director, officer, employee or agent thereof has committed or is about to commit a violation of sections 27 to 29, inclusive, or any rule, regulation or order issued by the commissioner thereunder, the commissioner may apply to the superior court department of the trial court for Suffolk county for an order enjoining such health maintenance organization or such director, officer, employee or agent thereof from violating or continuing to violate said sections 27 to 29, inclusive, or any such rule, regulation or order, and for such other equitable relief as the nature of the case and the interest of the health maintenance organization's policyholders, enrolled members, creditors, shareholders, members or the public may require.
(2) No security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of sections 27 to 29, inclusive, or of any rule, regulation or order issued by the commissioner thereunder, may be voted at any shareholder's meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the health maintenance organization or unless the courts of this commonwealth have so ordered. If a health maintenance organization or the commissioner has reason to believe that any security, membership or board of directors appointment or election rights of the health maintenance organization has been or is about to be acquired in contravention of sections 27 to 29, inclusive, of any rule, regulation or order issued by the commissioner thereunder, the health maintenance organization or the commissioner may apply to the superior court department of the trial court for Suffolk county to enjoin any offer, request, invitation, agreement or acquisition made in contravention of sections 27 to 29, inclusive, or any rule, regulation or order issued by the commissioner thereunder, to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders, and for such other equitable relief as the nature of the case and the interest of the health maintenance organization's policyholders, enrolled members, creditors, shareholders, members or the public may require.
(3) In any case where a person has acquired or is proposing to acquire any voting securities, membership or board of directors appointment or election rights of a health maintenance organization in violation of sections 27 to 29, inclusive, or any rule, regulation or order issued by the commissioner thereunder, the superior court department of the trial court for Suffolk county, or the superior court department of the trial court for the county in which the health maintenance organization has its principal place of business, may, on such notice as the court deems appropriate, upon the application of the health maintenance organization or the commissioner seize or sequester any voting securities of the health maintenance organization owned directly or indirectly by such person, and issue such order with respect thereto as may be appropriate to effectuate sections 27 to 29, inclusive. Notwithstanding any other provision of law, for the purposes of said sections 27 to 29, inclusive, the sites of the ownership of the securities of domestic health maintenance organizations shall be deemed to be in the commonwealth.
(b)(1) Any health maintenance organization failing, without just cause, to file any registration statement as required in sections 27 to 29, inclusive, may be required, after notice and hearing, to pay a penalty of $500 for each day's delay. The maximum penalty under this section shall be $10,000. The commissioner may reduce the penalty if the health maintenance organization demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the health maintenance organization.
(2) Every director or officer of a health maintenance organization holding company system who knowingly violates, participates in, or assents to, or who knowingly shall permit any of the officers or agents of the health maintenance organization to engage in transactions or make investments which have not been properly reported or submitted pursuant to subsection (a), (m) or (q) of section 28, or which violate any provisions of sections 27 to 29, inclusive, may if so determined by the commissioner, pay, in their individual capacity, a civil forfeiture of not more than $5,000 per violation, after notice and hearing before the commissioner. In determining the amount of the civil forfeiture, the commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations and such other matters as justice may require.
(3) Whenever it appears to the commissioner that any health maintenance organization subject to sections 27 to 29, inclusive, or any director, officer, employee or agent thereof has engaged in any transaction or entered into a contract which is subject to subsections (i) to (v), inclusive, of section 28 and which would not have been approved had such approval been requested, the commissioner may order the health maintenance organization to cease and desist immediately any further activity under that transaction or contract. After notice and hearing the commissioner may also order the health maintenance organization to void any such contracts and restore the status quo if such action is in the best interest of the health maintenance organization's policyholders, enrolled members, creditors, subscribers or the public.
(4) Whenever it appears to the commissioner that any health maintenance organization or any director, officer, employee or agent thereof has committed a willful violation of sections 27 to 29, inclusive, the commissioner may report the facts to the attorney general or to the proper district attorneys. Any health maintenance organization that willfully violates any provision of sections 27 to 29, inclusive, may be fined not more than $10,000. Any individual who willfully violates any provision of said sections 27 to 29, inclusive, may be fined in his individual capacity not more than $5,000 per violation.
(5) Any officer, director, or employee of a health maintenance organization holding company system who willfully and knowingly subscribes to or makes or causes to be made any false statements, false reports or false filings with the intent to deceive the commissioner in the performance of his duties under sections 27 to 29, inclusive, upon conviction thereof, shall be imprisoned for not more than two years or fined $5,000, or both. The officer, director or employee shall pay any fines imposed in his individual capacity.
(c) Whenever it appears to the commissioner that any person has committed a violation of sections 27 to 29, inclusive, which so impairs the financial condition of a domestic health maintenance organization as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, enrolled members, creditors, subscribers, or the public, then the commissioner may proceed as provided in sections 20 and 20A and chapter 175J.
(d)(1) If an order for liquidation or rehabilitation of a domestic health maintenance organization has been entered, the receiver appointed under such order shall have a right to recover on behalf of the health maintenance organization, (i) from any parent corporation or holding company or person or affiliate who otherwise controlled the health maintenance organization, the amount of distributions, other than distributions of shares of the same class of stock, paid by the health maintenance organization on its capital stock, or (ii) any payment in the form of a bonus, termination settlement or extraordinary lump sum salary adjustment made by the health maintenance organization or its subsidiaries to a director, officer or employee, where the distribution or payment pursuant to clauses (i) or (ii) is made at any time during the one year preceding the petition for liquidation, conservation or rehabilitation, as the case may be, subject to the limitations of paragraphs (2), (3) and (4) of this subsection.
(2) No such distribution shall be recoverable if the parent corporation or affiliate shows that when paid such distribution was lawful and reasonable, and that the health maintenance organization did not know and could not reasonably have known that such distribution might adversely affect the ability of the health maintenance organization to fulfill its contractual obligations.
(3) Any person who was a parent corporation or holding company or a person who otherwise controlled the health maintenance organization or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under paragraph (1) such person received. Any person who otherwise controlled the health maintenance organization at the time such distributions were declared shall be liable up to the amount of distributions he would have received if they had been paid immediately. If 2 or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets of the impaired or insolvent health maintenance organization to pay the contractual obligations of the impaired or insolvent health maintenance organization.
(5) To the extent any person liable under paragraph (3) is insolvent or otherwise fails to pay claims due from it pursuant to said paragraph (3), its parent corporation or holding company or person who otherwise controlled the health maintenance organization or affiliate at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from such parent corporation or holding company or person who otherwise controlled it.
(e) Whenever it appears to the commissioner that any person has committed a violation of sections 27 to 29, inclusive, which makes the continued operation of a health maintenance organization contrary to the interest of the policyholders, enrolled members or the public, the commissioner may, after giving notice and an opportunity to be heard, suspend, revoke or refuse to renew such health maintenance organization's license or authority to do business in the commonwealth for such period as he finds is required to protect the interests of the policyholders, enrolled members or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law.
(f)(1) Any person aggrieved by any act, determination, rule, regulation or order or any other action of the commissioner pursuant to sections 27 to 29, inclusive, may appeal therefrom to the superior court department of the trial court for Suffolk county. The court shall conduct its review without a jury and by trial de novo, except that if all parties, including the commissioner, so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.
(2) The filing of an appeal pursuant to this subsection shall stay the application of any such rule, regulation, order or other action of the commissioner to the appealing party unless the court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interest of policyholders, enrolled members, shareholders, creditors, members or the public.
(3) Any person aggrieved by any failure of the commissioner to act or make a determination required by sections 27 to 29, inclusive, may petition the superior court department of the trial court for Suffolk county for a writ in the nature of a mandamus or a peremptory mandamus directing the commissioner to act or make such determination forthwith.