§ 27-66-7. Review process and review criteria by department of attorney general — Conversions.
(a) The department of attorney general shall review all conversions involving a health
insurance corporation, health maintenance organization, nonprofit hospital service
corporation, or nonprofit medical service corporation.
(b) The department of attorney general shall, within twenty (20) days of its receipt of
an initial application, inform the department of business regulation and/or the applicant
of any additional information necessary to its ability to prepare the detailed report
required under subsections (d) and (e) of this section.
(c) Upon receipt by the department of attorney general of the additional information requested
in subsection (b) of this section, the application shall be deemed complete.
(d) The department of attorney general shall transmit, within sixty (60) days of the receipt
of the completed application, a detailed report of its findings to the department
of business regulation.
(e) The report of the department of the attorney general shall address each of the following
criteria:
(1) Whether any conflict of interest exists concerning the proposed conversion relative
to the officers, directors, senior management, experts, or consultants engaged in
connection with the proposed conversion including, but not limited to, attorneys,
accountants, investment bankers, actuaries, healthcare experts, or industry analysts;
(2) Whether individuals described in subsection (e)(1) of this section were provided with
contracts or consulting agreements or arrangements that included pecuniary rewards
based in whole, or in part on the contingency of the completion of the conversion;
(3) Whether any members of the board of directors will retain any authority in the new
health insurance corporation, health maintenance organization, nonprofit hospital
service corporation, or nonprofit medical service corporation;
(4) Whether individual officers, directors, or senior management engaged legal counsel
to consider their individual rights or duties in acting in their capacity as a fiduciary
in connection with the proposed conversion;
(5) Whether the conversion is proper under the Rhode Island Nonprofit Corporation Act,
chapter 6 of title 7;
(6) Whether the conversion is proper under applicable state tax code provisions;
(7) Whether the individuals who represented the existing health maintenance organization,
nonprofit hospital service corporation, or nonprofit medical service corporation in
negotiations avoided conflicts of interest;
(8) Whether the proposed conversion results in an abandonment of the original purposes
of the acquiree or whether a resulting entity will depart from the traditional purposes
and mission of the acquiree such that a cy pres proceeding would be necessary;
(9) Whether the proposed conversion jeopardizes the tax status of the acquiree;
(10) Whether the transacting parties are in compliance with the Charitable Trust Act, chapter 9 of title 18;
(11) Whether the proposed conversion will harm the public's interest in trust property
given, devised, or bequeathed to the acquiree for charitable, educational, or religious
purposes located or administered in this state;
(12) Whether a trustee or trustees of any charitable trust located or administered in this
state will be deemed to have exercised reasonable care, diligence, and prudence in
performing as a fiduciary in connection with the proposed conversion; and
(13) Whether the proposed conversion appropriately provides for the disposition of proceeds
of the conversion, which may include, but not be limited to:
(i) Whether an existing entity or a new entity will receive the proceeds;
(ii) Whether appropriate tax status implications of the entity receiving the proceeds have
been considered;
(iii) Whether the mission statement and program agenda will be or should be closely related
with the purposes of the mission of the acquiree;
(iv) Whether any conflicts of interest arise in the proposed handling of the conversion's
proceeds;
(v) Whether the bylaws and articles of incorporation have been prepared for the new entity;
(vi) Whether the board of any continuing entity will be independent from the new entity;
(vii) Whether the method for selecting board members, staff, and consultants is appropriate;
(viii) Whether the board will comprise an appropriate number of individuals with experience
in pertinent areas such as foundations, health care, business, labor, community programs,
financial management, legal, accounting, grant making, and public members representing
diverse ethnic populations of the affected community; and
(ix) Whether the size of the board and proposed length of board terms are sufficient.