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University trustee Stephen Kay helped negotiate severance pay for the former president of Beth Israel Deaconess Medical Center (BIDMC), where Kay serves as chair of the board of directors. Paul Levy, who resigned last month after a year of ethical controversy over his personal relationship with a female employee, received up to $1.6 million in the settlement orchestrated by Kay and the board.

By early April 2010, multiple Beth Israel Board members received and learned about an anonymous complaint letter, written in racist and sexist language, alleging that Levy had sexual relationships with two unidentified hospital employees, according to a review by the attorney general’s office.

Kay, a former executive at Goldman Sachs who previously served as chair of the board of trustees at Brandeis and chair of the presidential search committee last year, requested in a May 2010 letter that the attorney general’s office review the “appropriateness of the board’s governance process and conclusions” related to the board’s investigation of the complaint about Levy’s personal relationship with a female employee.

Boston Globe columnist Brian McGrory wrote on Wednesday that Kay should resign from the board at Beth Israel for a violation of public trust with taxpayer money and an unwillingness to enact a stricter punishment on Levy last year.

“Nobody is questioning whether BIDMC has world-class doctors and intelligent nurses. But what it also has is an executive team that is now constantly inviting the question: What else are they lying about?” McGrory wrote in his column.

Describing the employee’s salary and severance pay, the Attorney General’s Office, in its September, 2010 review “found no evidence of misuse or abuse of charitable funds. The Beth Israel Board announced Levy’s severance pay last month.

“There’s no doubt that Kay has done good things at Beth Israel, [but] in this particular incident, there has been a hemorrhaging of public trust,” McGrory said in a phone interview yesterday.

Kay could not immediately be reached for comment late yesterday afternoon.

At Brandeis, Kay currently serves as a trustee on several committees, including Budget and Finance, Executive, Investment, Nominating and Governance, and the Personnel Policy Committee.

“Steve Kay has provided great wisdom and leadership to Brandeis over the years as a member of the Board of Trustees, Chairman of the Board, a donor and most recently as head of the search process that led to the hiring of our new president,” Senior Vice President for Communications Andrew Gully said in a statement. “The entire Brandeis community, particularly students and faculty, benefits from his deep commitment to the university and its mission.”

The staff of BIDMC became aware of Levy’s personal relationship with the employee in 2003, and the Board Chair along with other senior staff expressed concerns about its implications on the rest of the hospital’s organization, according to the review. Kay did not serve as chair until 2009, and was named the board chair of CareGroup Health Systems, a company that manages BIDMC, in 1996.

After the complaint, Kay, in coordination with Beth Israel Vice President and General Counsel Patricia McGovern and Robert Sherman, a lawyer at Greenberg Traurig, LLP, launched an investigation and ad-hoc committee to review Levy’s behavior. The Board later fined Levy $50,000 for his actions.

Levy resigned on Jan. 7 but did not mention the relationship or investigations in a letter to the hospital’s community. Levy wrote that he came to the decision to leave Beth Israel after nine years, partly because he had just turned 60 years old and had some time to reflect as he was biking in the Atlas Mountains during his vacation in Africa.

“While I remain strongly committed to the fight for patient quality and safety, worker-led process improvement, and transparency, our organization needs a fresh perspective to reach new heights in these arenas,” Levy wrote.

During Levy’s tenure, the hospital served more patients than ever before with inpatient volume increased by more than 11 percent. Senior management was also able to save the hospital from bankruptcy and significantly reduce its debt.

“Over the last nine years, I have certainly made mistakes of degree, emphasis and judgment,” Levy wrote. “I have apologized to you directly for some of those, but I do so again, that such errors will not overshadow the many accomplishments and contributions of our hospital to the community and the health care industry.”

After a board meeting on Jan. 19, Kay wrote a public letter to the Beth Israel community disclosing the terms of its “negotiated departure with Levy.” His severance pay can be less than $1.6 million if he takes another job at another organization.

“During Paul’s nine-year tenure, financial stability was restored, scores of world-class surgeons and physicians joined the faculty, demand for patient services increased dramatically, and the medical center earned a well-deserved reputation as a leader in quality, accountability and patient safety,” Kay wrote.

The female employee whose hiring was later questioned because of her relationship with Levy began work in 2002 in Levy’s office as a “strategic planning analyst.” In April 2004, Jeff Liebman, the CEO at Beth Israel’s Needham location offered the employee a $75,000 job. By 2009, she earned $104,000, including bonuses, according to the Attorney General’s review.

After listening to advice from members of the senior management team, Levy asked Liebman to let the employee go, and Liebman said he had already planned to lay her off due to budget issues. In November 2009, she was let go.

The Attorney General’s review found that the employee was well qualified for the position and her salary, including $29,000 in severance pay after she left were typical for positions of that caliber, but it raised concerns about the need for her job.

“While her overall salary was within the range of her job grade, she was the only non-physician director who received a bonus in all four of the years reviewed. Second, both positions that the Employee held at BIDMC and BI-Needham were newly created and not maintained after she left,” Assistant Attorney General Jed Nosal wrote in the review.

The review said Kay conducted a full and well-structured investigation that included a range of positions and opinions about the best action to take, but it explained that action should have been taken earlier. Although Levy apparently did not directly influence the hospital’s treatment of the employee, the report said it was inevitable that other employees and senior officials would feel pressured to act in trying to please the CEO.

“Respect for Mr. Levy and his accomplishments may have created among some Board members a level of deference to management that was, and is, inconsistent with the level of vigorous and fully independent Board oversight that would have compelled definitive action far earlier,” the review said.

“Had he been called on his failure to act, or had his failure to act been reported to the entire Board, this acknowledged ‘lapse of judgment’ might never have occurred,” the review said. “For senior managers who reported to Levy, demanding a response was likely difficult. For Board members, it was their job.”

CORRECTIONS

Due to a typographical error, the original article had, in one instance, incorrectly stated that the hiring of a female employee was questioned because of her relationship with Stephen Kay. Consistent with the rest of the story, her hiring was questioned because of her relationship with Paul Levy, not Kay.

Due to a reporting error, the article, in one instance, incorrectly characterized the allegations of misconduct against Paul Levy. The complaint letter mentioned sexual relationships with two employees, but the Attorney General’s Office review and the ethical controversy last year focused on Levy’s personal relationship with only one female employee.