In suit, Blue Shield cites extravagant spending by fired executive
Blue Shield of California fired a top executive last month after he spent more than $100,000 on his corporate credit card, the company says, including on trips with girlfriend and “Sharknado” actress Tara Reid.
The details surfaced in a countersuit the health insurance giant filed Tuesday alleging fraud by Aaron Kaufman, the company’s former chief technology officer.
Blue Shield cited numerous examples of Kaufman’s extravagant spending, some of which came to light after an employee event involving Reid at a San Francisco bowling alley. Some of the expenses cited by Blue Shield included $17,491 that Kaufman spent on a Florida vacation to see Reid.
He also spent $832 for one night at the W hotel in Fort Lauderdale, Fla., with Reid on Jan. 21, according to the company. Three weeks later, he ran up a corporate tab of $1,382 on drinks at the Warwick, a Hollywood nightclub.
But the night of bowling in early January drew the most attention inside Blue Shield.
“At some point during the evening, Mr. Kaufman’s girlfriend acted inappropriately, taking inappropriate photographs of herself and sharing them,” the company said in court documents. Blue Shield confirmed that it was referring to Reid.
“Word of the behavior at the bowling alley event spread quickly at Blue Shield and caused a great disturbance within the company. Employees were embarrassed,” according to the company.
Kaufman charged $879.84 on his Blue Shield credit card for the bowling party.
Overall, the San Francisco insurer said more than 75% of Kaufman’s credit card charges didn’t have a specified business purpose and others were excessive. The company had previously reprimanded Kaufman in spring 2014 for improper use of his credit card.
Blue Shield said Kaufman defrauded the company by “repeatedly using his corporate card to pay for personal expenditures amounting to potentially hundreds of thousands of dollars.”
The company fired Kaufman on March 10, and it’s seeking to recover money he spent on personal expenses plus unspecified damages. Confronted about his spending, Kaufman told company officials he was going through a divorce and his wife had “locked up” his bank accounts and credit cards, according to Blue Shield.
Kaufman couldn’t be reached for comment, and his attorney didn’t return calls.
A representative for Reid didn’t respond to a request for comment. The 39-year-old actress has starred in the “Sharknado” movies, “American Pie” and “Van Wilder.”
The tech executive joined Blue Shield in 2013 and worked there two years. He was responsible for a $25-million information technology budget and managed about 30 employees.
He’s now executive vice president and chief product officer at SocialWellth in Las Vegas.
Kaufman started the legal battle April 6 by suing his former employer in Los Angeles County Superior Court. He claimed that Blue Shield retaliated against him after he reported financial wrongdoing.
He said in his lawsuit that the company wrongfully terminated him one day before he was due his 2014 bonus of $450,000.
Steve Shivinsky, a spokesman for Blue Shield, said the company denies those allegations.
“Mr. Kaufman went to great lengths to avoid scrutiny of his expenses,” Shivinsky said, “including intentionally misrepresenting his personal activities as corporate events.”
The insurer’s spending and executive compensation have drawn more scrutiny of late since it was revealed that California officials revoked the nonprofit company’s tax-exempt status in August.
The Times reported last month that the California Franchise Tax Board yanked Blue Shield’s longtime exemption from state income taxes after a lengthy audit.
Blue Shield, the state’s third-largest health insurer, is protesting the state’s decision.
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