Donations at Issue in Delaware Insurance Commissioner Race

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Insurance commissioner candidate Gene Reed Jr. has taken thousands
of dollars in campaign contributions from officers of a Pennsylvania
company that has received millions doing work for the state insurance
department.

Reed, currently the insurance department’s manager of consumer
protection enforcement, rejected suggestions that the donations were
unethical.

"The people that are going to donate to my campaign know that I’ve been
standing up in the trenches and fighting for consumers… and I won’t
stop as insurance commissioner," Reed said. "They know what my
integrity and character is all about."

Reed’s donor list includes maximum contributions from executives and
members of their families of a company that has conducted financial
examinations for the insurance commissioner’s office for which it has
been paid more than $60 million since 2004. Donors also include
executives with two insurance companies authorized to operate in
Delaware.

State law bars insurance companies from donating "directly or
indirectly" to candidates for insurance commissioner. There is no
apparent bar against receiving donations from companies that get money
from the state.

The maximum $1,200 donations from the principals of INS Regulatory
Insurance Services Inc. — or InsRis — and members of their families
have attracted the attention of several liberal-leaning Delaware blogs,
with commenters attacking Reed and praising his opponents.

Reed, 48, one of three Democrats in the race, has touted his experience
and ties to incumbent Commissioner Matt Denn, a candidate for
lieutenant governor.

In his 2004 campaign and again this year, Denn pledged not to accept
any contributions from directors or officers of insurance companies
operating in Delaware, insurance lobbyists or agents, portraying
himself as an advocate for consumers.

Denn said he has sent back thousands of dollars in donations based on
his fundraising policy, and is following it this year because he is
still insurance commissioner.

He said he is staying neutral in the current insurance commissioner campaign, and has not been commenting on the race.

Delaware’s insurance commissioner rules on insurers’ rate requests,
investigates complaints and makes sure that insurers are on solid
financial ground.

Reed took in more than $100,000 in total last year, with an ending balance of $85,000.

Reed said his campaign treasurer looks over checks, but he’s not
rejecting donations from any source outright. "Unfortunately, campaigns
cost money to run," he said. "My campaign finance report has nothing
but reputable people. … They’re people that believe in me."

Longtime consultants

Carmen Balber of the California-based Consumer Watchdog group, which
supports having insurance regulators elected, said donations such as
the ones from InsRis may be of concern if they come from a company
chosen by the commissioner.

"If it’s something that the commissioner hires, and would be expected to hire again, then you may have a problem," she said.

Reed said companies chosen to do market-conduct examinations for the
agency go through a rigorous procurement process, and numerous vendors
can apply. "It’s based on basically lowest bid, highest quality," he
said.

The principals of InsRis each contributed the maximum $1,200 to Reed’s
campaign in 2007. When other employees and family members at the same
addresses are added, people connected with the company donated a total
of $14,300 last year.

Earning millions in Delaware

The company has conducted examinations of insurers for the state agency
for several years, earning $60 million since 2004, according to a News
Journal database.

All the principals except President Alan Shaw have worked for or consulted with Delaware’s insurance department in the past.

Reed said InsRis is a very reputable firm that specializes in
doing work for state insurance regulators, and has helped in
examinations that have resulted in major fines against the industry.

Shaw said he’d known Reed for nearly a quarter-century. "He is a good friend and great regulator," Shaw said.

Reed said there was nothing sinister in the donations. "I’ve gone to
picnics with some of the family, they’re friends of mine and they know
my experience in the department," he said. "Of course they’re going to
donate to me — they’re my friends."

John Flaherty, a former Common Cause lobbyist and longtime
good-government advocate, said the case has an appearance of
impropriety, and urged Reed and the company to explain the
contributions.

"It almost seems that companies are looking to get contracts — that
may not be how it is, but it certainly gives the appearance of that,"
he said.

Family members donate

While the companies themselves did not make any donations, employees
and family members from other insurance industry-connected firms tied
to Reed’s campaign who donated include:

– W.R. Berkley, a Connecticut-based commercial property casualty
insurer authorized in Delaware. Three current or former executives —
including President and CEO William Berkley — donated to Reed’s
campaign.

– Accredited Surety and Casualty Co., a Florida-based property and
casualty insurer authorized in Delaware. The president and vice
president, who are husband and wife, both donated to the campaign.

– Westmont Associates, a Haddonfield, N.J.-based insurance consultant
whose staff includes former industry company executives. The company
consults and manages regulatory compliance issues. Fifteen people and
family members with past or present company ties donated to Reed. The
company’s president and founder, Fred Marro, said he’s been a personal
friend of Reed’s for about 20 years, and has worked with him on state
and national issues.

"Not only do I support him out of friendship, but I believe he is the
most qualified candidate," Marro said, adding he’s found Reed "to be
protective of consumers and firm but fair to the industry he regulates."

Reed faces Karen Weldin Stewart and Tom Savage of the Lewes area for
the Democratic nomination. Stewart’s campaign has sharply criticized
the donations.

"It is another form of a conflict of interest to be receiving funds
from a company that does business with your organization," Stewart’s
campaign manager, Elliott Jacobson, said.

Jacobson said Stewart is also refusing donations from any insurance
company employees. "It is possible that a $25 check may slip through by
accident, but our policy is if that’s the case, then we’d return the
check," Jacobson said.

Savage said he’s heard talk of the donations, but declined to comment.

Both Stewart and Savage have reported substantial campaign debts.
Stewart ran for the office in 2000 and 2004, and Savage ran for a state
Senate seat in 2004.

Jacobson said Stewart’s campaign is actively raising funds and working to clear away the debt and be competitive.

Savage last year reported taking in $300, with outstanding loans of more than $16,000, all from Savage himself.

The only Republican to have announced for the office so far is John
Brady, Sussex County’s elected recorder of deeds and an attorney to the
House Republicans who also serves as solicitor for several towns.

An extensive career

Reed has an extensive career with the department. He was elected to the
Insurance Regulatory Examiners Society’s board of directors in 2001 and
re-elected in 2005. In 2000, the Securities and Insurance Licensing
Administrators named him "Regulator of the Year."

Balber, of the consumer advocacy organization, said elected
commissioners who have to answer to voters are often better for
consumers. But she cautioned that voters need to watch for undue
industry influence on candidates. In California, "it has consistently
been a campaign issue," Balber said.

Reed said his main goal will be protecting consumers, and any policy he would develop would be based on that goal.

"I have fined insurance companies millions of dollars in 23 years; I’ve
fined agents millions of dollars," he said. "But I also have the
ability to work with the insurance industry and agents to solve
problems for Delaware citizens."

AT A GLANCE:  Delaware law bars insurance companies from
donating "directly or indirectly" to candidates for insurance
commissioner, but companies that get money from the state do not appear
to be restricted.

Contact the author Dan Shortridge at 856-7373 or [email protected]

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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