New Times Los Angeles

Quacks Like a Chuck

When we voted to make our state insurance commissioner an elected officeholder in 1988, everybody said our troubles were over. No longer would California’s consumers be at the mercy of an insurance industry suck-up. The first elected commissioner, of course, was Democrat John Garamendi, who would’ve been an admirable one-term commissioner if he hadn’t gotten swallowed up by the biggest insurance company failure in U.S. history (more on the demise of Executive Life Insurance and its relationship to Garamendi later).

Then came Republican Chuck Quackenbush, who became infamous as just the kind of industry butt-boy the ’88 initiative was supposed to protect us against. Quackenbush resigned almost two years ago when it appeared he might be impeached for his sorry handling of claims resulting from the Northridge earthquake. Chuck was allegedly quacked enough to believe he could get away with using cash from complaint settlements against Prudential Insurance to pay for, uh, public-service TV spots starring him during his attempt to get reelected in 1998. Last The Finger heard, Quackenbush was a recluse soaking up rays somewhere in Hawaii.

When Quackenbush‘s political ass wound up in the media meat grinder (where it was cranked into extra-lean patties by veteran L.A. Times Sacramento bureau reporter Virginia Ellis), Chuck’s friends inside and outside politics were stunned. Chuckie was such a handsome dude — he’d had a reputation beyond reproach. How could they have known he might go bad?

Well, maybe the fact that he took $8 million in campaign contributions from the insurance industry should’ve been a tip-off! Problem was, his political pals didn’t care — as long as he didn’t get caught with sticky fingers. And the press (always with 20/20 hindsight) didn’t play up those political contributions when he was running for office.

Which brings us to the current crop of contenders in the March 5 primary.

Let’s dwell only for a moment on the Republicans. Thanks to Quackenbush, they’ve got no more chance of getting elected California’s insurance commissioner than Ralph Nader had of getting enough votes for president to qualify for federal matching funds. Jeez, what’s The Finger thinking?! It’s far worse than that for these losers — who include Gary Mendoza, former deputy to ex-L.A. mayor and current GOP gubernatorial candidate Richard Riordan. The winner in the Republican primary has about as much chance of succeeding interim commissioner Harry Low as the seventysomething Riordan has of living long enough to run for president.

The Democrats running for insurance commissioner are Garamendi, who unsuccessfully sought the Democratic nomination for governor after he stepped down voluntarily from the commissioner’s post after four years; Montebello assemblyman Tom Calderon, chairman of the Assembly Insurance Committee, and former Orange County assemblyman Tom Umberg.

Now, there are those who argue that Garamendi’s tainted by the debacle over Executive Life Insurance, which had invested hugely in Michael Milken’s junk bonds and wound up getting seized and sold. Garamendi’s reputation was slimed because, as insurance commissioner, he took over the firm and sold it to French investors who turned out to be fronting for a bank controlled by the French government. Selling to a foreign government’s a violation of U.S. law, and it turned out that the company’s portfolio was worth billions more than Garamendi had sold it for. Naturally, angry policyholders and investors were calling for Garamendi’s hide, but this digit tends to accept his campaign’s spin that the French investors’ scam was so sophisticated that even a savvy Harvard Business School graduate such as Garamendi was taken in, that the vast majority of policyholders eventually got their money and that at least Garamendi acted in good faith and did nothing dishonest.

And while Garamendi’s handlers admit that the former commissioner from Walnut Grove was at the vortex of a scandal, they argue that there’s a scandal waiting to happen if his chief opponent, Calderon, is elected. Why? Because he’s the only candidate in the race who didn’t learn anything from the Quackenbush saga.

“The same insurance companies that gave more than $8 million to Chuck Quackenbush are now trying to buy the next insurance commissioner,” Garamendi campaign spokesman Gary Gartner spewed to The Finger. “Just like before, they’re the top insurance companies, and they’ve all given [big money] to Tom Calderon.”

Consider the source, eh? Yet here’s how Doug Heller, of the Santa Monica-based watchdog Foundation for Taxpayer and Consumer Rights sees things: “You can’t — if you’re putting yourself up for the position to regulate the insurance industry — take money from the industry. [Calderon’s] getting an extreme amount of money from companies that he’d be required to oversee, possibly fine, enforce the law against [and] deny or approve rate increases for. It’s the kind of relationship that’s very dangerous. This hurt thousands of policyholders, particularly Northridge earthquake victims, who were abused and defrauded by their insurance companies. Even though the Quackenbush administration found out plenty about that, it never did anything because it was bought off by the industry.”

The Garamendi campaign announced that state campaign-finance reports show that Calderon’s campaign received $1.8 million from insurance companies — 67 percent of his $2.7 million war chest. Among a sheaf of insurance company benefactors, Farmers and its political action committee gave Calderon $229,000, 21st Century threw in $180,000 and Mercury Insurance contributed $150,000.

The Finger hesitates to think what companies like Farmers, which Garamendi’s people say requested homeowner rate increases totaling 26 percent this year, hope to gain by powering Calderon’s campaign. Neither Garamendi nor Umberg has accepted campaign money from insurance firms.

“Every dollar that comes in from the insurance companies creates a potential conflict of interest,” Heller told this digit. “As we’re seeing with Enron…there’s a huge lack of trust in corporate America right now. The appearance of a conflict makes people turn off; it’s like we’re giving it all away to the insurance industry without even putting up a fight.”

Worse still, Calderon’s proved himself disingenuous. “We believed him when he voted [in 2000] to support legislation our [nonprofit, nonpartisan] organization sponsored to ban contributions from the insurance industry to candidates for commissioner,” said Heller. “We believed he understood the implications of the Quackenbush experience: That you can’t afford to have the fox guarding the henhouse.”

Obviously, such a restriction never made it into law. The Finger asked Calderon’s spokeswoman, Valerie Martinez, to explain why voters should support a candidate who seems to be in the pockets of the very firms he would supposedly regulate.

“You have to look at Tom Calderon’s record,” she said (which’s exactly what The Finger thought it was doing). “Tom has always taken insurance money, just like he’s taken money from any other contributor. He’s always managed to build a firewall between policy and politics. He’s 100 percent for consumers.”

OK, Valerie, but what about his support of banning insurance company contributions to commissioner candidates? Has he changed his mind, or lost it? “No!” she said. Then, can you confirm the Garamendi campaign’s math that your boss got $1.8 million from insurance industry goons? “I really don’t know, because we’re not keeping a tally,” Martinez said.

Figures…Calderon’s as big a waffler as Dick Riordan. Vote for anybody but him in the Democratic primary; we can’t risk having two more hypocrites holding top governmental offices in Sacramento.