Insurance chief claims ‘blackmail’;

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He wants probe, says industry leveled ad threat over auto plan.

Sacramento Bee (California)

Insurance Commissioner John Garamendi said Monday he wants the FBI, the U.S. Attorney’s Office and state Attorney General Bill Lockyer to investigate what he called an insurance industry attempt to extort and blackmail him as he campaigns for lieutenant governor.

Garamendi said Darry Sragow, a Los Angeles attorney and longtime Democratic political consultant, warned him last month that insurers would launch a $2 million negative advertising campaign against him if he did not drop or delay plans to adopt new regulations for auto insurance policies this year. Sragow delivered the message after he was contacted by an unidentified insurance industry official, Garamendi said.

“I firmly believe that its leaders have attempted political blackmail and extortion against me,” the insurance commissioner said of big insurance companies.

Rick Claussen, a spokesman for an insurance-industry funded coalition that is fighting the new auto insurance regulations with an advertising campaign unveiled Monday, said the allegations were silly.

“What we’re doing is a very legitimate public advocacy campaign,” Claussen said. “We’re not targeting Garamendi.”

In his two page statement, Garamendi said he was warned about the possible negative advertising campaign on April 24 by Sragow, a longtime acquaintance and Democratic Party political consultant who in 1994 managed Garamendi’s failed bid to become governor.

The insurance commissioner said that until April 24, insurers voiced their opposition to his plans through what he considered normal and appropriate channels.

Insurers have vigorously opposed Garamendi’s insurance pricing overhaul from the start, warning legislators and consumers that car insurance rates for rural and suburban drivers will soar while city dwellers’ rates will drop under the proposed new system. That’s because new rates will be based on drivers’ records and how much they drive, not so much on where they live.

Sragow wouldn’t identify who called him with the message, but he said he wouldn’t convey any remarks to a regulator or elected official that might be considered extortion or blackmail.

“I would not convey a message that I thought was any violation of the law,” Sragow said. “I wouldn’t be a party to anything like that. There was no discussion between me and the caller about the tone the advertising campaign would take.”

Sragow added that if he is asked by a court to reveal the identity of the person, he will. “Otherwise, I’ve agreed to keep it confidential,” Sragow added.

The Santa Monica-based Foundation for Taxpayer and Consumer Rights, which supports Garamendi’s auto insurance overhaul, said what the insurance commissioner described in his statement looks like blackmail and extortion — a felony — to it.

“The industry has threatened the regulator,” said spokesman Doug Heller. “The question here is: Who runs California? Elected officials or the Sopranos?”

So far, the fledgling coalition, called Californians to Stop Unfair Rate Increases, has not spent much money fighting Garamendi’s new regulations.

Its Web site offers only a draft script for a television ad that has not aired, a no-frills pamphlet and a press release that identifies chambers of commerce and 21 elected officials from rural areas who oppose the new regulations.

The materials mention Garamendi but do not attack him personally or refer to his campaign for lieutenant governor, said coalition spokeswoman Kathy Fairbanks.

Added Claussen: “If Garamendi looked at the materials, he would see that much of what he’s saying is pretty silly.”

The coalition said its campaign is being financed by a group of large auto insurers, including Farmers, 21st Century, State Farm, Safeco and Allstate.

Chip Nielsen, a San Francisco lawyer for the coalition, said he will disclose its campaign and lobbying expenditures when and as required by state law. So far, no such reports have been filed.

Tom Dresslar, a spokesman for Lockyer, said attorney general’s officials will treat any complaint they get from Garamendi seriously.

“Once we get a complaint to our office, we will undertake a serious, thorough review to determine if any laws have been broken,” Dresslar added.
The Bee’s Andrew McIntosh can be reached at (916) 321-1215 or
[email protected]

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