She testifies Monday — Quackenbush aides also subpoenaed

San Francisco Chronicle

Sacramento — The woman who has emerged as the key whistle blower in the investigation of Insurance Commissioner Chuck Quackenbush will be given immunity when she testifies Monday before an Assembly committee, sources told The Chronicle yesterday.

Cynthia Ossias, a San Francisco lawyer in the Department of Insurance, has been subpoenaed to testify before the Assembly Insurance Committee. She has been identified as the person who gave confidential documents to the Legislature.

Assembly investigators expect Monday’s hearing to be explosive, with new information that will call into question the truthfulness of statements by Quackenbush and his top aides.

Quackenbush will be given an opportunity to respond on Thursday, and one member of the committee says the evidence made public to date gives the commissioner a lot to respond to.

“It will be very important for Mr. Quackenbush to categorically refute the evidence now in possession of the committee involving how the foundations were established and the tactics used to raise money,” said Assemblyman Tom McClintock, R-Northridge, who represents the area hardest hit by the 1994 Northridge earthquake.

The Assembly Insurance Committee held three days of intensive hearings earlier this month.

Legislators are investigating allegations that Quackenbush coerced insurance companies into paying $12 million to two nonprofit foundations he created. The payments allegedly allowed the insurers to avoid paying as much as $3.7 billion in fines for improperly handling policyholder claims after the 1994 Northridge earthquake.

Critics say the payments to the foundations were used to promote Quackenbush‘s own political agenda and that none of the money went to earthquake victims.

Quackenbush has denied any wrongdoing.

Yesterday, Ossias’ lawyer disputed statements by the Department of Insurance that she was coerced by the Legislature into handing over documents.

“Suggestions that were made that she was used by the Assembly for political purposes are simply groundless,” said Doran Weinberg. “I think it will be clear on Monday that she acted entirely on principle.”

California Highway Patrol Commissioner D.O. “Spike” Helmick confirmed yesterday that Ossias received some immunity during the administrative investigation.

As a state employee, Ossias must answer questions about her job that are posed during a state investigation. Under the law, the information she provides as part of that investigation cannot be used against her in a criminal case.

The department could choose administrative action, including dismissal, Helmick said. The Assembly’s immunity will protect her from any prosecution, however.

A spokeswoman for the attorney general’s office said the law does allow the Legislature to confer immunity.

“The conferring of immunity by the Legislature could present legal hurdles for prosecution of someone under the penal code,” said Sandy Michioku, a spokeswoman for the attorney general.

The documents Ossias provided to the committee, called market conduct exams, are sensitive audits detailing insurers’ alleged claims- handling violations following the 1994 Northridge earthquake.

The exams have assumed a significant role in the deepening political scandal surrounding Quackenbush. They deal with the same insurance companies that were allegedly convinced to contribute to the foundations, allegedly to avoid fines.

The documents say state regulators found that some insurance companies had tendencies to lowball policyholder claims and delay payments.

Ossias was in charge of reviewing market conduct exams and making recommendations for fines.

Quackenbush‘s top aides have testified that there were never any fine recommendations and that the settlements were worked out because the charges in the exams would not stand up in court.

In other developments, the Assembly Rules Committee issued more subpoenas for Monday’s hearing late Thursday after a floor session called to pass a budget.

Included in the new list are three of Quackenbush‘s top aides, all of whom have appeared before, but have not given testimony under oath.

“We would like to get further information,” said Rich Zeiger, a spokesman for the committee. “The testimony of some of the new witnesses may bear on the testimony they gave earlier.”

All witnesses appearing before the committee on Monday have been subpoenaed and will testify.