Judge Orders Quackenbush’s Foundation to Shut Down

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San Francisco Chronicle

Sacramento — A Sacramento judge yesterday ordered a foundation set up by Insurance Commissioner Chuck Quackenbush to cease operations, saying continued management by the current board of directors would cause “irreparable harm.”

The ruling by Sacramento Superior Court Judge John Lewis was posted on the court’s web site yesterday.

Attorney General Bill Lockyer’s office had asked for the preliminary injunction against the foundation, accusing the directors of self-dealing and wasting $6 million meant to help victims of the Northridge earthquake. Lewis had previously granted a temporary restraining order.

The foundation — the California Research and Assistance Fund — was established from monies insurance companies paid in lieu of fines.

Quackenbush has been under investigation by Lockyer and lawmakers for allowing insurance companies to duck as much as $3 billion in fines for mishandled Northridge earthquake claims by contributing far smaller amounts to the nonprofit foundation.

Critics charge Quackenbush then used the foundation to further his own political goals.

The political fallout continued to spread this week when a group called People’s Veto posted recall petitions on the Internet seeking to force Quackenbush from office.

The secretary of state’s office on Monday allowed People’s Veto to gather petition signatures using its Web site, http://www.peoplesveto.org. The organization has until late November to gather 964,325 signatures.

The action against CRAF does not accuse Quackenbush of wrong-doing. Charges were leveled at two members of the foundation’s board and one of Quackenbush‘s top deputies, who resigned in the wake of growing revelations about the foundation’s spending.

Lewis said in his ruling that the attorney general’s office had persuaded the court that the board had ceded control of the foundation to the deputy, George Grays, and then misspent charitable money that was suppose to have a specific target.

“Plaintiff has further persuaded the court of the likelihood that … the public interest cannot be properly served by the continuation in matters of fund disbursement by the current directors of CRAF,” Lewis said. “Thus, there would be irreparable harm were the requested preliminary injunction not to be issued.”

Lockyer’s office did not comment yesterday.

The attorney’s for the foundations and Grays did not return phone calls yesterday.

In filings with the court, Lockyer’s office said the foundation wasted money and entered into unreasonable expenditures. Also, the two board members named as defendants — Ron Weekley and Eric Givens — “breached their fiduciary duty to CRAF by engaging in a ‘sham’ process to ratify these contracts long after the funds had been disbursed.”

Givens and a former board member testified before the Assembly Insurance Committee that no board meetings were held in the later half of 1999, even though checks were sent out from CRAF.

The attorney general’s office said it has also determined that at least one check — sent to the Skillz Athletic Foundation, a football camp that two of Quackenbush‘s sons attended — beared the forged signature of Weekley.

Weekley has been accused of “self-dealing” because of the foundation’s $18,000 check to Community Connections, which Weekley operates.

Lewis also said another outstanding lawsuit must be resolved before any action can be taken with the foundation. A lawsuit was filed in the same court on behalf of California taxpayers that would require Quackenbush to pay back the $12 million that went to the foundations.

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