San Jose Assemblyman Reaps Campaign Cash As Insurance Committee Chair

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SACRAMENTO, CA — When Assemblyman Joe Coto two years ago was named chair of the Assembly Insurance Committee   a powerful post with enormous sway over a multibillion-dollar industry he said he’d consider refusing campaign money from insurance companies.

He wanted to avoid any suggestion he would put the industry’s needs above those of consumers, he said. "The more independent one is, the more effective you’re going to be," Coto, D-San Jose, told the Mercury News at the time.

That turned out to be a fleeting impulse: Coto has collected insurance money at a pace unrivaled among other legislators. And on several occasions, he has carried bills requested by his contributors, a review of his time as insurance chairman shows.

Coto began collecting insurance industry donations within days of his statement to the newspaper and hasn’t stopped since, accepting more than $180,000 from insurance interests in 2007 and 2008. That’s more than a fifth of his total fundraising haul, according to campaign records compiled by theadvocacy group Consumer Watchdog and reviewed by the Mercury News.

And it’s more than double the amount of insurance money collected by all other members of the Assembly and Senate insurance committees but one, who still took far less than Coto.

Critics say Coto has reciprocated with favorable treatment of insurers. In an arena that frequently pits insurance interests against consumer advocates and plaintiffs’ attorneys, they say, Coto has made it clear where his allegiances lie.

Industry oversight

"He hasn’t done anything resembling oversight of the insurance industry," said Consumer Watchdog’s executive director, Douglas Heller. "And the few times that he has taken tough positions, he’s worked vigorously to advance the industry’s interests against the interests of consumers."

In a recent interview, Coto said he concluded early in his tenure as chairman that he could accept insurance donations and still be a fair arbiter of issues before his committee. Claims that he favors the industry, he said, are "not an accurate description."

"I’ve always maintained and instructed my staff to be open to anyone, consumer groups and industry people," he said. As evidence of his commitment to consumers, he noted legislation he’s wrote to boost payments to those on disability insurance.

Rex Frazier, president of the Personal Insurance Federation of California, defended Coto. While at times he’s disagreed with Coto on legislation, Frazier said the lawmaker handled the differences reasonably.

Frazier dismissed criticism of Coto as coming from "groups that are aligned with plaintiffs’ lawyers."

‘Juice’ committee

To be sure, Coto is hardly unique among lawmakers whose legislative actions jibe with the agendas of their contributors. But his role as head of the insurance panel, known as one of the Capitol’s "juice" committees because of its influence over businesses and its ability to raise large sums of money, makes his case noteworthy.

Coto recently wrote a controversial bill sponsored by Mercury Insurance Group, which gave $3,000 to the assemblyman. The measure would have made it harder to force auto insurers to pay customers refunds when their rates were shown to be illegally excessive.

Coto shepherded the measure through his committee on a 9-1 vote last month. It then headed to the Judiciary Committee, though the measure subsequently stalled after Coto surprised many observers by failing to show up for the committee’s hearing. Coto said he had learned that the committee wanted to amend the bill and he didn’t have time to address the proposed changes.

Last year, Coto carried legislation that was brought to him by a trade group representing insurance brokers and agents. The bill aimed to resolve disputes over when broker fees could be charged, but consumer groups argued it could result in higher fees for insurance customers.

Coto’s committee approved the bill April 30, and within days the trade group that sponsored the legislation, Insurance Brokers & Agents of the West, received a fundraising solicitation for $16,000 from a political organization tied to Coto.

"We’ve been asked to make an in-kind contribution to Vote Matters, an independent expenditure committee that supports the California Latino Caucus. … Joe Coto is chair of the California Latino Caucus," the insurance group’s chief executive, Clark Payan, wrote in a May 12, 2008, e-mail to his colleagues.

Payan said in an interview that he was not troubled by the timing of the request. "We contribute to a lot of different causes," he said, "and we contribute to legislators that support small businesses and the business climate." But the e-mail about the solicitation was no longer accessible on his group’s Web site after the Mercury News asked about it.

The group made the $16,000 donation to Vote Matters on May 16, according to campaign records. Less than a week later, the full Assembly approved the bill.

The insurance brokers political action committee also gave $25,000 to a ballot measure committee controlled by Coto on May 4.

In 2007, Coto wrote a bill, requested by Loya Casualty Insurance and Insurance Brokers & Agents of the West, to create a new category of insurance agents who sell only automobile policies. Aimed at boosting the number of agents in areas with large numbers of uninsured drivers, the proposal drew little notice or controversy.

But shortly after Coto unveiled the proposal, Loya Casualty’s chairman, Fred Loya, gave $10,000 to the California Latino Caucus Foundation at the assemblyman’s behest, state records show.

Later in the summer, after the Assembly passed the bill, Fred Loya and his wife, Maria, contributed $6,000 to Coto’s campaign account.

Campaign consultant

Coto said he takes a hands-off approach to his fundraising, leaving it to Julie Sandino, a political consultant he hired to raise money for him. Sandino sends out solicitations to thousands of contributors representing a spectrum of interest groups.

"There is a book that has 500 pages with lobbyists," Coto said. "I can’t communicate with all of them. That’s what Julie Sandino does." Coto said she receives 15 percent of whatever she raises; his campaign committee paid Sandino’s firm nearly $105,000 in 2007 and 2008.

Coto’s aggressive fundraising   he collected $862,000 in 2007 and 2008 for his own campaign account from a variety of sources, despite facing only token opposition for re-election   mirrors that of previous Insurance Committee
Chairman Juan Vargas.

In 2003 and 2004, Vargas took about $170,000 from insurance interests slightly less than Coto collected during his first two years as committee head. Vargas, too, was accused of siding consistently with the insurance industry during his time as chairman.

When he left office in late 2006, Vargas became vice president of insurance company Safeco.

Coto, a former East Side Union High School District superintendent who will be termed out of the Assembly next year and has signaled he will run for state Senate, vowed that he will not follow in Vargas’ footsteps.

"I do not have any interest in working in the insurance industry," he said.

Contact Mike Zapler at [email protected] or 916-441-4603.

Consumer Watchdog
Consumer Watchdog
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