Interim insurance chief vows restored trust

Sacramento Bee

In a move intended to douse lingering whiffs of scandal at the Department of Insurance, state leaders acted Wednesday to name a well-known law professor at McGeorge School of Law in Sacramento, J. Clark Kelso, to temporarily replace Insurance Commissioner Chuck Quackenbush.

In the move worked out with Attorney General Bill Lockyer, Quackenbush appointed Kelso to immediately replace Chief Deputy Commissioner Michael Kelley, who along with other department executives was tarnished by the scandal that drove Quackenbush to resign. Quackenbush is scheduled to leave office Monday; Lockyer is investigating the scandal at the department.

Lawmakers said they believed Kelley and other top Department of Insurance executives were to be put on administrative leave as a result of the agency’s practice of letting insurance companies contribute to nonprofit foundations instead of paying fines.

Department spokesman Scott Edelen, however, said that no such action had been taken, and that Kelley was reassigned from his appointed job to a civil service position, which Edelen declined to identify.

Kelso said in a news conference on the McGeorge campus in Oak Park that he does not want the job for long, and that he will step aside as soon as Gov. Gray Davis appoints someone to fill out Republican Quackenbush‘s elective term, which ends in 2002. Kelso predicted he would be back to teaching full time by the fall.

“My job is to prepare the department for new leadership and to begin the process of restoring public trust and confidence that the insurance industry is being effectively regulated and consumers’ interests are being properly protected by the Department of Insurance consistent with the rule of law,” Kelso said.

Indeed, Kelso said he would avoid making any decisions on matters of policy that could be postponed until Davis makes an appointment.

Kelso is expected to deal with department executives who were embroiled in the controversy with Quackenbush. “Obviously, personnel decisions are high on the agenda,” he said.

A 40-year-old Republican, Kelso is a professor and director of McGeorge’s Institute for Legislative Practice. In that role, Kelso has worked with the Legislature, the Governor’s Office and the judiciary on constitutional amendments, legislation and judicial reforms.

Kelso said he was contacted about the commissioner’s job on Monday by representatives for Lockyer and Quackenbush. He later met personally with Quackenbush and some of his staff, whom he declined to identify.

Quackenbush‘s lawyer, Donald Heller, said Kelso’s name came up during discussions among the commissioner, Chief Deputy Attorney General Peter Siggins and himself. The trio decided the replacement should be a lawyer, someone of “skill, competence and a high level of integrity,” and well-respected by the legal and political community, Heller said.

On Monday, Heller met with Kelso, who agreed the same day to accept the appointment.

Lockyer spokeswoman Sandra Michioku said officials in the attorney general’s office suggested Kelso after Quackenbush approached them to propose appointing a replacement for Kelley.

Michioku called Kelso’s appointment a step toward improving public confidence and trust in the department.

“Kelso … has indicated that he plans to get the department in shape for the person who will be appointed by the governor to replace the insurance commissioner,” she said.

The governor had no comment on Kelso’s appointment, which he learned of from Lockyer, said Davis spokeswoman Hilary McLean. Davis was not involved in selecting Kelso and does not yet have a list of candidates for a more permanent replacement, she said. Davis said last week that he hoped to name a replacement within 30 days.

Democratic and Republican lawmakers who had worried that Quackenbush‘s departure would leave executives implicated in the scandal in charge welcomed the news of Kelso’s appointment.

Assemblyman Fred Keeley, D-Santa Cruz, called the move “a very, very positive change. … It’s exactly what is needed over there on an interim basis.” Keeley was a leader of the Assembly Insurance Committee’s investigation into Quackenbush‘s administration.

Assemblyman Darrell Steinberg, D-Sacramento, said Kelso “is highly respected, extremely intelligent … and his integrity is above reproach.”

Assemblyman Dave Cox, R-Fair Oaks, said he’s confident Kelso will win respect from all, including department employees, consumers and insurance companies.

The appointment also gives the governor adequate time to conduct a “thorough and diligent” search for Quackenbush‘s interim replacement, Cox said.

Keeley said he believed from his conversation with Lockyer “that some of the executive staff at the department will be put on administrative leave.”

Michioku declined to comment on any possible action being taken against department executives. Edelen and Heller said they knew of no such action being planned.

Also Wednesday, further signs emerged that federal law-enforcement officials are gathering evidence about the Quackenbush administration’s practices.

Matt Jacobs, a former federal prosecutor who served as counsel to the Assembly Insurance Committee during its recent hearings, called Keeley to say that the U.S. attorney’s office wanted to interview him, according to Keeley.

A lawyer in San Francisco, meanwhile, asked a Superior Court judge to void four settlement agreements that Quackenbush aides reached with companies accused of mishandling claims arising out of the 1994 Northridge earthquake.

The recommendation came from Ray Bourhis, who was appointed by a court in 1991 as a “special master” overseeing the Department of Insurance‘s handling of consumer complaints. Bourhis wants new agreements with payments going to consumers.

The settlements Bourhis targeted involved companies that were pushed to contribute more than $8 million to the California Research and Assistance Fund, a foundation that, among other things, spent $3 million on advertising featuring Quackenbush.

Lockyer is investigating the spending of that foundation and others established with insurer settlement money.