L.A. Times, April 11, 2000 http://www.latimes.com/news/politics/calpol/lat_comish000411.htm
Quackenbush Stirs Debate on Cash, Influence
By RONE TEMPEST, Times Sacramento Bureau Chief
SACRAMENTO--When Californians voted 12 years ago to make the state insurance commissioner an elected position, the goal was to liberate the post from the control of the powerful industry it regulates.
"We believed that if we had an elected commissioner," recalled Harvey Rosenfield, author of the 1988 insurance reform initiative Proposition 103, "he would always be forced to do the right thing because he would be accountable to the voters. I never envisioned the time when the insurance commissioner would be purchased outright."
But like so many other efforts in California's wild experiment with direct democracy, the best intentions do not always have the predicted results. As the unfolding case of current Insurance Commissioner Chuck Quackenbush illustrates, the regulatory position may never have been more beholden to the state's $62-billion-a-year insurance industry than it is now.
Quackenbush accepts millions in political cash from insurance companies--a practice that would be illegal in several other states--and has rejected his own legal team's secret recommendation that some of those firms be fined heavily for mishandling claims. The developing quagmire has prompted questions about whether democratization of the job was a good idea.
"Campaign financing has turned a good idea on its head," said John Garamendi, California's first elected insurance commissioner, who served from 1990 to 1994. Garamendi, a former Democratic candidate for governor who now works as a consultant to a venture capital firm in Washington, D.C., said serious campaign finance reform is the only way to salvage the integrity of the job.
A Vow Not to Take Insurance Money
When he announced his candidacy for insurance commissioner in 1993, Quackenbush, like Garamendi before him, said he would not accept money from insurance companies, brokers or agents.
"You can't take money from the Aetnas and the Allstates and the USAAs," Quackenbush told the San Diego Union-Tribune. "You regulate them. The conflict there is difficult to explain to the voters."
Soon, however, Quackenbush reversed himself. Over the past six years he has collected several million dollars in contributions from the biggest companies in the industry.
According to the most recent disclosure statements, Quackenbush in 1999 not only accepted tens of thousands of dollars from companies with business before him, but he also used some of the money--$175,000--to pay off his wife's personal debt from her failed state Senate campaign. In the last six months of 1999, he took $245,000 in political donations--mostly from the insurance industry--even though he is prohibited by statute from seeking another term.
Later this month, a special hearing, convened by Assembly Insurance Committee Chairman Jack Scott (D-Altadena), will be held to determine if the heavy dependence on insurance money has improperly influenced Quackenbush's decisions as commissioner.
Meanwhile, at the urging of state Senate Insurance Committee Chairwoman Jackie Speier (D-Daly City), the California attorney general has opened an investigation into Quackenbush's handling of an "educational foundation" he set up with insurance company money after the devastating 1994 Northridge earthquake.
At least $3 million of the foundation money was used to produce slick public-service commercials featuring the telegenic commissioner, who is said to harbor ambitions for higher office. And $500,000 was transferred to the Greater Sacramento Urban League, an organization that has no business or activities related to earthquakes. Quackenbush is a member of the league's board of directors.
Quackenbush, through a spokesman, contends that none of this industry largess has ever affected decisions he made as commissioner. "There is absolutely no nexus at all between the business of the California Department of Insurance and the commissioner's political operation, including campaign fund-raising," said Deputy Commissioner Dan Edwards.
In fact, Edwards said, Quackenbush "has been on the record for a number of years" as preferring that the office be an appointed post. But the commissioner's troubles have given others the opportunity for a timely I-told-you-so.
"This election of the insurance commissioner was never a good idea," said San Mateo Superior Court Judge Quentin Kopp, who in 1997, while serving as an independent in the state Senate, sponsored a bill to restore the insurance job as a gubernatorial appointment, as it was before Proposition 103.
Kopp said he came to his conclusion about elected insurance commissioners after watching the rise and fall of a promising young Florida politician, Thomas D. O'Malley, in the 1970s.
O'Malley, a handsome ex-Marine from a powerful Democratic political family, seemed destined for higher things until he was charged with bribery and mail fraud while serving as Florida insurance commissioner in 1974.
Despite 26 pending impeachment charges facing him in the Florida Senate, O'Malley successfully ran for reelection in 1975 before resigning for health reasons. The health claim was complicated by a bizarre incident in which he was accidentally run over by a campaign Winnebago driven by his wife.
O'Malley was eventually indicted by a federal grand jury and sentenced to prison. Most of the allegations against him centered on his acceptance of money from insurance companies in exchange for favorable rulings.
"The problem is that the insurance commissioner is a kind of specialized industry director," Kopp said. "No one is interested in contributing to candidates for insurance commissioner except the industry itself."
Some States Act to Avoid Problem
Similar criticism has been made of other "down-ticket" statewide posts such as controller or treasurer, in which potential contributors are often those who have business before the respective officials or with the state pension boards on which they serve.
The logic of Kopp's argument is that, in a huge state like California, where running for state office is a multimillion-dollar affair, those competing for lower-level posts have much narrower sources of contributions than those in the top-of-the-ballot races for governor, lieutenant governor and attorney general.
Twelve states have elected insurance commissioners; the rest are appointed. But most of these states also have laws that limit or ban political contributions from the insurance industry.
In Washington state, for example, the elected insurance commissioner is barred under state ethics laws from receiving anything of value from insurers doing business in the state.
But that has not kept the issue of elected versus appointed from surfacing as a political issue. Incumbent Washington State Insurance Commissioner Deborah Senn, who recently announced her candidacy for the U.S. Senate, is a Democrat with a reputation for being tough on insurance companies.
Political opponents blame Senn for a breakdown in the market for individual health insurance in the state last summer. Insurance companies have an adversarial relationship with Senn. In January, a Republican state senator offered an unsuccessful bill to make the insurance commissioner an appointed post.
When she was a Kansas state legislator, Kathleen Sebelius sponsored a similar bill to change the Kansas insurance commissioner from an elected to an appointed position.
The bill failed and Sebelius decided in 1994 to run for the post herself, pledging that she would not accept any money from the insurance industry during her campaign or after she was elected.
Unlike Quackenbush, however, she stuck to her pledge. Moreover, for each of the past five years she has pushed unsuccessfully for legislation legally banning insurance industry contributions to her office.
"The way to separate the office from the money is for the Legislature to make it illegal," Sebelius said, noting that several other states, including Washington and Montana, have such laws.
But her experience in office has also changed her view on the elected versus appointed debate.
"I've now become a ferocious advocate of elected commissioners in large part because they have to be answerable to the voters. They have to be sensitive and responsive to consumer issues," Sebelius said in a telephone interview. "Most appointed commissioners tend to come directly out of the insurance industry and go directly back into it."
Harvey Rosenfield admits that things have not turned out as he hoped in California.
"But as bad as it has been under Quackenbush," Rosenfield said, "I'd still rather have a commissioner who is accountable to the voters, subject to recall and subject to impeachment."
There is some evidence that accepting political contributions from insurers is not necessarily the political liability that Rosenfield imagines.
Despite collecting more than $2 million from the insurance industry in his first campaign and more throughout his first term, Quackenbush was reelected handily in 1998. In his case, a wealthy campaign chest appeared to overcome the moral high ground of his opponents, who hammered at Quackenbush's acceptance of insurance money.
Some argue, in fact, that this reelection was more important politically than the first victory.
"Quackenbush," said Garamendi, "came in and collected enough money to overcome the natural disadvantage [that] accepting the money gave him."
Copyright 2000 Los Angeles Times