Note: Workers' Compensation Executive is published by California government. The article goes out its way to counteract and gloss over these damaging accusations. Also see articles about the scandal involving Commissioner Quackenbush. [Link 1] [Link 2] [Link 3]


Workers' Compensation Executive (California)

Vol. 6 No. 15 August 5, 1996


SACRAMENTO -- Nine members [It later grew to 17] of the California Department of Insurance's vaunted Fraud Division have filed a whistleblowers' lawsuit against the commissioner. They are charging, among other things, that the DOI leadership had conspired with insurance carriers to ram fraud cases through the courts "without meaningful review." Among the whistleblowers are three bureau chiefs, F. Clarke Walker, Eugene Asai and Joseph Lindsay. And according to one news account, "many of the whistle-blowers are former U.S. Department of Justice investigators and sworn peace officers." The group includes six men and three women who are seeking total damages of $90 million, including $45 million for general pain and suffering.

As of last Friday, department spokesman, Richard Wiebe, deputy insurance commissioner, told the Workers' Comp Executive that the department had not been served notice. But apparently all of the news media had.

"The commissioner is not surprised by the lawsuit," Wiebe said. "He said during his campaign (for office) and even in his inaugural speech that fighting fraud is going to be a top priority of this administration, and he hired Barbara Dotta, the former Fresno District Attorney, to make some major changes that would improve effectiveness of the fraud division.

"Unfortunately, since her first day on the job she's encountered nothing but resistance from certain elements within the fraud division who like things just the way they were."

According to a news account in the Contra Costa Times "the whistle-blowers' most damning allegations are directed at Deputy Insurance Commissioner Barbara Dotta and William Palmer, the insurance department's chief counsel."

An insurance company trade association executive, who is closely familiar with what has occurred, told the Executive, "Barbara Dotta went in there and found the place in disarray, truly in disarray. She immediately relieved the top manager of the unit and some of the other support managers and decided to pick her own people to help her get the unit back on line. "Insurers' experiences with the unit have been that it's falling into discredit," the executive continued. "It's at the point where people don't feel the department can enforce anything in the area of fraud or prosecute anything in the area of fraud. And the people who are complaining are the malcontents within the [fraud] bureau who have been set upon by management who told them, 'You are going to be held accountable now. You're going to have to start moving this stuff forward.'"

The DOI's fraud unit has been a laughingstock for some time experienced fraud investigators told the Executive. Because of the many complaints and the fact that the bureau has a backlog of more than 2,000 cases, the commissioner has requested that the Department of Finance conduct an audit of how the unit has handled its finances.

Several individuals close to the fraud investigation unit interviewed by the Executive suggested that the lawsuit might be a pre-emptive strike and one of the techniques of attorneys, Leo Donahue and Paul Lacey, for the whistleblowers, is that of trying cases in the media.

Going to the media with this issue surprised Wiebe because of the skeletons that he says are in the closets of some of the plaintiffs. He said, "Gene Asai, Joe Lindsay and Clarke Walker were charged with sexual harassment and retaliation by an employee of the fraud unit. On June 28, the department entered into a settlement agreement with the complainant and agreed to settle those charges for $125,000."

Wiebe added, "Asai and Lindsay are on administrative leave while an investigation is underway concerning charges unrelated to these, in other words, additional charges." Wiebe had to excuse himself from the interview to take a call. When he returned, he said, "These guys are on a public relations offensive. I just got a call from Channel 10, and they want to come over and talk to us."

The charges by the dissident nine that DOI leaders were conspiring with the industry to push fraud cases through the courts shocked a number of carrier fraud investigators contacted by the Executive.

A major carrier spokesperson told the Executive, "All carriers are required to file simultaneously both with the Fraud Division and directly with the office of the district attorney that has jurisdiction. And the DA alone is responsible for the decision on whether to prosecute or not. That weakens the argument that the industry is putting pressure on the Fraud Division to funnel these cases over to the DAs offices."

In his final comments, Wiebe said, "Insurance companies have made a major investment in SIUs pursuant to directives from the legislature and the department. This investment should be paying off in the form of convictions. And when the fraud division has accumulated a backlog of some 2,000 cases (that can't make them very happy.)"

The head of government affairs for a major carrier confided in the Executive, "If there's any kind of complaint that I've heard, it's that the Department of Insurance never did anything with these cases. And they were sitting on the damn things. They went on for ever and ever and ever."