With the court-supervised sale of Golden Eagle Insurance of San Diego imminent, State Insurance Commissioner Chuck Quackenbush said former owner John Mabee gave up all rights to the company Thursday and admitted to owing the state $69 million in loans.
Insurance companies Liberty Mutual of Boston and American International Group of New York are bidding for the $1.3-billion insurer in an auction supervised by San Francisco Superior Court Judge William Cahill, state sources said Thursday. A winner is expected to be named by today.
Both companies stepped in to guarantee policies and service after the state seized the 100,000-policy insurer on Jan. 31. Liberty Mutual will withdraw its bid if a sale is not completed by the close of business today, sources close to the auction said.
In submitting to the authority of state to sell his company, Mabee also promised to leave the insurance industry for good. Quackenbush's office said the stipulation was part of a settlement made with the commission as a prelude to a Golden Eagle sale.
In a statement, Quackenbush said Mabee would realize $2 million from the auction sale, after paying off the $69-million loan and taxes. Mabee and his attorneys were unavailable for comment.
After Quackenbush's office took control of Golden Eagle, one of the state's leading workers' compensation underwriters, the commissioner accused Mabee of operating the company with a $138-million reserve shortfall, making $69 million in improper self-loans and falsifying records.