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Insurance Regulator's Transfers of Funds Listed

Politics: Records show Quackenbush put $565,000 in contributions in his wife's campaign accounts. Officials say it was legal.


SACRAMENTO — By the time he left office last month, former state Insurance Commissioner Chuck Quackenbush had transferred a total of $565,000 in contributions, mostly from insurance companies, to his wife's campaign accounts, state records showed Thursday. .

The transfers occurred over two years, with the final payment of $220,000 to Chris Quackenbush's accounts coming in March, just as revelations of wrongdoing in the Department of Insurance were beginning to unfold. The transfers allowed the Quackenbush couple to pay off personal loans.

Sacramento County property records show that on April 19, the Quackenbushes paid off a $456,000 mortgage held by Chase Manhattan Bank on their Rio Linda home.

Quackenbush said in past interviews that the family took out the mortgage to finance personal loans Chris Quackenbush made to her 1998 state Senate campaign. She was defeated in the general election by Sen. Deborah Ortiz (D-Sacramento).

The latest transfers to his wife's political accounts were disclosed in campaign finance reports the Quackenbushes were required to file this week with the secretary of state's office.

Chris Quackenbush's report showed that the transfers allowed her to repay the personal loans to her campaign and to pay herself $52,000 in interest.

Chuck Quackenbush's lawyer, Don Heller, said the transfers of campaign funds, the repayment of personal loans and the payment of interest were all legal.

Chuck Quackenbush's reports revealed that in the last six months the former commissioner collected $191,000, mostly from insurance interests. Nearly all of the donations were made in the early weeks of the year, before the Department of Insurance became enveloped in scandal.

"It [the scandal] dried up the funding," said Tony Miller, a Sacramento lawyer and advocate for campaign finance reform. "Up until then, in terms of campaign contributions, he had been living high off the hog on the industry he regulates."

Miller acknowledged that Quackenbush's transfers did not violate state law. But he said it created the appearance of a conflict of interest when money raised from the industry he regulated was used to pay off personal loans.

"It's not just to run a campaign, but it was to support himself," Miller said. "That's why I think it's important to limit loans as well as transfers."

Proposition 208, passed by California voters in 1996 but held up by the courts, bans transfers from one candidate to another.

The November ballot will contain Proposition 34, placed there by the Legislature, which would severely restrict transfers between campaign accounts. The maximum transfer from one candidate to another allowed under the proposition is $3,000.

The donations that Quackenbush transferred to his wife's accounts included $10,000 from Washington, D.C.-based Geico Corp.; $30,000 from Safeco Corp. of Seattle; $25,000 from United Services Automobile Assn. of Texas; $30,000 from American Bankers Life Assurance Co. of Florida, and $20,000 from 21st Century Insurance Co. of Woodland Hills.

The 21st Century company was one of six insurers that reached settlements with Quackenbush that stopped investigations into their handling of Northridge earthquake claims.

The settlements required the companies to pay $12.8 million to foundations created by Quackenbush. Court documents filed by Atty. Gen. Bill Lockyer say that one of the foundations, the California Research and Assistance Fund, was used to finance polling and television spots designed to enhance Quackenbush's political image.

Quackenbush left office July 10 after revelations that he ordered settlements to be reached with insurers in order to raise money to finance television spots that would feature him.

Representatives of another foundation established by Quackenbush with insurance company settlements filed a petition with a Sacramento court Thursday asking that it be dissolved.

The California Insurance Education Project said it had $703,605 in remaining assets, which should be used to pay its legal fees and its sole creditor, the public relations firm Stoorza, Ziegaus, Metzger & Hunt.

Any money left over after those payments are made, the group said, could be distributed to charity, returned to the insurance companies involved in the settlements or paid to the state.

The petition said the foundation never spent its money for "partisan political purposes," even though its directors were aware that "earlier this year a public controversy arose concerning allegations that then-Insurance Commissioner Chuck Quackenbush and other . . . officials caused funds derived from settlements . . . to be used for partisan political purposes."

In a statement, Lockyer praised the foundation for cooperating with his investigation of "Northridge insurance settlements and related Department of Insurance activities."

He said its decision to place its remaining assets "in the care of the court" had prompted him to end that phase of his investigation.

The Department of Insurance scandal prompted consumer organizations, meanwhile, to file their own petition with the Legislature urging lawmakers to pass a "California insurance policyholder bill of rights."

The consumer groups said the package of laws should include measures to make examinations of insurance companies public, provide policyholders with an extended period of time to file claims, expand legal protections to consumers mistreated by insurers and ban insurance industry contributions to the state insurance commissioner.

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