SACRAMENTO — A day of explosive developments in the Chuck Quackenbush case included an arrest warrant, revelations of shredded documents and testimony that the insurance commissioner personally directed employees to collect millions from title companies for TV commercials that would feature him.
As legislative hearings on Quackenbush's actions resumed Monday, surprise testimony from staff counsel Robert Hagedorn was the first to directly link Quackenbush with a strategy of using punitive insurance settlements to enhance his public image.
Quackenbush directed staff lawyers in March to collect $4 million from settlements with title insurance companies for a "media buy" for the TV commercials, Hagedorn testified Monday.
The testimony followed that of another Department of Insurance lawyer, whistle-blower Cindy Ossias, that senior Quackenbush aides ordered her and other staff lawyers to shred key documents related to Northridge earthquake settlements.
Later, one current and one former deputy commissioner invoked the 5th Amendment to avoid self-incrimination. And an arrest warrant was issued for Sacramento football coach Brian B.T. Thompson, who failed to appear to testify.
Thompson, who received $263,000 from a Northridge foundation for a football camp attended by two Quackenbush children, eventually arrived at the Capitol Monday night after being tracked down by the California Highway Patrol and sergeants-at-arms for the Assembly.
"Congratulations," said Assemblyman Tom McClintock (R-Northridge) facetiously as Thompson sank low in his chair, "you have earned your place in history as the first person ever arrested by the California state Assembly."
Thompson was released by the committee after promising to appear with his attorney at hearings set for Thursday morning.
Fund-Raising Quotas Alleged
The most electrifying testimony came from Hagedorn, who reluctantly disclosed that after Quackenbush ordered his top staff to raise the $4 million, a deputy commissioner set minimums that each agreement would have to produce.
"I believe he had a number," said Hagedorn, "a total he had to bring in, so to speak."
Hagedorn said the instructions from the commissioner had been relayed to him in March by the department's chief counsel, Brian Soublet, who explained that they had been issued to top-level staff during a meeting with Quackenbush.
He said he was told the money was to be used for "outreach," a term he knew to mean television spots featuring the commissioner.
Asked if Soublet appeared to be troubled by the message he was having to deliver, Hagedorn nodded. "Yes, he was," he said.
Stunned by the revelations, several committee members said Hagedorn's testimony was the most damaging yet for Quackenbush, who has steadfastly maintained that he had no direct involvement in the settlements and the operation of the nonprofit foundations they financed.
"If it is true, it casts some doubt on his [Quackenbush's] claim that he was not involved in the disposition of funds," said Assemblyman Darrell Steinberg (D-Sacramento). "The facts get worse the more we hear."
McClintock said the commissioner's survival in office may depend on how he answers Hagedorn's assertions when he testifies before the committee on Thursday.
"It is imperative that Mr. Quackenbush refute this testimony," McClintock said.
A spokesman for the California Land Title Assn., meanwhile, said the organization was "outraged" by the revelations. "This is a sad commentary on the settlement process utilized by the Department of Insurance," he said.
The department had sought to settle its part of a lawsuit against title insurance companies that alleged the industry had benefited financially from escrow deposits it steered to certain lenders. The industry denied the accusations, but so far five companies have settled with the department for a total of $2.3 million.
The committee turned its attention to title company settlements after Ossias testified that she had been ordered to shred documents containing recommendations from department lawyers for fines against insurers accused of mishandling Northridge earthquake claims. Ossias was granted immunity from prosecution in exchange for her testimony.
The shredding came on direct orders from Quackenbush's top lieutenants, who had reached settlements allowing the insurers to escape fines by paying "small amounts" into nonprofit foundations created by Quackenbush, Ossias said.
The foundations are being investigated by state Atty. Gen. Bill Lockyer, who described one of them in court documents as a "sham" operation controlled by Quackenbush's former deputy, George Grays. Lockyer said foundation assets were used to pay for television ads featuring Quackenbush, political polling and grants to charitable organizations with ties to Quackenbush and Grays.
