Reforms on tap at workers' comp insurer State Fund
The scandal-plagued State Fund will get new oversight and must heed laws requiring openness.
Next month, a little-known state agency that doubles as a $20-billion insurance company will hold its first public board of directors meeting in 94 years.
After years of secrecy, questionable behavior by board members and more recently scandal at the agency, the Legislature and Gov. Arnold Schwarzenegger ordered sweeping changes now underway.
It took a scandal, a criminal inquiry, a shake-up at the top and a scathing independent audit to bring a new order to the State Compensation Insurance Fund, commonly known as State Fund, which provides workers' compensation coverage for 190,000 California employers.
The government-backed insurance company will have a revised management structure, and it must comply with the same open-meeting and public-records laws that apply to all other state and local government agencies.
State Fund critics say the changes are overdue.
"It's an important step forward," said California Insurance Commissioner Steve Poizner.
"I think the State Fund has taken advantage of the fact that it's not really a private insurance company, but it's not really a traditional state agency too.
"There was damage done by its lack of transparency."
A well-managed State Fund is essential to the health of California's economy, said Poizner, whose investigators have joined forces with the California Highway Patrol and the San Francisco district attorney's office in a criminal probe that started more than a year ago.
Most of the changes in State Fund's organization were suggested by its board chairwoman, Jeanne Cain, and Poizner in the wake of a scandal that exploded in March 2007 with the sudden firings of President James Tudor and Executive Vice President Renee Koren.
The dismissals occurred four months after the forced resignations of two members of State Fund's five-person board of directors amid conflict-of-interest allegations.
A California Department of Insurance audit released in December found that between 1996 and 2007, State Fund paid $140 million in fees to former board member Frank DelRe for administering group workers' compensation insurance. An additional $125 million went to former board member Kent Dagg for similar work involving policies sold to building trades employers.
The audit portrayed an organization in which key executives spent indiscriminately, moving billions of dollars with little oversight, minimal public checks and balances, and little scrutiny in past years from the governor, Legislature or insurance regulators.
