Eavesdropping Scandal Aftermath Pits Insurer Vs. Virginia GOP

August 22, 2005

The Republican Party of Virginia is suing its liability insurance carrier, seeking nearly $1 million in reimbursement for the GOP’s payout to settle a lawsuit over an eavesdropping scandal and attorneys’ fees the insurer refused to cover.

The insurer has called the lawsuit frivolous and also subpoenaed leading GOP operatives as part of its defense.

The state GOP contends in a complaint filed in U.S. District Court in Richmond that the Union Insurance Co. of Lincoln, Neb., breached its contract by not covering the $750,000 the party paid in December to Virginia Democrats who sued over two intercepted conference calls.

The lawsuit also seeks $200,000 for legal bills from the nine-month court battle with Democratic legislators and party officials who alleged GOP operatives violated their privacy rights.

The party contends it should have been covered because it did not know about or condone the espionage on calls made March 22 and 25, 2002, among Democratic lawmakers and, briefly, Gov. Mark R. Warner. The Democrats from across the state met by phone to discuss legal strategy for challenging the 2001 Republican-authored legislative redistricting plan.

Secret monitoring
The Republican’s former executive director, Edmund A. Matricardi III, secretly monitored the calls and pleaded guilty in 2003 to a single federal count of intercepting a wire communication. His boss at the time, former state GOP Chairman Gary R. Thomson, pleaded guilty to a related misdemeanor. He listened with Matricardi to part of the second Democratic conference call.

The Republican Party contends that as a corporation, it was harmed by the unsanctioned mischief of rogue operatives. “The insurance carrier refused to provide coverage and we are asking the courts to interpret the terms of our insurance policy,” said Shawn M. Smith, the Republicans’ current executive director.

Union Insurance Co. has asked the court to dismiss the lawsuit and order the party to pay the insurer’s costs and lawyers’ fees.

“The more I get into this, the more frivolous it seems,” said Christopher C. Spencer, the Richmond attorney representing the Lincoln, Neb.-based company.

The lawsuit argues that from the beginning, the Republican Party had no legitimate expectation that its liability insurance would cover illegal political espionage that resulted in criminal convictions against its top officers.

GOP officials subpoenaed
Spencer said he has also sent subpoenas to several high-ranking GOP officials seeking a broad range of records related to the scandal. Among those subpoenaed are gubernatorial candidate and former attorney general Jerry Kilgore, several members of Congress, House of Delegates Speaker William Howell and the campaign committees of U.S. Sens. George Allen and John Warner.

Spencer said he wants the Republicans to produce records, including e-mails and other correspondence, shedding light on donations to the party that paid for the settlement. “I want to know who paid what to whom and why,” Spencer said. Some basic information about donations is public record, but those records “don’t tell me the why,” he said.

The records could provide some new insight into the March 2002 political espionage. Democrats have been especially critical of how Kilgore responded to the case as attorney general. Kilgore, whose office reported the eavesdropping to state police, has insisted he acted appropriately.

“I think the facts are finally going to come to light and we’re going to find out what Jerry Kilgore knew and when he knew it,” said Mark Bergman, spokesman for the state Democratic Party.

Matricardi used a phone number and a pass code provided by a former state Democratic Party employee to secretly monitor two private conference calls among Democratic legislators and, for a time, Gov. Warner. Thomson also listened to a portion of one of the calls. The Democrats were discussing a legal challenge to the 2001 Republican-drawn redistricting plan.

The Democrats sued in federal court in March 2004, alleging their privacy rights had been violated. Two weeks later, Union told the Republican Party that its liability policy did not cover the misdeeds alleged in the Democrats’ lawsuit.

In December, the GOP paid a $750,000 settlement to the Democrats. As of June 30, the GOP still owed $55,500 of the $200,000 in lawyers’ fees it incurred battling the Democrats’ lawsuit, according to state campaign finance records.

A hearing is set in federal court in Richmond on Sept. 8 to set a trial date for the lawsuit against Union.

Union’s lawyer Spencer said he was mystified at the timing of the GOP’s lawsuit against Union — filed July 18, not four months before election day in a hotly contested race for governor between Democrat Timothy M. Kaine and Republican Kilgore– “because the insurance company denied coverage a long time ago.”

“You would think that if there was any merit to their position, they would have disputed the company’s decision right then,” he said.

Associated Press reports were used in this story. Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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