Court Documents Allege New Mexico’s Serna Ran ‘Pay to Play’ Operation

July 12, 2006

While much of the controversy surrounding former New Mexico Insurance Superintendent Eric Serna has centered on Con Alma, his conduct wasn’t limited to the health foundation he founded, court documents allege.

Serna and one of his top aides offered favorable treatment to an Ohio insurance company in exchange for contributions to charities, the Albuquerque Journal reported in a copyright story Sunday.

The court documents were filed Friday by attorneys for Zelphoe Maloney of Albuquerque, whose HMO denied coverage for a bone marrow transplant. Serna upheld a panel that agreed with Lovelace Sandia’s position that the procedure was experimental in Maloney’s case.

Serna stepped down as Con Alma’s board president in April and retired as insurance superintendent at the end of May.

The state attorney general’s office is investigating Serna’s activities as insurance superintendent. His attorney, Robert Gorence, confirmed the FBI also is investigating Serna’s activities.

“There hasn’t, and I’m confident won’t be, anything that arises of criminal nature, which would mean an indictment or complaint. These allegations don’t begin to meet that standard,” Gorence said.

Maloney’s attorneys said the documents “will demonstrate that Serna operated a ‘pay to play’ operation that was well-known to health insurers, banks, investment advisers and others over whom Serna had regulatory power.”

According to the court filing:

Albuquerque insurance lawyer Bill Madison would testify that he felt like he “was being asked to act as a bag man in a shakedown operation.”

In late 2002, he represented Ohio Casualty, which the New Mexico Insurance Division claimed should pay $400,000 in penalties for using unlicensed adjusters in the state.

Madison met with Serna and Serna’s deputy, Joe Ruiz, that year.

Serna indicated to Madison that he favored “good corporate citizens” making contributions to legitimate charitable organizations.

Ruiz said Serna sometimes “looked the other way” on fines when insurance companies agreed to make contributions to favored charities. Ruiz said Serna would choose Con Alma and $35,000 would be sufficient.

Ruiz also had a favorite charity and said “an additional $5,000 from Ohio Casualty would be looked upon favorably.”

Madison declined but said the Ohio company was willing to pay a $25,000 penalty. Otherwise, the parties would have to let a judge decide the legitimacy of any penalty.

Serna agreed, and the case was closed with a consent order. The insurance company paid $25,000.

Madison declined to comment on the matter, and Ruiz could not be reached for comment.

An adjusting firm and two insurance companies, which contributed a total of $50,000 to Con Alma, also were mentioned in the documents.

The court documents also allege that Serna sought a donation to a “New Mexico Law Student Scholarship Fund,” at his daughter’s school from the Bank of Santa Fe, which, at the time, had the state contract to hold insurance deposits.

A spokeswoman for the Catholic University of America, a Washington, D.C., school, confirmed that Marisa Serna attended the school from fall 2000 to June 2001, but she said she could not provide further details and wasn’t obliged to because the university is a private institution.

Alan O. Austin, who was president of the school at the time, declined to say whether the bank made a contribution to the scholarship fund.

The university’s Web site indicates that Serna served on a law school “board of visitors,” which provided advice and support in areas that included fundraising.

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