The turbulent drama surrounding California Insurance Commissioner Chuck Quackenbush reached a climax on June 28 with the Commissioner’s resignation from office. As the dust settles, IJ looks back at the major events leading up to his ultimate downfall.
March 26, 2000
The Los Angeles Times reports that Quackenbush allegedly collected political contributions from insurance companies, transferring $100,000 of these to his wife’s campaign accounts. The report highlights certain contributions made by a group of insurers under the scrutiny of the California Department of Insurance (CDI) in the wake of the Northridge earthquake to a special fund created by the Commissioner allegedly in lieu of paying fines for unfair claims practices.
State assembly panel demands that Quackenbush appear at an April hearing and produce confidential reports prepared by the CDI on the handling of the Northridge claims by Allstate Corp., Farmer’s Home Group, Farmer’s Insurance Group, Fireman’s Fund Insurance Co., State Farm Insurance Companies and 21st Century Insurance Co.
“This seems to be the annual rite of Spring in Sacramento-another politically motivated hearing designed to miscast the Department’s accomplishments and impressive record.”
—Quackenbush defends CDI’s enforcement action record
Reports show Quackenbush rejected recommendations made by his own legal team to fine three state insurance companies for allegedly low-balling Northridge-related claims. Foundation for Taxpayer and Consumer Rights (led by Harvey Rosenfeld) requests the State Attorney General to initiate an investigation.
Allegations that Quackenbush persuaded Fireman’s Fund Insurance Co. to donate $555,000 to the California Research and Assistance Fund (CRAF), which subsequently ran television public service spots starring the Commissioner. Cries of political self-promotion.
State ethics panel launches review of Quackenbush’s acceptance of approximately $345,000 in campaign donations from insurers in 1999.
Lawmakers announce the Commissioner’s budget will be held for approval pending legislative hearings and Attorney General’s probe. In a three-hour interview with the L.A. Times, Quackenbush admits collecting campaign contributions from companies involved in scandal, but maintains innocence in any wrongdoing.
George Grays, senior aide to Quackenbush, resigns in face of allegations that he ran CRAF directly from Commissioner’s state office.
Quackenbush says Insurance Commissioner should be an appointed, not elected position.
A second foundation created by Quackenbush (California Insurance Education Foundation) comes under scrutiny. Allegations that only small percentage of monies donated were spent on minority outreach and earthquake-related projects and that fund was idea of San Diego public relations firm Stoorza Ziegaus & Metzger Inc.
List of foundation fund recipients revealed to include social service groups, minority community projects and athletic programs (including football camp in which Quackenbush children participate).
New charge: Quackenbush allegedly agreed to absolve Farmers Insurance of wrongdoing with respect to Northridge in return for a $1-million donation to foundation.
“I’m…proud of the Foundation concept, although I am not particularly pleased with the implementation of the concept…We believe that the Foundation approach to settlements is an effective, innovative way to do many things of benefit to consumers.. .Notwithstanding the important works of the groups that have received Foundation support, I believe that he earthquake research projects should have been prioritized. They obviously were not. For that, I take responsibility.”
—Quackenbush testifies at Assembly Insurance Committee Hearing
Quackenbush holds press conference to respond to allegations. Harvey Rosenfeld, in separate press conference, calls for the Commissioner’s resignation.
Sacramento Superior Court Judge John R. Lewis seizes control of CRAF after State Attorney General labels it a “sham.”
“Resign, Mr. Quackenbush.” -L.A. Times editorial
Northridge victims air grievances before Senate Insurance Committee. Former Simi Valley Councilwoman, Sandi Webb, launches Quackenbush recall bid.
“I have been tried, sentenced and crucified all at the hands of the media, with its liberal slant and pro-Democrat bias, without the fair and just opportunity to confront my accusers and defend myself against their partisan allegations… I want to reassure you and make it absolutely clear that every action we took was completely legal and designed to get money into the hands of deserving earthquake victims…Please know that your support and advice is vitally important in helping end this political witch-hunt and to ensure a strong Republican future for California.”
—Quackenbush, letter to fellow Republicans; vows not be run out of office
The San Jose Mercury News calls for Quackenbush’s resignation.
Assemblyman Wally Knox asks Attorney General to investigate a $4.2-million Holocaust fund announced in December 1999.
Senate Insurance Committee Chairwoman Jackie Speier requests that confidential documents compiled by CDI to evaluate insurance companies performance in handling of Northridge claims be made public.
At Senate Insurance Committee Oversight hearing, Quackenbush refuses to testify. Prior to walking out, he distributes copies of “confidential” e-mail to back up his allegations that he is the victim of a “political ambush.”
State Senate Committee serves Quackenbush with a subpoena to testify with respect to his handling of Northridge-related settlements.
Quackenbush blames his former Chief of Staff, William Palmer, for unilaterally setting up CRAF.
Attorneys for Farmers Insurance state that Quackenbush personally intervened in negotiations over Northridge claims.
Assembly Insurance Committee initiates hearings. Evidence presented showing foundation funds were used for poll testing Quackenbush’s political popularity.
Memo outlining plan to finance Quackenbush’s political campaign with fines paid by insurance companies comes to light. Republican Assemblyman Tom McClintock says evidence in Quackenbush investigation “points in the direction” of impeachment.
Confidential state reports released to public. Auditors of the Department, in confidential documents, allege insurer misconduct with respect to Northridge claims.
Field Poll reveals 47 percent of Californians believe Quackenbush should resign. If he will not take that step, 54 percent believe he should be impeached.
Superior Court Judge John R. Lewis, finding that CRAF director misspent assets, extends freeze on remaining $6.3 million in the CRAF.
Quackenbush reaps a rare victory when Superior Court Judge Joe S. Gray reverses his own prior decision and orders a stop to the dissemination of market conduct examinations, made public by a Senate Judiciary committee.
Cindy Ossias, a senior lawyer at the CDI’s San Francisco office, is revealed to be the key whistle-blower in the investigation. Reveals she was appalled by alleged sweetheart deals made for insurers. Quackenbush swiftly puts Ossias on administrative leave.
Ossias testifies before State Assembly Committee. Staff counsel Robert Hagedorn also provides testimony damaging to Quackenbush. Deputy Commissioner Mark Lowder and Grays take the Fifth Amendment, refuse to testify.
Quackenbush scheduled to testify June 29, along with general counsel Brian Soublet and Deputy Commissioner Norris Clark.
“I hereby resign my position as Insurance Commissioner of the State of California effective July 10, 2000.”
—Quackenbush, letter addressed to Bill Jones, Secretary of State; Gray Davis, Governor, State of California; Robert Hertzberg, Speaker of the Assembly; and John Burton, Speaker Pro Tem of the Senate.