N.J. Gubernatorial Hopeful Hit Over Out-of-State Insurer, Campaign Gifts

August 15, 2005

A public interest lawyer has charged Republican Douglas Forrester with intentionally skirting New Jersey law by licensing an insurance company out-of-state and using the shell operation to illegally funnel millions in loans to his largely self-financed gubernatorial campaign.

In the most scathing rebuke of the candidate and his finances to date, the lawyer, Bruce Afran of Princeton, accused Forrester of violating campaign finance laws enacted to prevent undue influence in state-regulated industries, such as insurance and banking. Among other things, the law bans insurance companies and those who own a majority stake in them from donating money to political causes.

Forrester owns a 51 percent interest in Heartland Fidelity Insurance Co., a Washington, D.C.-based company he started two years ago. Heartland insures the price of health benefit plans offered by BeneCard Services Inc., another Forrester company.

“I have to seriously question how he can continue to run,” Afran said. “This amounts to misrepresentation to the Department of Banking and Insurance.”

Banking and Insurance officials said they had requested additional documents from Heartland, two days after the company asked state regulators to look into the matter.

However, department spokeswoman Jaimee Gilmartin declined to say what documents were requested. And how quickly the department could offer an opinion on the dispute depends on how swiftly Heartland complies with the request for more information, she said.

When questioned about the issue, U.S. Sen. Jon Corzine, the Democratic gubernatorial candidate, told a reporter that what Forrester is doing is inconsistent with the spirit of the law, and that it will be up to other people to decide on the legal issue.

Forrester has donated more than $8 million to his own gubernatorial campaign this year, mostly in increments of $1 million or more, according to the Election Law Enforcement Commission Web site. The site does not specify which of Forrester’s self-gifts were made via loans from Heartland.

He also donated more than $220,000 to candidates running for statewide offices and to various Republican committees in 2003 and 2004, the ELEC site shows.

Forrester again defended his contributions as legal.

During a news conference at which he picked up the endorsement of a veterans organization, Forrester said Heartland was set up in Washington, D.C., and is regulated there, not New Jersey. The campaign finance law being cited, therefore, does not apply.

“The spirit of the law and the letter of the law are very closely related here. They have to do not so much with the site of where an insurance company may be, but rather who has exclusive jurisdiction over regulatory matters,” he said. “Because the regulatory authority is not in New Jersey but in another jurisdiction, there is no conflict here with regard to contributions.”

A security guard at Heartland’s downtown Washington address initially said that he’d never heard of the company. After calling his supervisor, the guard clarified that Heartland does have space in the G Street office building, but “no one is there.” To reach Heartland, a visitor was told to write.

Forrester conceded that Heartland has just “a couple” of administrative employees, a standard practice for such companies. Those employees are in New Jersey. However, Forrester said that changes nothing with regard to the company’s regulatory status.

Forrester was confident state insurance regulators would find in his favor. He declined to speculate on how he would proceed if regulators did not side with him.

Afran maintained that all Forrester’s contributions since he founded Heartland — to himself and to other Republicans — violate state statute.

“There’s no ambiguity in this law,” he said.

Afran, a Green Party candidate for Senate in 2000 who teaches a constitutional law course at Rutgers-Camden, said it’s clear Heartland’s business is conducted in New Jersey, not D.C. A First Amendment right allowing candidates to spend their own money on their campaigns does not include spending corporate money, he said.

“Corporate monies are regulated differently,” he said. “The Supreme Court has said that the First Amendment protects only your right to spend your own money. Congress has repeatedly put corporate money under campaign finance restrictions.”

David Rebovich, director of the Rider Institute for New Jersey Politics in Lawrence, said even if federal case law protects Forrester’s right to spend money on his own campaign, donations to other candidates that may cause a problem.

“He may well have donated to individual candidates or county party organizations, and they may have to give the money back,” Rebovich said.

And, if Forrester loaned money from Heartland Fidelity to his campaign, he may end up having to pay Heartland Fidelity back, according to Rebovich.

Afran and a colleague filed an unsuccessful federal lawsuit last year in which they’d hoped to force a special election to fill the term vacated when Gov. James E. McGreevey resigned. Senate President Richard J. Codey was appointed to fill the last 14 months of McGreevey’s term.

Staff writers Donna De La Cruz in Washington, Jeff Linkous at the Statehouse and Chris Newmarker in Trenton contributed to this report.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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