Florida’s Citizens Under Scrutiny for Alleged Management Misconduct, Favoritism

By | November 23, 2012

Florida officials are seeking answers after an internal investigation into the conduct of some former and current executives of the state’s largest property insurer yielded evidence of incomplete investigations into inappropriate behavior, favoritism and mismanagement of funds.

Citizens Property Insurance Corp. had come under increased scrutiny after a decision to disband its office of corporate integrity and terminate its four employees as part of a plan to revamp the insurer’s handling of employee conduct issues and internal fraud and abuse.

The plan calls for dividing the responsibilities of the office of corporate integrity so that employee conduct problems are handled through its employee relations office. To oversee corporate expenditures, the committee also called for the insurer to hire four forensic accountants that will be housed in the office internal audit.

Now, however, an internal investigation has revealed just what exactly the office was investigating and the allegations have state officials looking for answers.

Florida Governor Rick Scott, who previously stated his concern over Citizens’ disbanding of the office, said the internal report has raised even more questions that need to be answered.

“Given the appearance of impropriety, I request you conduct a thorough review of the terminations to determine whether any of them were retaliatory in nature,” said Scott in a letter to state Chief Inspector General Melinda Miguel.

Citizens Chair Carlos Lacasa, noting that many of the allegations predated his chairmanship and Citizen’s President Barry Gilway’s tenure, has called for a more public airing of the issues surrounding the corporate integrity office at the insurer’s budget workshop on Monday, Nov. 26.

“It is imperative to have a full and fair vetting of all relevant facts,” said Lacasa in a letter to Gilway.

Citizens Chief of Internal Audit Joe Martins, in a five-page report that only generalized his findings, listed a number of issues that came up in an anonymous complaint through the insurer’s hotline, Tell Citizens.

Martins focused on 27 complaints that had been referred to an external counsel during the period of June 2008 and December 2011. Among his findings are that there appeared a certain level of favoritism toward personnel within the insurer’s Human Capital Management division.

For example, a senior manager was allowed to resign before there could be an investigation into his improper behavior. Two employees were terminated for using their company-issued computers to promote their outside employment, while two employees of the capital management division were not investigated or disciplined for similar offenses.

Some human capital management employees were also apparently treated differently by senior management and by the insurer’s Determination Committee, which authorizes spin-off investigations if an investigation into one employee uncovers evidence of other staff involvement.

Questions about mismanagement of company funds have also been raised.

Apparently, the appointment and compensation of external counsel for various matters was handled differently and not in accordance with the organization’s purchasing policies. Some of those contract matters covered differences in how fees were calculated and how these contracts were structured regarding the period of time the counsel were appointed.

This is far from the first time Citizens officials have come under scrutiny.

The insurer has also been under fire over charges that executives overspent thousands of dollars on travel and related expenses including the misuse of corporate credit cards for personal use.

The insurer has also been criticized for several moves it has made to try to reduce its exposure.

Citizens had to step back from a program to re-inspect homes that led to many homeowners losing their windstorm credits. After substantial public criticism, the insurer reinstated many of those credits and/or gave policyholders more time to retrofit their property.

A plan to lend private insurers part of Citizens surplus in exchange for removing policies has also been objected to by Scott, elected officials and consumer groups.

Topics Carriers Florida

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