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Lloyd's Ally Takes Pay Cut
San Diego Reader
From $132,000 to $33,000 Per Year
The San Diego Reader has located Chuck Quackenbush, the first California politician/bureaucrat to self-destruct in this century. Present and former San Diegans were involved in his plunge from grace. Quackenbush is the former insurance commissioner who resigned in mid-2000 rather than face a certain impeachment. Where is he now? He is a deputy sheriff in Lee County, in southwest Florida.
The former commish fell hard. According to another deputy sheriff there, Quackenbush's salary is "around $33,000 a year," and he has been working the night shift. He was raking in $132,000 a year as insurance commissioner. The tall, handsome former California State Assembly member from Silicon Valley, brimming with military spit and polish, had been groomed by Republicans for a run at governor or U.S. Senate.
After his resignation, he and his family beat it for Hawaii, where Quackenbush claimed he was doing political and military intelligence consulting. People assume that he is still there. I got a tip that he is a low-rung law enforcer in Florida. I reached a source at the California Department of Insurance who said that as far as he knew, Quackenbush was a deputy sheriff in Fort Myers. "We don't really care," he added.
Fort Myers is the second-biggest city in Lee County. The county sheriff's department confirmed that he is on its payroll as a deputy sheriff. I left phone messages for Quackenbush and e-mailed him, but he did not answer.
His wife is a real estate salesperson in the area, according to ads in local media.
Quackenbush was elected insurance commissioner in 1994 and reelected in 1998. But the Los Angeles Times began writing about dubious practices in claims settlements from the 1994 Northridge earthquake, which did $27 billion of damage in the Los Angeles area. Several large insurers were subject to billions of dollars in fines because of their inadequate handling of quake claims. But according to a torrent of news reports at the time, the insurance companies were let off the hook if they would contribute a collective $13 million to foundations that had been organized largely by former staff members of ex-governor Pete Wilson, who began his political career in San Diego.
These foundations were supposed to educate the public about the importance of insurance. "The foundations he created weren't for consumers. They were only there to help Quackenbush run for governor," said whistleblower and insurance department attorney Cindy Ossias not long after Quackenbush left.
As the media pointed out, one of those so-called foundations, California Research and Assistance Fund, went astray with its money. As it turned out, $3 million of that money went to TV ads featuring and glorifying the politically ambitious Quackenbush. Half a million dollars went to the Sacramento Urban League, of which Quackenbush was a boardmember. A full $263,000 went to the Skillz Athletic Foundation, a football camp attended by Quackenbush's children.
In late April of 2000, Quackenbush went before the Assembly Insurance Committee and said he was "mortified," although he conceded he had made mistakes in judgment. His staff members had never told him about where that foundation money was going, he insisted, although a top aide later denied that claim. Politicians of neither party were buying his story. Democrats said he had put together a slush fund with money that should have gone to quake victims. Republicans largely agreed and put much of the blame on former Pete Wilson advisers who were shoveling money to their own public relations firms.
One of those firms was San Diego's Stoorza Ziegaus and Metzger, which was the state's largest public relations firm, with more than 90 employees. (It went out of business in 2002, primarily done in by the dot-com/tech collapse.)
According to press reports, in 1999 the firm had sent out a memo telling how Quackenbush could use insurance-company money to reverse the perception that the commissioner was "too closely aligned to insurance companies." A member of Stoorza's Sacramento office, Mitch Zak, had talked about the concept at the same time that Marty Wilson, who was with another public relations firm, was doing so. Both had served in the Wilson administration; Marty Wilson had been a close adviser of Pete Wilson (no relation) since Pete's days as mayor of San Diego. Marty Wilson did not respond to queries.
The Stoorza firm wound up getting a $50,000 bonus and $600,000 contract, to last through 2001. It helped set up a foundation, California Insurance Education Project, with former San Diego state legislator Lucy Killea on its board, along with still another Pete Wilson veteran. It's doubtful the Stoorza firm collected the whole contract, because the Quackenbush flap erupted in the middle of it.
In any case, the California Insurance Education Project was apparently not in on the bad stuff -- the TV ads and the diversion of funds to the Urban League, the sports group, etc. Gail Stoorza-Gill says her former firm had "absolutely no involvement" in the monkey business quarterbacked by the California Research and Assistance Fund, and evidence suggests that is true.
"Quackenbush didn't know a thing about insurance; he was naïve, was used terribly," says Jeffrey C. Peterson of Escondido, executive director of the American Names Association, which is based in Rancho Santa Fe. The association represents Americans who in the 1970s and 1980s invested in the fabled insurance market, Lloyd's of London. At Lloyd's, individuals called "Names," along with corporations, come together to spread financial risk. American Names concluded that Lloyd's had recruited them only because it was in deep trouble from asbestos and pollution claims. A group of California Names sued Lloyd's for fraud. So did the California Department of Corporations.
According to Peterson, Lloyd's members had provided reinsurance to the corporations that had insured structures in the area of the Northridge quake. So Lloyd's faced Northridge, asbestos, and pollution claims at the same time it was defending itself from fraud suits. But it had an ally in Quackenbush. Indeed, Peterson believes Quackenbush had been hurriedly picked for the insurance commissioner job by a San Francisco law firm that represented Lloyd's.
Quackenbush came to Lloyd's defense in the Department of Corporations fraud case. Quackenbush wrote a brief favoring Lloyd's. It's rare to have two separate state agencies opposing each other. The Department of Corporations suit was thrown out on a technicality.
In the California Names fraud suit, Quackenbush penned a brief supporting Lloyd's. The California Names lost at the district court level. A 3-judge appellate panel then overturned the lower court's decision. Then an 11-judge appellate panel overruled the 3-judge panel, and Lloyd's was home free again.
Next, the Department of Insurance received $400,000 from Lloyd's and obfuscated the reason for the payment. The Los Angeles Times reported that the payment was covered up as "educational briefings." It was widely believed to be reimbursement for legal work done for Quackenbush's interventions. A federal grand jury in New York probing Lloyd's investigated that $400,000 payment. "The assistant U.S. attorney handed up an indictment proposal to the Department of Justice in Washington," says Peterson. But the document hit Washington right around the time of 9/11, while international factors were in the forefront; the case evanesced. When you fight Lloyd's, you fight the British government, notes Peterson.
But Quackenbush got some nifty trips abroad paid for by Lloyd's and insurance companies, according to the Times.
In 2002, federal and state probers dropped their investigation of Quackenbush. In the end, two people in the case, including one of his close aides, were convicted criminally and a third was hit with a misdemeanor.
In 2003, Quackenbush wistfully told the Insurance Journal that he had trusted that aide because of his record in Pete Wilson's administration.
In 2002 his wife, Chris, told the San Francisco Chronicle that her husband was the victim of a "witch-hunt." At the time, they were in Hawaii and he was not working. "It's very difficult for someone who has been at the top to take an ordinary job," she explained.