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Calif. Insurance Probe Targets Leak

June 23, 2000

SACRAMENTO, Calif. (AP) _ An employee in Insurance Commissioner Chuck Quackenbush’s office disclosed hundreds of pages of confidential audits to an Assembly committee probing alleged wrongdoing by the commissioner, authorities said Thursday.

An Assembly spokesman described the disclosure as the act of a whistleblower outraged by insurers’ excesses. The Republican Quackenbush’s aides said it was illegal and demonstrated the political nature of the investigation targeting him. Quackenbush has asked the California Highway Patrol to investigate the disclosure.

Cindy Ossias, a lawyer in the Insurance Department’s San Francisco office, acknowledged to state investigators her role in releasing the audits earlier this year, authorities said.

The audits are a critical piece of the political scandal enfolding Quackenbush. They detail alleged violations by insurance companies following the 1994 Los Angeles earthquake, including delaying payments to customers with quake-related claims, providing inaccurate information and low-balling claims.

The insurance companies could have been forced to pay up to $3.7 billion for more than 2,500 violations. Instead, Quackenbush instead allowed a half-dozen companies to resolve the matter by donating $12.45 million to a nonprofit fund he created.

Quackenbush said the fund, called the California Research and Assistance Fund, was intended to help consumers with quake claims and avoid years of litigation with insurers. But instead, millions of dollars were spent on television advertising featuring the commissioner, and other money was donated to groups with no connection to quake issues.

More than $6 million in CRAF’s assets have been frozen by a Superior Court judge pending further investigation.

The audit documents, called market conduct exams, are protected by law from disclosure, but no charges have been filed in the case and it was not clear who has the documents now.

The CHP’s probe is continuing, and several other employees are under investigation in connection, Quackenbush spokesman Dan Edwards said.

Edwards described the disclosure as theft and a violation of law solicited by a Democrat-controlled committee.

``It was a very orchestrated conspiracy to solicit stolen documents from the department staff and then cover up possession of those documents,″ Edwards said.

But a spokesman for Assemblyman Jack Scott, a Democrat from Pasadena, said the employee disclosed the documents for the public good.

``Our understanding is that the person in question felt that there were things going on in the Department of Insurance that were not right and felt an obligation to have those things come to light,″ said spokesman Rich Zeiger.

CRAF was the largest of several funds authorized by the commissioner that were bankrolled by settlements with insurers.

Committees in the Assembly and Senate are investigating the commissioner and the funds. The state attorney general’s office and the Fair Political Practices Commission also are investigating.

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