Lawsuit Seeks First Executive Documents

Lawyers at the Center for Public Interest Law in San Francisco on Monday sued California Insurance Commissioner Roxani M. Gillespie, attempting to force her to make public documents relating to a transfer of $45 million from a subsidiary of First Executive Corp. to the parent company in 1989.

First Executive, based in Los Angeles, is a financially troubled life insurance holding company that has taken huge losses because of the declining value of its junk bond portfolio.

The lawsuit was filed on behalf of Joseph M. Belth, a professor of insurance at Indiana University and the editor of Insurance Forum, a muckraking insurance-industry newsletter. The newsletter has reported extensively on First Executive’s troubles.

Belth had written to the state Insurance Department, requesting copies of the records under the California Public Records Act. But Michael Bayless, senior counsel for the department, turned him down. Bayless maintained that the documents are confidential under the state insurance code.

In a telephone interview Monday, Belth noted that the insurance commissioner had to give her consent before the $45 million could be withdrawn from the capital of Executive Life of California, one of the company’s main insurance subsidiaries, and transferred to the parent company. The state regulator must approve such transfers because of the risk that companies might draw so much money out of insurance subsidiaries that policyholders might be at risk.

Belth noted that the transfer was made a few months before First Executive publicly acknowledged that it was experiencing financial difficulties.

Earlier this year, there was considerable concern that Executive Life might be in such bad shape that it could default on life insurance policies and annuities. But regulators and other experts more recently have indicated that, at least for the moment, the subsidiaries appear secure.

Belth said he didn’t have enough information yet to say if the “upstreaming” of the $45 million to the parent might have been improper or suspicious. But he said the public deserves to know why the insurance commissioner permitted the payment. “It’s important that information about upstreaming be in the public domain,” he said.

A First Executive spokesman said the firm wasn’t aware that the lawsuit had been filed. He said he wouldn’t comment on it until the firm has been served with a copy.

Officials at the Insurance Department couldn’t immediately be reached for comment late Monday.

The suit is not the first for Belth. He has also sued First Executive in a state court in New York, attempting to force the New York state Insurance Department to release a report about First Executive by a financial consulting firm. First Executive had referred to the report in its own public documents. It contended that the report gave a glowing review of the company’s prospects and said that it is basically in sound condition.

Belth wants to know if the consultants’ report actually says what First Executive claims it does. Belth won the lawsuit, but First Executive is appealing the decision. Meanwhile, Belth confirms that he has received a copy of the report from a source other than First Executive. He refused to discuss its contents, saying that he will be reporting on it shortly in his newsletter.