Wilson Signs Bill to Limit Junk Bond Buying by Insurers

Gov. Pete Wilson signed legislation Monday to prevent insurance companies from risking their financial stability by investing heavily in so-called “junk bonds.”

The Republican chief executive, wading through hundreds of bills passed at the end of the legislative session, also has signed measures designed to limit the distribution of tranquilizers and sleeping pills, protect stranded motorists, and punish graffiti vandals.

Over the weekend, Wilson signed a bill to increase civil and criminal penalties for so-called “hate crimes”--acts of violence motivated by prejudice based on race, religion or sexual orientation.

The junk bond bill, by state Sen. Patrick Johnston (D-Stockton), will require insurance companies to limit their investments in high-yield, high-risk junk bonds to no more than 20% of their portfolios. The bill also restricts how much these companies can invest in mortgages and real estate.

The bill was similar to one killed in committee a year ago after a lobbying effort by industry companies, including Executive Life and First Capital, which later were seized by state regulators. Executive Life held 60% of its assets in junk bonds, and First Capital had 40% of its investments in the bonds.

“This bill sends the message that insurance companies cannot treat policyholders’ money as if it goes into their own personal piggy bank from which they can play investment bankers,” Johnston said.

Wilson also signed a measure by Assemblywoman Jackie Speier (D-South San Francisco) to place stricter limits on prescriptions for powerful tranquilizers and sedatives known as benzodiazepines.

This class of drug includes the sleeping pill Halcion, banned last week by Great Britain, as well as the tranquilizers Valium and Xanex. The bill limits prescriptions to a four-month supply instead of six. The bill also will require the prescriber’s personal signature on the prescription rather than a rubber stamp replica.

“Medical studies document that long-term use of benzodiazepines can lead to a dependency that is harder to kick than a cocaine or heroin habit,” Speier said.

Under the stranded motorists bill by Assemblyman Richard Katz (D-Sylmar), tow-truck drivers will have to be certified by the California Highway Patrol and the Department of Motor Vehicles and will be subject to criminal background checks when a city or county hires them by contract. The measure was prompted by “a series of violent crimes” committed on stranded drivers, the governor’s office said.

The graffiti bill makes it a new crime to “write, spray, scratch or otherwise affix” graffiti on another person’s property. Violation can carry a sentence of 48 hours’ public service and a $250 fine.

Wilson also has signed legislation increasing the misdemeanor penalty for hate crimes from six months to one year, and allowing judges to add up to three years to felony sentences for other offenses if the crime was motivated by race, color, religion, ancestry, national origin, disability or sexual orientation.

The bill also removes the cap on punitive damages in civil suits brought by hate-crime victims.

Wilson also signed legislation authorizing the California Department of Food and Agriculture to spend up to $500,000 to begin designing a facility to produce sterile Mexican fruit flies. The sterile flies combat infestation by breeding the flies out of existence.