Wilson Vetoes Funds to Fight Insurance Fraud

In a surprise move, Gov. Pete Wilson on Wednesday vetoed $11.5 million sought by Insurance Commissioner John Garamendi to increase the investigation and prosecution of fraud involving injured workers and auto insurance.

Wilson, who has championed reform of the costly and inefficient workers’ compensation system, noted in a budget veto message that fraud is “one of the most significant elements driving the growing costs” of the system.

But he charged that Garamendi, an independently elected official, had failed to “verify the effectiveness” of his current anti-fraud efforts and did not document the need for hiring additional investigators.

Officials of the Department of Insurance voiced surprise, noting that a special panel of workers’ comp insurance experts appointed by Wilson had recommended beefing up the anti-fraud budget.

Anti-fraud investigations and prosecutions by agents of the department and local district attorneys are financed by fees paid by California employers and cannot be used for general operations of the state government.

“This couldn’t have caught us more by surprise,” said Garamendi spokesman William Schultz. “What this means is (that) the department will collect $10 million in revenue that the governor is preventing us from spending to fight fraud.”

The governor said he would support expanded anti-fraud activities, but he said the department first must demonstrate that “the benefits to California employers exceed the costs of the program.”

Likewise, in support of expanded auto insurance fraud actions, Wilson said Garamendi must clearly outline how he intends to spend the funds and must be “accountable for the effectiveness of such efforts.”

Overall, the governor, who has tangled with Garamendi for the past year over Proposition 103 automobile insurance rebates to motorists, vetoed nearly $20.9 million from the budget of the Department of Insurance.