State Threatens to Sue Ousted Insurance Exec

State Insurance Commissioner Chuck Quackenbush on Monday threatened to sue ousted Golden Eagle Insurance owner John Mabee to recover $69 million in personal unsecured loans the company made to him before its Jan. 31 takeover by state regulators.

The demand is part of Quackenbush’s effort to turn up the heat on Mabee, who was ousted by regulators when the state assumed control of Golden Eagle, the state’s third-largest workers’ compensation insurer. At the time, state officials alleged that Mabee had improperly drained cash out of the company by means of the unsecured loans, some of which date back to the 1980s and none of which has been repaid.

At a news conference here Monday, Quackenbush said Mabee had stepped up his “improper” actions as the state was closing in, loaning himself $2 million on Dec. 31 after the state had instructed him not to make any more loans without prior approval.

An unidentified executive at Golden Eagle also wrote a $300,000 check to the law firm of Baker & McKenzie, several hours after the insurance firm had technically been taken over by the state, Quackenbush said. The commissioner has since asked the law firm to return the money.

Baker & McKenzie attorney Don McGrath said Monday that the $300,000 was a retainer paid by the company in connection with Mabee’s request in mid-January for representation in his and the company’s fight with the commissioner.

When the check arrived, “I had no notice of . . . any orders which would prevent me from taking a retainer from a client,” McGrath said, adding that he has since been negotiating a return of the unearned portion of the retainer to the state.

About a dozen insurance companies have expressed interest in buying Golden Eagle in a sealed-bid auction that will close April 4. The company, which has about 1,400 employees in San Diego, has 100,000 policyholders, mostly in California.

Mabee, a successful horse breeder in San Diego, has insisted that the takeover was politically motivated and says he will fight the seizure in court. In a statement issued Monday, he said that as the company’s sole shareholder, “all assets belonged to him and were his to deal with.” He said that at no time “did any of his actions jeopardize” the company’s resources.