The state Assembly is poised to give final legislative approval to a measure by Democrats that would force Republican Insurance Commissioner Chuck Quackenbush to seek Senate confirmation of a key appointment.
The bill, which passed the Senate on a strictly partisan 23-14 vote Thursday, would give lawmakers veto power over the commissioner's authority to name the head of the conservation and liquidation office, an arm of the department that oversees insolvent insurance companies.
Quackenbush has been criticized in recent weeks for allowing William W. Palmer, who heads that office, to simultaneously hold additional positions in the department and operate a private law practice.
Although Palmer, who earns more than $200,000 a year, is paid out of the assets of failed insurance companies, he also is Quackenbush's chief of staff and his legal advisor, and he coordinates the recovery of insurance benefits for Holocaust victims.
Just before Thursday's vote, Quackenbush's office distributed a memorandum to lawmakers objecting to the measure on the grounds that it is unnecessary.
"The conservation and liquidation office is doing a great job," said Steve Suchil, chief of Quackenbush's legislative bureau. "All of our activities are subject to court review and approval, and our books are examined by the courts."
Under Quackenbush, he said, the office has returned more than $720 million to policyholders of defunct insurance companies.
But Sen. Patrick Johnston (D-Stockton), who shepherded the bill by Assemblyman Jack Scott (D-Altadena) through the Senate, said it is improper to use the assets of failed insurance companies to pay a high salary to an official who divides his time among other jobs.
He said Senate confirmation is the best way for lawmakers to monitor appointments and ensure that the director of the office "meets the high standard . . . of a public official."
Senate Insurance Committee Chairwoman Jackie Speier (D-Daly City) said it is a conflict of interest for Palmer to hold other jobs in the insurance commissioner's office and operate a private law practice.
Court records show that Palmer, acting as a private lawyer, represents clients in a lawsuit against Berkshire Hathaway Inc., a conglomerate that owns insurance companies regulated by the insurance commissioner's office.
State records show that over the past several years, Palmer has attempted to recover the assets of stockholders who owned shares of Blue Chip Stamp Co., a trading stamp company that merged with Berkshire Hathaway in 1983.
At the time of the merger, Blue Chip stockholders were told to exchange that stock for shares in Berkshire Hathaway. But hundreds of shareholders never got the notification, and their stock was eventually turned over to the state.
Palmer attempted to recover their assets and in 1996 reported on his state disclosure forms that he had earned at least $200,000 in fees for his private services.
In an interview last week, Palmer said he sought legal advice from several experts on state ethics laws, and they assured him that it was not a conflict of interest for him to have a private law practice.
He said that while he intends to continue to oversee the Holocaust project and provide Quackenbush legal advice, he has asked the commissioner to find a replacement for him as chief of staff.
"I want to be done with that job, [but] I don't intend just to abruptly leave [Quackenbush]. He has been a mentor to me," Palmer said.
He said he has been disappointed by the legislators' criticism and feels it is unfair because he has devoted many unpaid hours to state service. "I'm tired and I feel like I've been abused," he said.