Lockyer Subpoenas Records of Quackenbush Foundations

Accelerating his investigation of Insurance Commissioner Chuck Quackenbush, California’s attorney general has issued subpoenas to the managers of nonprofit foundations that Quackenbush created and to executives of companies that did business with them.

Atty. Gen. Bill Lockyer ordered the members of the foundations’ boards of directors to produce extensive financial documents showing how they spent millions of dollars collected from insurance companies. The money was intended to benefit earthquake victims and consumers.

Among those slated to get subpoenas were members of the boards of directors of the California Research and Assistance Fund, the California Insurance Education Project and the Title and Escrow Consumer Education and Outreach Corp.

A spokesman for Lockyer declined to comment, citing the pending investigation.

Richard Martland, an attorney for the education project, confirmed that his board has been asked to appear at the attorney general’s office and produce all corporate documents. Board members include former California Health and Welfare Secretary Sandra Smoley and former state Sen. Lucy Killea, a Democrat from San Diego.

“It’s a straightforward corporation,” Martland said. “We’re really not too concerned about the subpoenas.”

While Lockyer is examining all three foundations, the primary focus of his investigation is the research and assistance fund, a nonprofit organization that Quackenbush created with $11.5 million in contributions from the insurance industry.

As overseer of the state’s charitable trusts, Lockyer is examining the foundation to determine if it spent the money entrusted to it as its charter directed. He also is trying to determine if the foundations were operated independent of the insurance commissioner’s office.

Insurance companies were directed to make contributions to the research and assistance fund as part of a settlement they reached with Quackenbush after his investigators reviewed Northridge earthquake claims and found hundreds had been mishandled.

In news releases he issued announcing the settlement, Quackenbush said the foundation would provide education on earthquake safety and preparedness and offer restitution to Northridge victims who had not been fully compensated for their losses.

But an accounting provided by its attorneys has shown that so far $3 million has been spent on public service television spots featuring Quackenbush and nothing has gone to earthquake victims.

Another $500,000 was contributed to a building fund at the Greater Sacramento Urban League. Quackenbush sits on the league’s board of directors.

In an interview, Quackenbush insisted that he was not involved in the decisions to create the ads or contribute to the league.

Lockyer has issued subpoenas to the three consultants who created the ads and shared a $445,000 fee from the foundation. All three--GOP political consultant Joe Shumate, media consultant Don Sipple and media buyer David Bienstock--worked on Quackenbush’s 1994 and 1998 election campaigns. They have said they were paid the standard industry fee for their work.

Deputy Insurance Commissioner George Grays resigned Friday after several organizations that had sought grants from the foundation said their requests were routed through him.