Funds Went to Host of Non-Quake Purposes

The first full accounting of expenditures from a controversial earthquake research foundation set up by Insurance Commissioner Chuck Quackenbush shows hundreds of thousands of dollars spent on social service groups, minority community projects and athletic programs in Northern California, including a football camp attended by two Quackenbush children, records obtained by The Times reveal.

The payment of $263,000 to Skillz Athletics Foundation, a football scouting and training program, came from the $11.6-million California Research and Development Foundation created by Quackenbush with insurance company settlements he negotiated after the Northridge earthquake. None of the money obtained in the settlement has reached victims of the 1994 quake.

Other expenditures detailed in the records include an $18,000 payment to a company operated by a foundation board member, a $100,000 consulting fee to Quackenbush’s chief political advisor, $200,000 to a chapter of the 100 Black Men social service organization, $10,000 to the Black Film Makers Assn., and $45,000 to an organization that teaches children to use the 911 emergency telephone number.

None of these activities were mentioned in the Department of Insurance announcements about the creation of the fund. It was established with $11.6 million in “voluntary donations” obtained by Quackenbush in lieu of massive fines and other penalties against insurers that the department found had mishandled claims from the 1994 Northridge earthquake.

The expenditures are in addition to previously reported payments of $500,000 from the fund to the Sacramento Urban League and more than $4 million for television public service spots featuring Quackenbush, including one in which he poses as an NBA referee with Laker star Shaquille O’Neal.

The list shows that about half the foundation’s funds have been exhausted; $6 million, set aside as restitution for Northridge earthquake victims, remains undistributed.

In a letter obtained Monday by The Times, Quackenbush defended the non-earthquake expenditures as part of an “outreach to minority communities that have been historically underserved by the insurance industry.”

Representatives of insurance companies, however, contend that the expenditures are not consistent with verbal and written agreements they received from the insurance department that the Northridge settlement money would be used for earthquake research.

“It’s very disappointing,” said William Sirola, a spokesman for State Farm Insurance Co., which contributed $2 million to the fund.

“It was our understanding,” he said, “based on our letter of agreement, that the funding was primarily for scientific research and the development of good scientific information for assessing residential earthquake damage. That research has considerable public value.”

State Assembly Insurance Committee Chairman Jack Scott (D-Altadena), who has scheduled a hearing for Thursday to examine how well the Republican commissioner policed the handling of insurance claims after Northridge, said he found it shocking that earthquake victims have not yet received any of the funds.

“Where is the Northridge earthquake in this?” he asked. “This foundation takes the place of a regulatory scheme designed to protect the consumer. As far as I know, not one victim has benefited from this fund.”

Deputy Insurance Commissioner Dan Edwards, a spokesman for Quackenbush, said the remaining $6 million will go to victims of the Northridge earthquake whose damaged property was uninsured or underinsured.

He denied that any of the expenditures have violated the agreements with insurers.

“The conversations and discussions made it very clear to all parties that . . . ultimately all [expenditure] decisions would rest with the foundation’s board of directors,” he said.

A letter accompanying an agreement with Allstate Insurance, however, advised the company that its $2-million contribution would go for a “humanitarian public earthquake study and education fund.”

Besides the Assembly hearing, three other state offices are investigating Quackenbush’s actions: the Senate Insurance Committee, the Fair Political Practices Commission and state Atty. Gen. Bill Lockyer, who has jurisdiction over charitable foundations.

Lawyers for the research foundation have declined to make its expenditures public, citing the attorney general’s investigation. But in a letter to the fund’s board of directors, Quackenbush said he had pieced together a listing of the expenditures and found them “to be legal, appropriate and necessary to carry out the fund’s mission.”

Money Went to Political Figures

The listing included $400,000 spent on a project called PACE--Protection, Advice and Coverage for Everyone--managed by Marty Wilson, a consultant who was a member of former Republican Gov. Pete Wilson’s political team. The project is designed to provide education on insurance products and services to underserved communities in California.

A breakdown provided by a source with intimate knowledge of the project said $100,000 of the money went to Marty Wilson’s company, Public Strategies Inc., and another $100,000 was paid to Joe Shumate and Associates, Quackenbush’s political advisor who was a subcontractor on the PACE program.

Shumate also collected a $175,000 fee for his work in producing the public service spots featuring the commissioner.

In an interview, he said his fee was standard for the industry. “I believe I fully earned my money,” he said.

The project paid smaller amounts to nine other businesses specializing in work with minorities and based mostly in Los Angeles. The source pointed out that several of those companies had a track record of working with Democratic causes.

Nearly half of the non-earthquake expenditures by the fund were made to organizations in Sacramento, including $25,000 to the Meadowview Community Assn., a neighborhood group, and $18,000 to Community Connection, an organization managed by Ron Weekley, a member of the fund’s board of directors.

Most of the grants distributed by the fund went to organizations that served three communities: Los Angeles, Oakland and Sacramento.

In Los Angeles, $12,000 went to the National Latino Peace Officers Assn., $70,000 to Athletes and Entertainers for Kids, a group that helps at-risk children, and $10,000 to the 2nd District Education and Policy Foundation, a program supported by Los Angeles County Supervisor Yvonne Brathwaite Burke.

Contributions to Oakland organizations included $100,000 to Freedom Fund, a nonprofit community development corporation, and $40,000 to the Oakland Mentoring Center, which provides mentoring for troubled youths.

B.T. Thompson, president of Skillz Athletics Foundation, the Sacramento-based group that received the $263,000 grant from the foundation, could not be reached for comment Monday.

In his letter, Quackenbush listed Skillz Athletics as an organization “helping ‘at-risk’ youth by providing recreation programs, counseling and mentoring.”

However, the Web site operated by the organization (www.gtskillz.com) presents itself as a football scouting and training program to connect athletes with college football recruiters.

“Skillz scouting is in business to guide student athletes through the process of obtaining a college scholarship,” the Web site states. The site lists players from Sacramento-area high schools it has placed at universities in California, Stanford, Wyoming and Hawaii. It mentions nothing about programs or policies for minority or “at-risk” players.

A spokesman for the commissioner said two of Quackenbush’s children had attended the camp and paid the full fees for the program. He said the commissioner was not involved nor aware of the decision to contribute to the camp.

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Where the Money Went

The $11.6-million California Research and Development Foundation was created by state Insurance Commissioner Chuck Quackenbush with money from insurance companies, in lieu of penalties for their handling of claims related to the Northridge earthquake.

Expenditures: $5.6 million

spots featuring Quackenbush: $3 million

“Quake Ready” program including children’s Web site and TV spots featuring Shaquille O’Neal and Quackenbush: $1 million

Sacramento Urban League: $500,000

PACE minority outreach program: $400,000

Skillz Athletics Foundation (football camp): $263,000

100 Black Men organization: $200,000

Freedom Fund for community development: $100,000

Athletes and Entertainers for Kids: $70,000

911 4 Kids: $45,000

Oakland Mentoring Center: $40,000

Meadowview Community Assn., Sacramento: $25,000

Community Connections: $18,000

National Latino Peace Officers Assn.: $12,000

Black Film Makers Assn.: $10,000

2nd District Education and Policy Foundation (L.A.): $10,000

Northern California Reinvestment Consortium: $10,000

*

Remaining: $6 million

For Northridge earthquake victims whose damaged property was uninsured or underinsured.