State Insurance Dept. Reinstates Whistle-Blower

Whistle-blower Cindy Ossias, whose disclosure of confidential documents and explosive testimony contributed to the downfall of former state Insurance Commissioner Chuck Quackenbush, will be reinstated in her job as a lawyer in the Department of Insurance.

Ossias said she was notified Friday by her immediate supervisor that he expects her to report to work at the department’s legal division in San Francisco on Monday, seven weeks after Quackenbush put her on administrative leave for leaking documents.

“I am relieved,” she said in an interview. “I’m not sure this is going to be the end of it, but certainly I’m relieved that I’m going back to work in some capacity.”

Steven J. Green, acting chief counsel for the department, confirmed that Ossias is being reinstated and that no further disciplinary action against her is contemplated by his department.

Assembly Insurance Committee Chairman Jack Scott (D-Altadena) said he is pleased with the decision: “I felt that Cindy Ossias displayed an uncommon amount of bravery in revealing what she thought was gross misconduct.”

Assemblyman Fred Keeley (D-Boulder Creek), a member of Scott’s committee, concurred, saying Ossias “performed a valuable and important public service.”

Ossias, 49, emerged in late June as the whistle-blower who had leaked documents that launched a legislative investigation of Quackenbush for agreements he reached with insurance companies accused of mishandling Northridge earthquake claims.

Her role was uncovered by the California Highway Patrol, which has jurisdiction over state property, in an investigation requested by Quackenbush. The commissioner was trying to determine who gave lawmakers copies of the secret agreements and confidential studies of how four insurance companies handled Northridge claims.

Investigators reported to Quackenbush that during their questioning of his employees, Ossias admitted she had provided the documents, believing that it was the only way to expose what she viewed as egregious wrongdoing.

The former commissioner reacted swiftly, placing her on administrative leave and announcing that the department was considering other “appropriate action, including dismissal.”

The documents she leaked showed that Quackenbush agreed to allow insurance companies to make contributions to nonprofit foundations he created, rather than pay fines for mishandling claims. Evidence gathered by the Assembly Insurance Committee revealed that funds from one of the foundations were used to purchase television spots designed to enhance Quackenbush’s political image.

In testimony before lawmakers, Ossias said that she and other insurance department lawyers had been ordered to shred documents containing their recommendations for fines against the companies. Two days after the hearing, Quackenbush announced he was resigning effective July 10.

Although Green would not say why the department decided to reinstate Ossias, Acting Insurance Commissioner Clark Kelso gave lawmakers some insight into his decision-making during a hearing last week.

Kelso told the state Senate Insurance Committee that California employees who witness wrongdoing rarely know what steps they can safely take to expose it.

“Most state employees do not have a clear sense of where they can safely go,” he said. “I think there is confusion about what the right thing to do is. . . . Often they are alone, scared.”

It is against California law to disclose confidential state documents. Whistle-blowers who release information to expose wrongdoing are protected from prosecution, but only when the information is taken to the attorney general or the state auditor. Ossias gave documents to the Legislature.

Keeley said a legislative report soon to be released will make recommendations to beef up whistle-blower laws. “It is incumbent on the Legislature to be certain that people who find themselves needing to expose wrongdoing have avenues for performing that public service without fear of losing their jobs,” he said.

Ossias said she considers herself “lucky” to be getting a job back because she knows “whistle-blowers generally are not so fortunate.”

“And I’m trusting that I will be given work and that I will not be stuck in some office doing busywork,” she said. “I have knowledge, experience and skills that the state can use.”

Green said Ossias’ assignment will be determined by her supervisor but “she will not be doing just busywork.”

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Times staff writer Carl Ingram contributed to this story.