6 Key Quackenbush Managers Resign in Shake-Up

California Insurance Commissioner Chuck Quackenbush’s inner management circle resigned en masse Thursday, as a new leadership team moved to reorganize the Department of Insurance and remove the taint of scandal from its operations.

On his first day in office, newly appointed chief deputy commissioner Clark Kelso asked for and received the resignations of six of Quackenbush’s key deputies, including several who were forced to testify before Senate and Assembly investigative committees last month.

“My goal is simply to establish new leadership and to keep the department fulfilling its important role in protecting and serving consumers and regulating the insurance industry,” Kelso said in a statement.

Submitting resignations were Chief Deputy Commissioner Michael Kelley, Chief Counsel Brian Soublet and deputy commissioners David Langenbacher, Mark Lowder, Steve Suchil and Jim Dong.

All six will move to lower-level positions in the state civil service system, but most will remain employed at the Department of Insurance.

Kelso did not say if he contemplated any disciplinary action against any of Quackenbush’s top staff, most of whom were involved in the administrative actions that ultimately toppled the commissioner.

“He [Kelso] did precisely the right thing,” said Senate Insurance Committee Chairwoman Jackie Speier (D-Hillsborough). “The culture in the Department of Insurance has got to change. The ethics in the department has got to change. The only way you can make a clear statement on that is to clean house.”

But she said she was disturbed that most of the deputies would “get two bites at the apple” because they would be allowed to remain in the department in lesser positions. She said she hoped Kelso would consider disciplinary action against those who took part in the activities that led to Quackenbush’s downfall.

It was revealed during the committee hearings that insurance companies accused of mishandling Northridge earthquake claims had been allowed to avoid fines when they agreed to settlements with the department. As part of the settlements, they were required to contribute to nonprofit foundations created by Quackenbush.

The settlements were negotiated by Quackenbush’s top staff, which at one point displayed mock-ups of fake news stories to pressure the companies to reach agreements. The phony stories, purporting to show what the companies could expect if they did not cooperate, reported that Quackenbush planned to publicize confidential surveys on the handling of Northridge claims by major insurers.

Testimony before the committees showed that the foundations were used to finance a television advertising campaign featuring Quackenbush, political polling and grants to charities, some of which had ties to the commissioner.

Kelso, who will become acting insurance commissioner Monday when Quackenbush steps down from the top post, said he expects to appoint a new corps of interim deputy commissioners “in the next several days.” He did make one appointment Thursday, naming Deputy Atty. Gen. Steven J. Green to serve as his acting chief counsel.

The deputies who submitted resignations could not be reached for comment, but Langenbacher, in an e-mail to his staff, said: “I intend to continue employment with the department and am looking forward to working with you in whatever capacity I find myself.”