Quackenbush’s Farewell: $1 Million for Legal Team

In his final days as insurance commissioner, Chuck Quackenbush approved contracts obligating California taxpayers to pay more than $1 million in legal fees to lawyers representing the commissioner and his top staff in investigations of wrongdoing.

The largest contracts provided for payment of up to $700,000 to a team of lawyers that helped Quackenbush defend himself in proceedings that included hearings before the Legislature, an inquiry conducted by the attorney general, a taxpayer lawsuit and a complaint against him pending before the Fair Political Practices Commission, the state board that oversees campaign financing.

Other contracts provided for payment of legal fees of up to $150,000 each for former chief legal counsel Brian Soublet, Chief Deputy Commissioner Michael Kelley and Deputy Commissioner Mark Lowder.

The contracts were authorized under a provision in state law that requires taxpayers to foot the bill for defending government officials who face legal action as a result of decisions they made as part of their official duties.

But some familiar with the law say evidence shows that Quackenbush acted outside his authority while in office, and therefore should not receive taxpayers’ help with legal bills.

Quackenbush left office July 10 after revelations that his department had reached secret settlements requiring insurance companies accused of mishandling Northridge earthquake claims to contribute $12.8 million to foundations he created.

His successor, acting Insurance Commissioner Clark Kelso, accepted the resignations of Kelley, Soublet and Lowder as one of his first actions.

Court documents show that the foundations were used in efforts to enhance Quackenbush’s political image by financing polling and television spots that featured him. They are now the targets of a probe by state Atty. Gen. Bill Lockyer and a criminal investigation by the FBI.

On Tuesday, Lockyer revealed that a federal grand jury is being used in the investigation of the Department of Insurance.

Sacramento criminal defense attorney Don Heller, who represents Quackenbush, said he had expected federal authorities to convene a grand jury to issue subpoenas and question potential witnesses.

He said Quackenbush will seek modifications in the contracts to require the state to also pay for his legal costs in the federal probe.

“In the course of an investigation by state, federal and local agencies, if there are no criminal charges pending, I think there is [a state] responsibility for providing a defense,” he said.

Lockyer, who must give his consent when the state hires private lawyers, agreed in a May 19 letter that Quackenbush and his aides could employ outside counsel for the legislative hearings. He said his office could not represent department officials because it was one of the agencies investigating the commissioner’s activities.

Tony Miller, the Sacramento attorney who filed the complaint against Quackenbush with the FPPC, said it is inappropriate for taxpayers to foot the former commissioner’s legal bills in the FPPC matter and questionable for them to pay in the other proceedings.

“It clearly adds insult to injury here,” Miller said. “It’s appropriate when a public official is clearly acting within his or her authority. . . . But when the official has allegedly acted outside his or her authority, I don’t think the state should be bound to pay for [the] defense.”

Miller alleges in his FPPC complaint that Quackenbush violated state law by accepting large contributions from insurance companies that had matters pending before his department.

Assemblyman Tom McClintock (R-Northridge) said there is something incongruous about state officials asking taxpayers to provide lawyers for an appearance before the Legislature.

“I can’t imagine why any state employee would need representation in a fact-finding hearing before the state Legislature,” he said.

But Heller, who charges the state $325 an hour for his services, said Quackenbush was entitled to have a lawyer provided by the taxpayers because “the conduct occurred in the course and scope of his official duties.”

Another state agency, the Department of General Services, which has responsibility for approving individual contracts, rejected contracts for lawyers to represent Kelley and Soublet.

The department’s chief counsel, Jeff Marschner, said the two contracts, which came to him for approval after Quackenbush left office, were for services not authorized by the attorney general. He said he also thought the new administration at the Department of Insurance should have a chance to review them.

“When you have these contracts coming through for representation of people who were with the prior administration,” he said, “the decision as to whether they are appropriate should be made by somebody who is not an interested party.”

Scott Edelen, a spokesman for the Department of Insurance, said his agency will make sure all expenditures comply with the contracts.