Funds Used for Quackenbush Poll, Panel Told

Public funds from a foundation created by California Insurance Commissioner Chuck Quackenbush were spent on a political poll that tested his popularity and that of other state politicians, evidence presented Tuesday to a state Assembly committee shows.

The existence of the $100,000 poll, conducted earlier this year by prominent Republican consultant Joe Shumate, was the most explosive revelation to surface at the opening of three days of hearings that could lead to Quackenbush’s impeachment. The committee is probing his handling of $12.8 million in insurance settlements after the 1994 Northridge earthquake.

Tuesday’s disclosures were the most direct evidence yet that Quackenbush used his office and public funds to conduct political business.

Assemblyman Tom McClintock (R-Northridge) said the testimony revealed an “unfolding picture of a department operating entirely beyond the law that is making up things as they go along.”

The committee also heard testimony Tuesday of repeated involvement by former senior Quackenbush aide George Grays in decisions about spending by the California Research and Assistance Fund (CRAF), one of the presumably independent foundations set up with the insurance company settlements. Grays is scheduled to testify later in the week.

One e-mail presented by the committee Tuesday showed correspondence between Grays and a political consultant that discussed ways to edit public service announcements paid for by the foundation so “Quackenbush screen time is enhanced.”

“It’s a whole web of political back-scratching,” committee Chairman Jack Scott (D-Altadena) said during a break in the proceedings.

And one former Insurance Department staffer testified that she was transferred to a lesser job after pressing for heavy fines against insurers for their handling of Northridge claims. Leone Tiffany said she was surprised to learn later that in lieu of penalties, the department reached settlements with insurers that required them to contribute to the foundations.

Meanwhile, a parade of insurance company executives broke their silence about Quackenbush, the state’s chief insurance regulator, to complain that money they donated to the California Research and Assistance Fund ended up as grants to organizations that had nothing to do with earthquake education or research. The donations were part of the settlements the insurers made with Quackenbush’s department, which had been investigating their handling of Northridge claims.

A State Farm executive said he was “shocked” to find that company donations had been used to fund, among other things, a football camp in Sacramento attended by two Quackenbush children.

“Tackling drills were not the kind of shaking we expected the money to be spent on,” State Farm lawyer Steve Patterson said.

The methodical Assembly Insurance Committee hearings, scheduled to feature 40 witnesses discussing hundreds of pages of evidence, contrasted sharply with the more scattershot approach taken by the Senate Insurance Committee the day before.

Officials said privately that the careful approach is necessary in the event that the evidence they gather is ultimately used to build a case for impeachment. The Assembly is empowered under the California Constitution to impeach state officials for misconduct in office.

Assemblyman Darrell Steinberg (D-Sacramento), one of the chief questioners in Tuesday’s hearing, said it was too soon to discuss impeachment but the committee’s findings “are obviously disturbing.”

For committee members, Steinberg said, the most alarming evidence and testimony centered on the use of foundation money for the political poll conducted by Shumate, who acknowledged that he has been Quackenbush’s paid political consultant for the past 14 years.

Shumate said the poll was commissioned as part of a Quackenbush initiative to determine why minority communities are underserved by the insurance industry.

A transcript of the poll, however, showed that while about half of the questions dealt with insurance issues, the rest were purely political, aimed at gauging the opinions of Asians, Latinos and African Americans regarding both political parties and a few statewide officeholders.

In addition to Quackenbush, the politicians included Democratic Gov. Gray Davis, Atty. Gen. Bill Lockyer, Lt. Gov. Cruz Bustamante and Republican Secretary of State Bill Jones. Paid for by the California Research and Assistance Fund, it was begun in January and concluded in April. Results were turned over to the foundation in May, well after revelations about Quackenbush’s foundations and the spending of those funds had become public.

The most dramatic moments in the hearing came when the committee asked Shumate whose idea it had been to ask political questions in the poll. Surprising committee members, he replied that it had come from State Farm Insurance, which he said had financed the survey.

“So you received instructions on the development of the poll from officials at State Farm?” asked Assemblyman Fred Keeley (D-Boulder Creek) who shared questioning duties with Steinberg.

“State Farm made a donation to CRAF for the express purpose of funding this research component,” Shumate said. “The people who funded the research component asked for a series of questions.”

Keeley interrupted the questioning to request that State Farm officials in the audience be called to testify.

When asked if State Farm had contributed additional money to the foundation to pay for a poll, stunned company officials emphatically insisted that Shumate was wrong.

“Absolutely not,” said Patterson, a company attorney.

“You did not request those questions?” Keeley pressed. “No,” Patterson repeated heatedly.

He said the company had been approached by Grays, asking that it finance the poll, but when State Farm demanded to see a proposal Grays dropped the request.

The company had no interest in making such contributions, Patterson said, because of revelations in the Los Angeles Times about the spending practices of the foundation. “We stayed a good mile from any further donations” beyond the $2 million State Farm had made to the foundation.

State Farm attorney Kenneth Cooley said after the hearing, “I think George Grays was trying to solicit funds. He was running short. He was dialing for dollars. He must have thought we were a soft touch. But we are not.”

Earlier, the Assembly committee had presented Shumate with the e-mails detailing plans by Grays to expand Quackenbush’s screen time in a series of CRAF-funded television spots. The e-mails suggested that Quackenbush could get extra time if footage of earthquake victims was cut. Film of Quackenbush “huddling with minority group leaders” was to be added.

The e-mails stated that Quackenbush would have a chance to quickly review the latest drafts of the script, suggesting that Quackenbush had an active role in the process.

“Does this refresh your memory about any conversations you or any others might have had with the commissioner?” Keeley said.

But Shumate stated again and again that he never spoke with Quackenbush about the commercials, that he spoke only with Grays. He added that it was Grays who approached him about working on the commercials and seemed to be “the contact person for CRAF.”

“I do not remember conversations with anyone except Mr. Grays,” Shumate said.

When Quackenbush testified before the committee in April, he said that he had spoken to Shumate about the ads.

The hearings will continue today.

Questions From the Quackenbush Poll

Public money from a foundation created by state Insurance Commissioner Chuck Quackenbush was used to conduct a political poll testing his popularity and that of other state politicians, according to testimony Tuesday at a state Assembly committee hearing. The $100,000 poll was conducted in April among 1,376 people, mostly minorities. Some of the questions:

* Do you agree or disagree that the Republican Party does a good job representing people like me?

* Do you agree or disagree that the Democratic Party does a good job representing people like me?

* Performance ratings (Excellent, Good, Fair, Poor, Don’t Now/Refused) for:

Gov. Gray Davis

Lt. Gov. Cruz Bustamante

Atty. Gen. Bill Lockyer

Sec. State Bill Jones

Insurance Commssioner Chuck Quackenbush

California Legislature

*

Times staff writer Amy Pyle contributed to this report.