Republicans Say Quackenbush Is Losing Support

As explosive new revelations surfaced before the state Assembly Insurance Committee on Thursday, Republican leaders said pressure is mounting for them to ask Insurance Commissioner Chuck Quackenbush to resign.

“We have advised those close to Quackenbush that support for him is eroding--eroding rapidly,” said one senior Republican official.

On the third day of hearings into the commissioner’s actions, one witness took the 5th Amendment to avoid self-incrimination and another said she did not recall writing hundreds of thousands of dollars in checks that bore her name.

And in what could be a new blow to the commissioner, sources said one of his former senior deputies, George Grays, has agreed to cooperate in an investigation of the Department of Insurance by the California attorney general.

Quackenbush, who has more than two years left on his term, is reported by friends to be “very depressed” by the wave of testimony connecting him to controversial foundations set up with insurance company settlements related to mishandled Northridge earthquake claims.

A longtime Quackenbush political consultant testified Thursday that he warned the commissioner as early as last fall about serious problems with one foundation, including “unconscionable costs” run up by Grays.

“I was quite vociferous in asking that Mr. Grays be terminated,” said David Bienstock, a consultant who specializes in placing television ads for political candidates.

Neither Grays nor his attorney, Ed Swanson, could be reached for comment.

Insurance Committee Chairman Jack Scott (D-Altadena) said the testimony before his panel has produced revelations that seem more disturbing day by day, but he will refrain from rushing to the judgment that Quackenbush should be impeached.

He said, however, that his committee may “make recommendations” to the Assembly Judiciary Committee, which would draft articles of impeachment if the lower house were to take such action.

Despite the Republican commissioner’s claim that he is the victim of a Democratic “witch hunt,” few members of his own party have stood up to defend him. Republican Assemblymen Tom McClintock (D-Northridge), Dave Cox (R-Fair Oaks) and Rico Oller (R-San Andreas) have been some of the toughest questioners at the Assembly hearings.

Of the Legislature’s two main Republican leaders, Sen. Jim Brulte of Rancho Cucamonga appears most ready to engage Quackenbush in a discussion about possible resignation. He said he and Scott Baugh of Huntington Beach, leader of the Assembly’s Republicans, met Thursday to discuss the Quackenbush case but had not yet committed to confronting the commissioner.

Meanwhile, Quackenbush has been calling legislators to gauge his standing. One who received a call this week said the commissioner sounded nervous and depressed.

“The hardest choice for a politician is deciding when to go and when to stay,” said Assemblyman Bill Leonard (R-San Bernardino), who like other lawmakers and legislative staffers had his office television tuned to the hearings Thursday.

Most disturbing in Thursday’s proceedings, Scott said, was the testimony of Kimberly Brockman, former board president of the main Quackenbush foundation, the California Research and Assistance Fund, who said the handwriting on four checks bearing her name was not hers and appeared to be that of Grays. The checks included $117,000 in donations to a football camp attended by Quackenbush children.

“I think she’s very credible,” Scott said.

Brockman, who described herself as a close friend of Grays, said the former Quackenbush deputy had tried at one point to persuade her that they had had a meeting at which she had signed four blank checks for him.

“I don’t recall the meeting,” she said.

Brockman said she resigned from the board in January because “I had begun to get just a bad feeling in my stomach” about the spending practices of the foundation that Grays had appointed her to head.

The committee’s investigation has focused primarily on the foundations created by Quackenbush with $12.8 million in settlements with the major insurers that paid claims after the Northridge earthquake. Quackenbush has testified that they operated independent of his office, but documents and testimony presented during the hearings has provided evidence that California Research and Assistance Fund was run by Grays.

Eric Givens, the secretary of the foundation’s board, told the committee that he did not attend a single board meeting in 1999, but that Grays presented him with fake minutes that showed meetings had occurred. He said he signed one set of minutes but refused to sign any more.

Another board member, Ron Weekley, declined to testify “based upon my 5th Amendment privileges.”

Weekley, whose business, Community Connections, received an $18,000 grant from California Research and Assistance Fund, said he would “very much like to cooperate” with the committee but had been advised by his attorney not to testify.

He noted that he is already a defendant in a civil lawsuit filed against the foundation by state Atty. Gen. Bill Lockyer.

“I believe I have always acted in good faith and come before you with a clean conscience,” he said. “However, serious charges have been leveled--I think unfairly--against me in a civil action and we have heard that a criminal investigation may be underway.”

Bienstock said last fall he warned Quackenbush that Grays’ behavior might lead to such investigations and “potentially put the commissioner in jeopardy.”

He said Quackenbush listened without comment to his warnings and then months later dispatched his chief deputy, Michael Kelley, to meet with Bienstock in Los Angeles and get more details.

During a three-hour meeting, said Bienstock, he told Kelley he had learned the foundation had agreed to spend $500,000 for the production of an earthquake preparedness spot featuring Quackenbush and Los Angeles Laker Shaquille O’Neal.

“I thought the costs were unconscionable for the work product that was being delineated,” he said, adding that a spot of that length usually costs between $25,000 and $40,000.

He said Kelley promised to conduct an investigation but he never heard more from him.

Kelley, who had already testified before the committee, was summoned to reappear, and this time the committee required him to testify under oath.

Kelley said he had only a vague recollection of the meeting with Bienstock, but the thing he remembered most vividly was that the consultant had paid for their lunch with a black American Express card.

He said he only reported back to the commissioner that Bienstock was “quite vexed with George Grays over some kind of video.”

Elise Kim, whose firm, Strategi LLC produced the video, insisted to the committee Thursday that the costs were not out of line.

But Kim acknowledged that it was her longtime friend Grays who arranged for her a $1.1-million contract with the foundation, and had approved grants of $190,000 and $45,000 for two nonprofit organizations she operates.

Under questioning, she conceded that she had never been required to make applications for the grants.

“You didn’t make formal application?” Scott asked incredulously.

“No, we spoke to him [Grays],” said Kim.

As the drama played out in the Legislature, ghostly silence prevailed Thursday on the 17th floor of the Sacramento office tower housing the top managers of the California Department of Insurance.

“With 22 subpoenas coming into our office,” said deputy press secretary Scott Edelen, “most of our people are over at the Capitol.”

Standing below a large framed photo of a smiling Quackenbush, Edelen said he, like most department employees, hasn’t let the unfolding investigation of his boss distract him from work. That afternoon he finished writing three press releases about the arraignments of insurance scam suspects.

“I’m a state employee and there are 1,200 employees in the department,” he said. “We all have our jobs to do regardless of what goes on down the street.”

At the department’s license bureau next door, a worker at the public counter threw up his hands when asked about the Quackenbush hearings.

“I don’t get involved in politics,” said the man.

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Contributing to this story were Times Sacramento Bureau Chief Rone Tempest and Times staff writers Dan Morain, Nancy Vogel and Jenifer Warren.

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Questions About Checks

These checks were written on accounts controlled by a foundation created by state Insurance Commissioner Chuck Quackenbush. They are signed in the names of two foundation board members who went before the state Assembly Thursday: Kimberly Brockman, who said she did not recall signing four checks bearing her name, and Ron Weekley, who took the 5th Amendment.