Memos Link Quackenbush to Money Plans

Handwritten notes from a Sacramento political consultant indicate that California Insurance Commissioner Chuck Quackenbush may have been involved directly in plans to spend money from insurance company settlements as early as September 1999.

Quackenbush has consistently denied any direct knowledge of or involvement in foundations he set up with $12.8 million collected from insurers in lieu of penalties for their handling of Northridge earthquake claims. But he is repeatedly mentioned in the memos, written between March and December 1999.

The notes were written by Martin Wilson, managing director of Public Strategies Inc., which ultimately received $375,000 from one of the foundations to conduct a political poll of minorities.

One dated Sept. 29, 1999, notes that Quackenbush would contact insurance companies to seek money for a project being pushed by Wilson to expand insurance coverage in minority areas and enhance the commissioner’s image.

“Chuck to ask co’s,” Wilson’s note says. The documents, obtained by The Times, could figure prominently in a hearing Monday before a state Assembly committee investigating Quackenbush’s handling of his settlements with the insurance companies.

Also on Thursday, state Atty. Gen. Bill Lockyer filed a motion in state court detailing dozens of irregularities--including a $30,000 forged check and faked meeting minutes--in the way one of the controversial foundations was operated. The foundation, California Research and Assistance Fund, is the same one involved in the Public Strategies contract.

Despite mounting pressure to resign from members of his own political party, Republican Quackenbush said Thursday through a spokesman that he will testify as scheduled at the hearing Monday.

George Grays, a deputy insurance commissioner until he resigned in April, is also scheduled to testify Monday. Unless he wins some form of immunity, legislative sources say, he is expected to take the 5th Amendment to avoid self-incrimination.

Referring to the Wilson notes, Deputy Insurance Commissioner Dan Edwards said any suggestion that the commissioner had a role in the planning of the Public Strategies project is incorrect.

“I don’t believe Chuck to have been intimately involved in this program at any time,” he said. “A lot of people talk about Quackenbush this, and Quackenbush that, just because they want to invoke his name to push their project along.”

A source knowledgeable about the documents and the project said Wilson never discussed the proposal with Quackenbush. The source said Wilson’s memo outlining the commissioner’s role was based on information provided by Joe Shumate, an advisor to Quackenbush during his 1998 reelection campaign and a participant in the project.

Shumate was on vacation and could not be reached for comment.

One set of notes dated May 26, 1999, says that Shumate is “to meet with Quackenbush next week.” It also observes that the key to winning approval for the proposal is “to get Quack pumped up on project.”

In addition to the handwritten notes, Wilson wrote memos that outlined an “information, education and outreach campaign” aimed at minority communities in Southern California that would be financed with state money and contributions from insurance companies.

Several of the memos were addressed to Grays. “I am grateful for your input,” says a June 15, 1999, memo to Grays from Jonathan Wilcox, one of the partners in the project. “I know we have made significant strides toward the development and delivery of an outstanding public benefit for the commissioner.”

A source knowledgeable about the memos said Wilson did not know about the existence of the foundations until he was told in the fall of 1999 that a portion of his project had been approved and would be paid for by the foundation.

Edwards said officials in the Department of Insurance were told about the project by Grays and were led to believe it had been approved by the foundation’s board of directors.

Testimony before the legislative committees last week revealed, however, that the board of directors never met during 1999 to approve any projects.

In his filing on Thursday, Lockyer asked a Sacramento court to bar the foundation from spending any more money. Lockyer said directors of the foundation “ceded” control to Grays, who wastefully diverted its assets.

He said Grays paid premium prices for television commercials that featured the commissioner and were produced by political consultants with close ties to Quackenbush.

The directors of the foundation, Lockyer said, breached their responsibility by “diverting and wasting charitable assets” through contracts with consultants whose charges “were neither fair nor reasonable.” None of the contracts, the attorney general noted, were submitted for competitive bidding.

To cover up the wild spending by the foundation, Lockyer said, board members created false meeting notes and postdated documents.

A sworn affidavit submitted by a handwriting expert concluded that a $30,000 check written to a Sacramento football camp attended by Quackenbush children and signed in the name of foundation board member Ron Weekley was a forgery. However, the expert said an $18,000 check written by Weekley to his own private company appeared to be authentic.

Lockyer filed a 6-inch-high stack of court documents to support his request that an injunction issued last month to freeze the remaining assets of the foundation be continued. A hearing on that request is scheduled June 21.

The attorney general, who oversees charitable trusts in California, is seeking ultimately to have the foundation dissolved.

Lockyer said its remaining assets include $6 million for restitution to earthquake victims that he feared would also be wasted if the injunction is lifted.

A plan for distributing the money--highly praised by Quackenbush and already approved by the board--is “seriously flawed,” he said.