Quackenbush in Talks That Point to Resignation

Attorneys representing California Insurance Commissioner Chuck Quackenbush on Tuesday entered talks expected to lead to his resignation and an end to the widening investigation of his actions, legislative sources said.

Top state officials said Quackenbush could quit as early as today. A source close to the talks said the parties were “very close” to a deal Tuesday night.

Quackenbush himself has not commented.

Donald Heller, the commissioner’s main attorney, who is leading the talks on his behalf, declined to discuss the latest turn of events, saying, “I’m not going to comment on anything relating to Commissioner Quackenbush at this time.”

Other sources said Senate Republican Leader Jim Brulte of Rancho Cucamonga met with Heller earlier Tuesday, setting off a series of conversations involving the attorney and legislative leaders.

Legislative sources said Quackenbush’s requests included payment of attorney fees and an end to legislative hearings into his case. But they said Quackenbush is unlikely to get all that he is asking.

“He has nothing left to deal with,” one source said. “We are not negotiating his resignation, because we’re not going to trade anything for this. That’s an important concept.”

But if Quackenbush does step down, the source said, there will be no further need for a hearing: “We needed to find out what went on. If the commissioner resigns, that will speak volumes.”

Assembly Speaker Bob Hertzberg (D-Sherman Oaks) said the talks have not stopped preparations for the continuing hearings.

“My approach is to work hard, do my homework and prepare for the hearings,” he said Tuesday. “If [Quackenbush] wants to do something, let him do it.”

The talks were sparked by the resumption of hearings in the Assembly on Monday, at which a Department of Insurance attorney testified that he was told Quackenbush personally directed department employees to collect $4 million from title insurance companies to finance television commercials that would feature the commissioner. In addition, a current deputy commissioner and a former deputy took the 5th Amendment to avoid self-incrimination.

Quackenbush has been served with a subpoena and is scheduled to testify Thursday before the Assembly Insurance Committee.

Before the commissioner is slated to take the stand, two more of his deputies, Brian Soublet and Norris Clark, are expected to be questioned about the meeting at which he allegedly asked for settlements to pay for television ads.

The questioning is expected to be probing, with most of the committee, Democrats and Republicans alike, said to be leaning toward impeachment.

Committee member Thomas Calderon (D-Montebello) said he intended to ask the commissioner:

“How could this have happened under your watch? After all these revelations, how in the world do you think you can go on as commissioner? The department has no credibility left to regulate the industry.”

Assembly Republican Leader Scott Baugh of Huntington Beach said that in conversations with Heller, he described the attitude among Republicans in the lower house, who have been among Quackenbush’s harshest critics:

“If he refuses to testify,” Baugh said he told Heller, “there will be a bipartisan effort to initiate an impeachment inquiry. If he does testify and cannot credibly refute the allegations, there will be a bipartisan impeachment inquiry.”

As his attorneys met with lawmakers, the commissioner’s wife, Chris, said her husband was at home in the affluent northern Sacramento County suburb of Rio Linda on Tuesday night.

“He doesn’t want to see any reporters now,” she said, speaking to a journalist on the front porch of their sprawling home.

Asked about reports of her husband’s resignation, she said: “I surely hope not. There is nothing I know of. Why would there be? Chuck has done a miraculous job for the state of California, for consumers and for taxpayers. That’s why they reelected him.”

As she has done before, she described the allegations against her husband as part of a Democratic plot.

“Chuck was the darling of California, and the Democrats knew it,” she said.

It was Quackenbush’s transfer of thousands of dollars from his political accounts to his wife’s failed 1998 state Senate campaign that first drew attention to his activities in office. Chris Quackenbush used the money to pay off her own campaign debt, incurred with a second mortgage on their Rio Linda home.

Later, the commissioner came under scrutiny for his handling of settlements obtained from six major insurance companies after the Northridge earthquake. After Insurance Department investigators found widespread mishandling of Northridge claims by those companies, Quackenbush directed them to contribute to nonprofit foundations instead of paying fines.

An examination of those foundations showed that millions of dollars were spent on public service commercials featuring the commissioner, on political polling and on grants to organizations that had nothing to do with earthquakes.

One of the foundations paid $263,000 to a football training camp attended by Quackenbush’s children. It also paid $500,000 to the Sacramento Urban League, on whose board of directors the commissioner sits.

Until the hearings this week, Quackenbush had not been directly tied to foundation spending, although a political consultant testified that he had warned the commissioner as early as last fall that the money was being spent wildly and inappropriately.

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Times staff writer Nancy Vogel contributed to this story.