Quackenbush Resigns; Probe Will Continue

Under the cloud of a criminal investigation and facing certain impeachment, Insurance Commissioner Chuck Quackenbush resigned Wednesday, one day before he was to testify under oath on his role in a widening political corruption scandal.

Minutes later, state Atty. Gen. Bill Lockyer issued a statement signaling that the resignation will not end the commissioner’s troubles. Lockyer vowed to continue “without delay” a criminal investigation of settlements Quackenbush made with insurers accused of mishandling Northridge earthquake claims, and of foundations he established with settlement moneys.

Delivered to Secretary of State Bill Jones shortly after noon, Quackenbush’s letter said simply, “I hereby resign my position as insurance commissioner of the state of California effective July 10, 2000.”

The resignation, the first of an elected official since a criminal conviction forced former schools Supt. Bill Honig to step down in 1994, was immediately forwarded to Gov. Gray Davis.

Davis said he will nominate a successor of “unquestioned integrity,” but did not set a timetable. The appointment is subject to confirmation by both houses of the Legislature.

Quackenbush, who was a rising Republican in a state dominated by Democrats, made no public appearances Wednesday, but his attorney said he believes it will be proved that his client did nothing improper.

Quackenbush, only the second elected insurance commissioner in California history, was scheduled to testify under oath before the Assembly Insurance Committee today.

In what was expected to be a pivotal hearing, he was summoned to answer allegations that he personally directed his staff to extract settlements from title insurance companies to finance a television advertising campaign that would benefit him politically.

Almost simultaneously with the submission of Quackenbush’s resignation, the committee called an emergency session to cancel the hearing. Members said they interpreted the resignation as an admission that the Republican commissioner could not refute mountains of evidence they have gathered against him.

Damaging Testimony

Lawmakers said the turning point came Monday, when a top lawyer in the Department of Insurance testified that he had been under orders from Quackenbush to reach settlements with title companies that would provide $4 million for an “outreach” campaign featuring the commissioner.

“We had two witnesses prepared to testify Thursday who would completely corroborate his testimony,” said Assemblyman Fred Keeley (D-Boulder Creek). “This was firsthand evidence. They were in the room when the commissioner made his statements.”

Keeley said lawmakers believe it was the expectation of further damaging testimony from these witnesses--trusted deputies Norris Clark and Brian Soublet--that “led to his resignation.”

Quackenbush’s use of his public office for political purposes has been the focus of an investigation that began after revelations that he had reached settlements with insurance companies that required them to contribute to nonprofit foundations he created.

The settlements were made despite recommendations from his staff that the companies be fined as punishment for claims-handling violations that were uncovered in a department examination after the 1994 Northridge earthquake.

The foundations were used to finance public service spots starring the commissioner, to pay for political polling and for grants to charities--many of which had ties to Quackenbush and his staff. The contributions included $500,000 to the Sacramento Urban League, where Quackenbush sits on the board of directors, and $263,000 to a football camp attended by two of his children.

In court documents, Lockyer described one of the foundations as a “sham” operation controlled by Quackenbush’s former deputy commissioner, George Grays.

Mood of Relief in Both Parties

In the Capitol, Quackenbush’s resignation, which had been urged by fellow Republicans for more than a week, was greeted with no public jubilation by Democrats.

Instead, a mood of solemn relief prevailed among members of both parties who will be spared the election-year pain of possibly impeaching a statewide officer. Some members expressed personal sympathy for the 46-year-old official and his family.

“For those who might believe there is some joy to be taken from these events, they are mistaken,” said Assembly Insurance Committee Chairman Jack Scott (D-Altadena). “Personally, I take no joy in the ruin of a man.”

Republicans, who had increasingly isolated themselves from Quackenbush during the past month, said the evidence against him became so overwhelming that they had no choice but to desert him.

“I’m sure many expected us to circle the wagons and defend the insurance commissioner simply because of his party affiliation,” said Republican Assemblyman Ken Maddox of Garden Grove. “This did not occur. We value our integrity.”

Quackenbush’s harshest critic, Assemblyman Tom McClintock (R-Northridge), who had issued the first call for his impeachment weeks ago, accused the commissioner of “betraying the most fundamental principles of the Republican Party.”

“He’s an example of the frailties of politicians when they lose sight of their official duties in pursuit of that siren song of self-interest,” said McClintock.

Assembly Speaker Bob Hertzberg (D-Sherman Oaks) said it was clear the sentiment in the Assembly was building overwhelmingly toward impeachment. “There is no question . . . that that is where this was leading,” he said.

Support for Quackenbush was just as weak in the Senate.

“I think that it is good for him and good for the institution,” Senate President Pro Tem John L. Burton (D-San Francisco) said of Quackenbush’s departure. “It’s in another arena; let [Lockyer and the courts] decide how much of what he did crossed over the legal line.”

No Immunity From Prosecution

Both Lockyer and members of the Assembly Insurance Committee said “no deals” had been made with Quackenbush to give him immunity from prosecution in exchange for his resignation.

On Tuesday, his lead attorney, criminal defense lawyer Donald Heller, had tried to engineer a deal with Lockyer and the Assembly under which Quackenbush would resign in exchange for an agreement that the state would pay some of his legal costs and the Assembly would stop its investigation.

“No deal was offered by my office to Mr. Quackenbush and none is contemplated,” Lockyer said. “If crimes have been committed by anyone associated with these actions, my office will take action to see to it they are prosecuted.”

Heller said the commissioner is prepared to cooperate with Lockyer’s investigations.

“He is resuming private life for the first time in 14 years,” said Heller. “He has not made any decisions as to what he will be doing. He is going to take one day at a time. Mistakes were made, but he believes, and I concur, that he has done nothing illegal or improper.”

It was unclear why the commissioner delayed the effective date of his resignation until July 10. “There’s some matters that need to be resolved in the Department of Insurance,” Heller said. “There’s final housekeeping matters.”

At her stucco lakeside home in a north Sacramento suburb Wednesday afternoon, a bitter Chris Quackenbush called the Democratic lawmakers who investigated her husband “rabid jackals.”

She defended his actions, saying his only motive was to win millions of additional dollars from insurance companies for earthquake victims.

Meanwhile, the commissioner, who occupied the office for nearly five and a half years, will be eligible for a monthly government pension of $2,970 when he reaches age 60, officials of the Public Employees Retirement System said.

“If he was indicted, impeached or resigned, it will not affect his retirement rights, because he is vested under the system,” said spokesman Brad Pacheco.

Dan Dunmoyer, a powerful insurance industry lobbyist who helped recruit Quackenbush to run for the statewide office in 1996, attended the Insurance Committee’s brief meeting, but turned aside a reporter’s request for an interview.

Later, Dunmoyer, president of the Personal Insurance Federation of California, distributed a statement that said he would have no comment “due to the ongoing investigation.” The industry contributed more than $8.6 million to Quackenbush’s campaigns, according to the Foundation for Taxpayer and Consumer Rights.

Consumer groups applauded the resignation, saying it would give Davis an opportunity to appoint a replacement to serve out the balance of Quackenbush’s term who may be more “consumer-oriented.”

“With the departure of Quackenbush, we as consumers, we as policyholders and we as voters are once again free of the tyranny of a . . . politician and the insurance companies to which he was beholden,” said Harvey Rosenfield, president of the Foundation of Taxpayer and Consumer Rights.

But Harry Snyder of Consumers Union was critical of the Assembly for canceling its hearing. He said the investigation should continue until the Legislature has addressed the issue of campaign finance reform. He said the state’s lax laws had allowed insurance companies to wield unprecedented influence over Quackenbush through millions of dollars in campaign contributions.

“The public should not be satisfied with the resignation of one elected official on a get-out-of-jail-free pass,” he said.

Scott, the committee chairman, praised his members for acting in a bipartisan manner during the investigation and promised that a final report with recommendations for reforms in the insurance commissioner’s office will be adopted within weeks.

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Times staff writers Nancy Vogel, Miguel Bustillo and Julie Tamaki contributed to this report.

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