New Law Prohibits Insurers’ Gifts to State Commissioner

A loophole in state ethics laws that allowed former Insurance Commissioner Chuck Quackenbush to secretly accept luxury overseas trips from those he regulated was closed Tuesday by Gov. Gray Davis, who signed legislation to ban the practice.

The measure, AB 931, by Assemblyman Dario Frommer (D-Glendale) prohibits insurance companies from giving gifts to the Department of Insurance that would benefit the commissioner. It will take effect Jan. 1, 2002.

Quackenbush, who resigned in July 2000 rather than face impeachment, took trips in 1999 and 2000 to London, Amsterdam and Beijing that were paid for by insurers with business pending before him.

“This will close a loophole . . . that ex-Commissioner Quackenbush exploited to travel the globe first-class at the expense of . . . insurance companies,” Frommer said.

The former commissioner’s travel was arranged by a San Francisco lawyer, James Woods, who accompanied Quackenbush on the trips and whose insurance company clients picked up the tab.

The European journey was paid for by three Dutch insurance companies that had agreed to pay $4.2 million into a humanitarian fund for Holocaust survivors and were awaiting the go-ahead from Quackenbush to make the payment.

China Trip Not Disclosed

Expenses for the London leg of the trip were picked up by Lloyds of London. That company was seeking approval from American insurance regulators to reduce the amount of money it was required to keep on deposit in the United States to pay claims.

The trip to China and Quackenbush’s five-day stay in Beijing were paid for by Liberty Mutual Group and Metropolitan Life Insurance Co. Those companies sent money to a nonprofit institute, which in turn underwrote that trip.

Quackenbush never disclosed his acceptance of the free travel to China and reported only portions of the European trip.

Under the state’s Political Reform Act, there are strict limits--$320 in most instances--on gifts to public officials, and all must be disclosed. An exception from the limits and the disclosure requirements is made when corporations and nonprofit groups give gifts to state agencies and do not specify a particular recipient.

Quackenbush claimed that the trips to Europe and Asia were gifts to his department that he, as the head of the agency, decided to utilize personally.

Although his successor, Harry Low, has refused to accept any travel gifts, Frommer said that a change in law was needed because “we cannot count on every future insurance commissioner to do the right thing.”

Quackenbush resigned from office after it was disclosed that he had allowed insurance companies to avoid fines for mishandling Northridge earthquake claims by paying into a nonprofit foundation he created. Proceeds from the foundation were used to pay for commercials featuring the commissioner.