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home / insurance / in the media

Los Angeles Times
Jun 23, 2000

by Virginia Ellis and Carl Ingram

Whistle-Blower Emerges in Quackenbush Probe

Scandal: Staffer provided documents, saying she could no longer tolerate misconduct.
SACRAMENTO--A senior lawyer for the state Department of Insurance, saying she could no longer remain silent about what she viewed as egregious wrongdoing under Insurance Commissioner Chuck Quackenbush, emerged Thursday as the key whistle-blower who leaked confidential documents to the Legislature.
     
Cindy Ossias, 49, who works in the department's San Francisco office, told California Highway Patrol investigators that she provided committees in the Assembly and the Senate this spring with copies of an internal review of insurers' claims-handling practices after the Northridge earthquake, sources said. The reports are a key element in the unfolding scandal surrounding Quackenbush's office.
     
"I think she recognized there was a pattern of misconduct and malfeasance. She felt somebody needed to know about it," said Assembly Insurance Committee Chairman Jack Scott (D-Altadena), one of several legislators who rose to defend Ossias after her action became known Thursday.
     
Reaction from Quackenbush was swift. Ossias, who joined the department 10 years ago during a Republican administration, was immediately placed on five days' paid administrative leave. A spokesman for Quackenbush said the department is considering other "appropriate action, including dismissal."
    
 "A key element to this is that she is a lawyer and she had additional burdens of responsibility in her capacity as a lawyer," said Deputy Insurance Commissioner Dan Edwards.
     
State Sen. Martha Escutia (D-Whittier) said it was unfortunate that Ossias had become the target of disciplinary action.
    
 "I think that she's a very courageous person," said Escutia. "She obviously decided that keeping that information secret and away from the public was ultimately doing greater harm than releasing it."
     
Ossias has been subpoenaed to testify before the Assembly Insurance Committee on Monday. Her lawyer declined to comment.
     
The reports--called market conduct examinations--that she gave the Legislature were ultimately made public by Escutia's Senate judiciary subcommittee, which posted a summary of its findings on the Internet. The reports are key to the unfolding scandal surrounding the Quackenbush handling of Northridge earthquake settlements with major insurance companies.
     
The reports detailed claims-handling violations by State Farm, Allstate and 20th Century and had been used by Quackenbush to reach settlements with those insurers that required them to contribute millions of dollars to foundations the commissioner created. Quackenbush agreed in return not to fine the companies or to finalize the reports.
     
The foundations are being investigated by state Atty. Gen. Bill Lockyer, who has asked the court to dissolve one of them, calling it a "sham" operation controlled by one of Quackenbush's deputies. Funds from the foundation were used to finance television ads featuring Quackenbush, provide contracts for his political advisors and make contributions to charities, some of which were connected to him.
     
Ossias "saw something that was wrong. . . . She thought her only course was to release the documents," a source said. "Sometimes employees feel strongly about things they believe to be wrong. That's why she released the materials, to unburden herself."
    
CHP officials briefed state Senate President Pro Tem John Burton (D-San Francisco) and Assembly Speaker Bob Hertzberg (D-Sherman Oaks) on the latest development Thursday.
     
The CHP has been investigating the release of the documents at the request of Quackenbush's chief deputy, Michael Kelley, who contends that a law was broken when they were given to the Legislature. Under California law, market conduct exams are confidential unless the commissioner chooses to make them public.
     
Sources said the two legislative leaders were told Ossias admitted that she provided the reports and copies of settlement agreements to Paul Donahue, a former chief consultant to the Assembly Insurance Committee, in response to his request for information about the settlements.
     
When the Assembly did not make the reports public as she had hoped, sources said, she told the investigators she then provided copies to Amy Bach, a lawyer for the Senate subcommittee.
     
"It appears there was an effort at hand to solicit confidential documents from a department employee and those documents were taken without authorization," said Edwards.
     
Most disturbing, he said, was that her disclosures show that Assembly leaders were not truthful when they denied to Quackenbush's lawyers that the market conduct exams were in their possession. Edwards characterized it as an effort to "get Quackenbush."
     
A source familiar with the CHP investigation disagreed.
     
"I don't think it was some devious plan to get Quackenbush," the source said. "I think she thought that what was going on was improper and she tried to do the right thing."
     
Assemblyman Fred Keeley (D-Boulder Creek) said neither he nor any other member of the Assembly Insurance Committee ever saw the reports, because Donahue took them with him when he left his job in the Legislature.
     
"From the first day of our oversight hearings and extending through what I anticipate will be the last day, access to market conduct exams has not been important to our endeavor," he said. "Our issues relate to the conduct of the commissioner and his executive staff."
     
He said the Assembly did release settlement agreements because "we do not believe those are in any way privileged."
     
Keeley described Ossias, whom he has since interviewed in preparation for her appearance before the committee Monday, as a "very dedicated and sincere public servant."
     
"My understanding is that this particular individual felt that the actions of the commissioner and executive staff were not appropriate as it related to settlements and the outcome of those market conduct exams," he said.
     
A 1983 graduate of Golden State University's School of Law, Ossias has been the lead lawyer in overseeing the handling of insurance claims for natural disasters including the 1991 Oakland Hills fire, the 1993 Malibu, Altadena and Laguna Hills fires and the 1994 Northridge earthquake.
     
She was hired in 1990 by former Insurance Commissioner Roxani Gillespie. In 1991 she was appointed by Gillespie's successor, John Garamendi, to a special task force that wrote the state's regulations governing unfair claims practices by insurance companies.


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