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home / insurance / in the media

The Los Angeles Times
Oct 30, 2002

by Virginia Ellis, Times Staff Writer

Donation by GOP Heats Up Race for Insurance Chief

SACRAMENTO: As the election nears, the Republican Party has dropped $1.2 million into the campaign of insurance commissioner candidate Gary Mendoza, enabling him to unleash a spate of negative commercials against his opponent, former commissioner John Garamendi.

The donation -- the largest the party has given this year to any statewide candidate, including gubernatorial hopeful Bill Simon Jr. -- suggests that Republican leaders are pinning their hopes on Mendoza, a Latino with a pro-consumer record, to fend off what polls have indicated could be a Democratic sweep of statewide offices.

A consumer group criticized the party's assistance, however, saying large insurance firm donations to the Republican Party in recent weeks may have helped make it possible.

"Insurance company contributions to a commissioner candidate are the kiss of death," said Douglas Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "What better way to avoid the scrutiny of the voting public than to give it to the party rather than directly to the candidate?"

Party spokesman Rob Stutzman said there was no connection between the insurance company money and the Republican contribution to Mendoza, noting that it's illegal for contributors to donate money to the party with the provision that it then be given to a particular candidate. And he said the $322,500 the party has received from insurance companies this month falls far short of the $1.2 million given Mendoza.

"Mr. Heller is creating fantasies," Stutzman said.

But the donation has made a contest out of a race that until a few weeks ago was considered by many to be Garamendi's to lose.

After his first election to public office in 1974, Garamendi's terms in the state Assembly and Senate, his service as California's first elected insurance commissioner and unsuccessful races for governor and state controller gave him high name recognition. He easily won the Democratic primary despite facing a candidate who received $1.5 million in insurance company contributions.

Until party money began to pour into Mendoza's campaign Oct. 18, Garamendi, 57, had a 3-1 lead in fund-raising. With loans and contributions, he collected nearly $3 million, while Mendoza, 47, had received only $1 million.

"This donation is a very serious effort on [the Republican Party's] part to challenge my candidacy, and we take it very seriously," said Garamendi. "I'm doing my best to counter with appropriate television and outreach."

California has had an elected insurance commissioner only since 1992, but rising insurance rates, a crisis in the workers' compensation system and a scandal that forced the resignation of the last elected commissioner, Chuck Quackenbush, have made the office highly visible.

The next leader will take over at a time of turbulence in the industry when many insurers are refusing to write homeowners policies, construction is being slowed by the difficulty contractors have getting coverage, and workers' compensation carriers are leaving the state.

Despite their differences, both candidates have refused donations from the industry and each has promised a pro-consumer approach to regulation.

"Both candidates have taken a very strident view that they do not plan to bring balance to this office," said Dan Dunmoyer, president of the Personal Insurance Federation. "They plan to side primarily with the consumer no matter what the consequence to business."

Mendoza, a lawyer who was former Los Angeles Mayor Richard Riordan's deputy for economic development, focuses on his decisions as former commissioner of corporations in the administration of Republican Gov. Pete Wilson.

It was Mendoza who persuaded Blue Cross of California to transfer $2 billion to two charitable foundations when it converted from a nonprofit health insurer to a for-profit company. Among the functions of the foundations was improving access to health care for the uninsured.

Since leaving office, Mendoza has been hired by Wellpoint Healthcare Network -- the for-profit successor company to Blue Cross -- to push for a similar conversion in Maryland.

Garamendi, who plans no negative ads because "I prefer the positive," tells voters that when he was commissioner, he forced insurance firms to make bigger payouts to those hurt by wildfires in Southern California and the Oakland Hills.

"I'm well known in the state, and my positives are very good," Garamendi said. "My opponent is totally unknown. My task is to remind the public who I am and what I have done."

First-time candidate Mendoza tries to counter Garamendi's name recognition by suggesting that his record is flawed.

"My opponent's campaign strategy boils down to two things," he said. "A vague familiarity with the name and a lack of familiarity with his record."

Mendoza airs ads accusing Garamendi of selling off assets in the 1991 bankruptcy of Executive Life when they were undervalued. Garamendi said he tried to return full benefits of all policies to the policyholders but had to sell assets during economic turbulence.

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