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NEWS RELEASE
Apr 14, 2000


CONTACT: Doug Heller 310-392-0522 ext. 309

Quackenbush Lieutenant Resigns Amid "Insurancegate" Scandal

George Grays Is Fall Guy For the Commissioner, Say Advocates
Consumer advocates dismissed the resignation yesterday of Insurance Commissioner Chuck Quackenbush's Deputy Commissioner George Grays, calling him a fall guy in a Quackenbush-orchestrated effort to protect himself from the growing "Insurancegate" scandal. Quackenbush shielded State Farm and two other insurance companies from $3.4 billion in fines and policyholder repayments -- the largest ever assessed against insurance companies in the United States -- in exchange for $10.75 million in contributions to non-profit organizations and $75,000 in donations to his own political committee.

"Whether one deputy or the entire Department of Insurance resigns, Commissioner Quackenbush must explain this trail of clues which leads directly to his door," said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). "The public will not be satisfied because a deputy steps down; George Grays is just the Commissioner's fall guy. His departure provides no protection for Quackenbush, who must ultimately be held responsible for the Department's illegal and unethical acts."

George Grays, who was also a fundraiser and political advisor to Quackenbush, helped Quackenbush direct $500,000 from an earthquake "research and assistance" foundation to the Sacramento Urban League, a non-profit organization. Chuck Quackenbush is a member of the Sacramento Urban League's board of directors. The group used the money to build a worker-training facility and has no history of working on earthquake issues.

FTCR has asked Commissioner Quackenbush, through a formal public record act request, to hand over the market conduct examinations of insurance companies that originally led to the $3 billion assessment against State Farm, Allstate and 20th Century recommended by Quackenbush's own staff. In lieu of the fines, Quackenbush set up the California Research and Assistance Foundation which made the payment to the Urban League. The Foundation also spent $3 million airing advertisements featuring Quackenbush.

Advocates contend that the Insurance Commissioner has no authority to set up a foundation and, instead, should have fined the companies for any violations of the law and created a restitution fund for earthquake victims who were low-balled.. Reports indicate that the examinations demonstrate extraordinary mistreatment of policyholders by the companies. Quackenbush has not yet provided the documents to FTCR.

"Commissioner Quackenbush continues to defy demands to make public the insurance company examinations and key information about these foundations that are at the heart of 'Insurancegate,'" said Harvey Rosenfield, president of FTCR. "This resignation is an attempt to provide cover for Quackenbush and the companies that made secret deals with him to avoid punishment."

Commissioner Quackenbush is presently under investigation by two legislative committees, the State Attorney General and the Fair Political Practices Commission.



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