Another standard defense is to defy oneâ€™s critics to discover any official act favoring the contributor in question. Unfortunately for Lara, soon after the questioned contributions were made, he and his department intervened in a pair of legal disputes to the benefit of one of the insurers.
Lara and his subordinates argue that those decisions were necessitated by the law and precedent, not any influence gained through political contributions. But the commissionerâ€™s failure to distance his campaign from the industry has invited scrutiny not only of the recent legal decisions but also of every meeting or speech that might suggest a broader effort to ingratiate himself with the insurers he was elected to regulate.
Steeped in Sacramento politics as a veteran legislator and aide, Lara entered last yearâ€™s race for insurance commissioner as a consummate insider with no shortage of support from special interests. He had taken contributions linked to insurers both as a legislator and during the race for the Democratic nomination for commissioner. In keeping with the standard practice of commissioners for nearly two decades, however, Lara subsequently pledged to return industry donations and refuse them going forward.
The custom of eschewing insurance industry support dates to Chuck Quackenbushâ€™s ignominious resignation from the office in 2000. A Republican legislator from Silicon Valley who became the stateâ€™s second elected insurance commissioner with substantial support from insurance companies, Quackenbush aborted his second term amid allegations that he had leveraged industry money to benefit himself and his family.
The current commissionerâ€™s difficulties began in earnest last month after the San Diego Union-Tribune reported that despite last yearâ€™s pledge, his recently formed reelection campaign had taken more than $50,000 â€” the bulk of its income to date â€” from donors with previously undisclosed ties to the insurance industry. Lara later vowed to refund the donations, which he attributed to an â€œhonest mistake,â€ and hire a treasurer to vet future campaign contributions.
More than $30,000 in donations to Laraâ€™s re-election campaign were linked to Applied Underwriters, a workersâ€™ compensation insurer owned by Warren Buffettâ€™s Berkshire Hathaway. Buffettâ€™s company is planning a sale of the unit that must be approved by the Department of Insurance. In addition, Applied has a significant stake in dozens of disputes with employers it insured, stemming from policies the department deeemed unapproved and therefore unlawful.
In June, two months after the political contributions linked to Applied, Lara stayed his recent approvals of administrative law judgesâ€™ rulings in two of those disputes for reconsideration. While the Union-Tribune report led Lara to recuse himself from those cases and all other matters involving the insurer, his staff followed the stays with amended decisions requiring the insured companies to pay Applied under the terms of another policy approved by regulators. That amounted to a break for the insurer in those cases.
Lara and his staff say their initial approval of the rulings overlooked a small but crucial clause and footnote that departed from a precedent established under the previous commissioner, Dave Jones, forcing them to revise the orders. They also maintain that a May meeting between Lara and Appliedâ€™s chief executive did not stray into the details of the cases, which would violate state law against such communications outside a proceeding.
The industry donations have also brought scrutiny to the commissionerâ€™s activities beyond the Applied cases, from his support for legislation facilitating pet insurance to his apparent willingness to help insurers make use of data on driver behavior. Laraâ€™s office maintains that the initiatives stand to benefit consumers as much as the industry.
Even if Laraâ€™s official acts donâ€™t justify suspicion in and of themselves, theyâ€™re bound to be viewed in the compromising light of the contributions he accepted. In just over half a year in an office whose importance is growing amid wildfire and other risks, the commissioner has engendered a remarkable degree of distrust â€” and reaffirmed the wisdom of his recent predecessors.
Chuck Quackenbush, a Republican legislator from
He resigned in disgrace in 2000 amid revelations that he had allowed insurers to donate to a pair of foundations rather than pay fines for mishandling claims arising from the Northridge earthquake.
Insurance industry money helped Quackenbush
Until Ricardo Lara took office, subsequent insurance commissioners avoided taking campaign contributions from the industry they regulate so as not to invite similar suspicions about their impartiality.
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