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Posted by tonyb on July 09, 2000 at 06:40:12:


By Michael Kahn

SAN FRANCISCO (Reuters) - California's embattled Insurance Commissioner Chuck Quackenbush
resigned on Wednesday amid allegations that he used millions of dollars in official settlements with
insurers to boost his own political career.

Quackenbush, a telegenic Republican who once appeared to be a future candidate for national office,
stepped down after his lawyers spent a night negotiating with state legislators in an attempt to limit his civil
and criminal liability in one of the biggest political scandals to hit California in decades.

But neither the Assembly committee probing his actions nor the state attorney general's office offered any
deals, officials said. Attorney General Bill Lockyer said his office would continue probing the Department of
Insurance's handling of settlements stemming from the 1994 Northridge earthquake in southern California.

``If crimes have been committed by anyone associated with these actions, my office will take action to see
to it that they are prosecuted,'' Lockyer said in a statement. ``We will seek civil penalties and restitution
where appropriate.''

Quackenbush announced his resignation in a one-sentence letter submitted to California Secretary of State
Bill Jones. The commissioner's office declined to comment and Quackenbush's private attorney was
unavailable for comment. The resignation, which takes effect July 10, allows Quackenbush to avoid
testifying before the Assembly Insurance committee and averts potential impeachment.

``No Joy In The Ruin Of A Man''

``Personally I take no joy in the ruin of a man,'' said Assembly Insurance Committee Chairman Jack Scott, a
Democrat. ``Unfortunately through either intention or neglect the Department of Insurance committed
unacceptable abuses of power during Mr. Quackenbush's tenure as commissioner,'' Scott added.

Quackenbush, one of only two Republicans elected to statewide office in California, had denied any
wrongdoing in connection with the deals that his office made with insurance companies accused of
mishandling billions of dollars in claims stemming from the Northridge earthquake. The deals struck last
year by the department with insurers apparently allowed insurance companies to escape $3.3 billion in
fines stemming from underpaid claims in exchange for donations of some $12 million to the California
Research and Development Foundation, a nonprofit organization now depicted as a fund to further
Quackenbush's political ambitions.

Calling the investigation a political witch hunt, the two-term Republican denied any direct involvement in the
management of the earthquake fund foundation and a separate, parallel foundation established with
similar settlements from title companies.

Close Ties With Foundation Alleged

But Insurance Department lawyer Robert Hagedorn on Monday provided the closest thing yet to a direct link
between Quackenbush and the foundation activities, testifying that department chief counsel Brian Soublet
told him last March that the commissioner had demanded $4 million from the title company fund for a
``media buy'' to finance commercials that ended up featuring the commissioner.

The months of revelations took their toll on the reputation of an insurance commissioner who had gained
international attention for pressing European insurers to make good on their Holocaust-era claims.

Democratic Gov. Gray Davis, who is now charged with appointing someone to serve out Quackenbush's
term, said he would begin the process of finding a replacement. ``I will name someone of unquestioned
integrity, with the ability and experience to restore credibility to this important office,'' Davis said in a

Secretary of State Jones, the only other Republican in statewide office, issued a statement calling
Quackenbush a ''loyal friend.'' ``Prior to the controversy surrounding this resignation he served the people
well,'' Jones said. ``His contributions to public policy should not be overlooked.''

But Doug Heller, a spokesman for the nonprofit Foundation for Taxpayer and Consumer Rights, called
Quackenbush a ''lackey'' to the insurance industry and said the legislature should outlaw financial ties
between the commissioner and insurers. ``The next insurance commissioner must be someone who has
never taken a penny from the insurance companies either as an employee or as an elected official,'' he

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