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Probe of financial mismanagement widens at State Fund
Board chair vows to go where 'evidence leads us'
By Gilbert Chan - Bee Staff Writer
Published 7:27 pm PDT Wednesday, March 28, 2007
Financial investigators are deepening their probe into questionable business practices that have rocked the executive suite at California's largest workers' compensation insurance carrier, a top official told lawmakers Wednesday.
Jeanne Cain, chairwoman of the State Compensation Insurance Fund's board, said corporate investigators are launching a top-to-bottom review of the quasi-public carrier's entire management and operation.
At the same time, the Department of Insurance has launched its own investigation, and State Fund has asked Attorney General Jerry Brown to look into possible criminal matters that could involve millions of dollars.
"It will go wherever the evidence leads us," said Cain. "We have a lot of work ahead of us."
She declined to cite specifics about possible fraud, financial mismanagement or conflicts of interest that may have sparked the firing last week of President James Tudor and Renee Koren, vice president of group insurance, as well as placement of a third senior executive on paid administrative leave.
During an investigative hearing Wednesday before the Senate Business, Finance and Insurance Committee, Cain described the nearly century-old organization and its governing board as hampered by an antiquated management structure and laws that prevent the five-member board from wielding stronger oversight. She said the board, appointed by the governor plans to bring the Legislature proposed changes within 90 days.
The committee's chairman, state Sen. Michael Machado, D-Linden, criticized State Fund for having "a culture of insiders and secrecy" and said there's a need for "greater transparency" within the organization.
Cain said the board will work with Insurance Commissioner Steve Poizner, who Wednesday ordered a Department of Insurance audit of State Fund's business practices and a series of governance changes, including hiring a chief financial officer and beefing up ethics and conflict-of-interest policies.
Cain said the board has empowered interim President Larry Mulryan to contract with an outside financial chief and aggressively handle any personnel issues, including placing additional employees on administrative leave.
"We believe there should be stronger internal controls," Cain
said.
last updated: March 29, 2007
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