Insurance Schemes
Insurance is a big area for abuse in local government. It usually
constitutes a sizeable dollar percentage of a town's contracts, and an
insurance broker who works in government can use his or her position to
get the insurance business of companies that do or want to do business
with the town. And insurance is an area few people understand, and
which no department, office, or board may be responsible for overseeing.<br>
<br>
According to <a href="http://www.nola.com/politics/index.ssf/2011/01/aaron_broussard_and_tim_…; target="”_blank”">an
article
in the New Orleans <i>Times-Picayune</i> this week</a>, the discovery
of an insurance scheme brought down the Jefferson Parish president and
his top administrator (the parish attorney later resigned, as well).
Now, the state board of ethics has filed three dozen ethics charges
against them. <a href="http://en.wikipedia.org/wiki/Jefferson_Parish,_Louisiana" target="”_blank”">Jefferson
Parish</a> (pop. 400,000) is part of New Orleans.<br>
<br>
The center of the scheme was an agreement between <a href="http://www.wjmc.org/" target="”_blank”">a community hospital</a> and an insurance
company owned by the administrator and his wife. The administrator's
insurance company also did business with several parish contractors as
well as with several insurance companies that did business with the
parish. The former owner of one of these contractors was convicted on
federal bribery charges (he had been president of another local
parish), and another of the contractors is currently under federal
investigation.<br>
<br>
Not only was the insurance broker a parish administrator. He was also a
member of the parish Insurance Advisory Committee, which had
jurisdiction over the hospital's insurance matters. That is, there is an oversight body, but at least one of its members had a bit too much expertise.<br>
<br>
Insurance schemes are often very complex with many players, and this was no exception. When others want to be
involved, it's hard to say no. According to the charges, the
administrator's company entered into "cooperative endeavor agreements
with two other insurance agencies managed by politically connected
associates," one a former parish president. The company also is said to
have shared commissions with an agency that does insurance work with
several public entities in the area.<br>
<br>
The charges against the former Jefferson Parish president include
accepting $5,000 for "legal services" provided to the administrator's
insurance agency, and $4,500 annually as a holiday gift from his staff ($100 from each staff member),
with the funds collected by the administrator.<br>
<br>
The lesson to be learned is that there has to be knowledgeable but
independent oversight over all insurance dealings that involve either
the government itself or those who do business with the government. There also needs to be full disclosure, with serious penalties for any company that does not disclose, so that you don't get this sort of web of players.<br>
<br>
Insurance dealings should be included in the transactional disclosure required of
those bidding for contracts or seeking permits. It could even be added
to annual disclosure forms for high-level officials. It seems to be such an easy an area
to abuse, it requires a great deal of transparency.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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