S.D. Agent Investigation Under Scrutiny

September 15, 2005

South Dakota state legislators have asked Division of Insurance officials to explain how they investigate agents and companies, and how they resolve conflicts with them, after hearing complaints this week from two agents.

Members of the Legislature’s Government Operations and Audit Committee asked division officials to return to their Oct. 13-14 meeting in Pierre after testimony from Sioux Falls agent Steve Tinklenberg and South Sioux City, Neb., agent Pat Bohall ended late Monday afternoon.

The committee reviews the operations and fiscal affairs of state departments and agencies.

Earlier Monday, Bohall told legislators that he had lost hundreds of thousands of dollars in business and legal fees because of charges brought against him in 2001 by the division. The charges were dropped entirely in May of this year.

Bohall complained that the agency sent letters to all the insurance companies for whom he did business, advising them that he was being investigated on 10 charges ranging from altering applications to impeding a Division of Insurance investigation.

But no follow-up letters were sent after the charges were dismissed, he said.

“Is it asking too much to do that?” Sen. Jerry Apa (R-Lead), asked division officials.

Replied division director Merle Scheiber: “I will gladly investigate that. That is not an unreasonable request at all.”

Both Bohall and Tinklenberg notified the state in summer 2004 that they were going to sue, claiming investigators from the Division of Insurance and the Insurance Fraud Protection Unit had violated their civil rights in the way they conducted their investigations.

The cases never went to trial. Instead, the state paid Tinklenberg $57,500 and Bohall $90,000 through its Public Entity Pool for Liability to resolve the claims. Tinklenberg is appealing to the South Dakota Supreme Court a ruling to revoke his insurance license.

Although Division of Insurance officials Monday said the investigators in question no longer worked for state government, Bohall asked whether Randy Moses, the division’s assistant director for regulation, knew the investigators were using questionable tactics and, if he did, why he wasn’t held accountable.

Bohall noted that at one point during the investigation of him, Moses and other division officials had called him and his lawyer to Pierre for an informal meeting on his case.

Asked whether he had counseled other agents to lie to investigators, Bohall said no. At that point, he said, Moses and the others produced a transcript of a telephone conversation he had with another agent.

Bohall noted that the transcript was incomplete. In one of the missing sections, Bohall said, he had told the other agent “to just tell the truth.”

Bohall and his lawyer asked for the unedited version. He said Moses and the others produced a second transcript that also had been edited. When he and his lawyer again asked for the full transcript, plus the tape recording and the name of whomever transcribed it, they received none, Bohall said.

“There is an old saying, ‘The fish stinks from the head,’ ” Bohall told the committee. “This fish had some scales pulled off. But the head is still there. … Randy Moses. My recommendation is, I think he should be gone.”

Moses did not return a phone call Tuesday seeking comment. Nor did he appear before the committee Monday, although Sen. Jason Gant (R-Sioux Falls) said he was asked to be there. Committee members asked that he be made available at the October meeting.

Tinklenberg said he has spent $145,000 to fight criminal and administrative charges that he defrauded a Waverly farmer out of a life insurance policy.

A Watertown jury found him not guilty of the criminal charges. And a Pierre hearing examiner ruled twice against the division’s attempt to take away Tinklenberg’s license, although the division reversed those decisions, sent them before a second examiner and ultimately received a ruling in its favor.

Tinklenberg appealed the second hearing examiner’s decision to circuit court, where a judge ruled in the division’s favor. Now, the issue is going to the state Supreme Court.

Tinklenberg said he knows there are many insurance agents across South Dakota who simply paid fines to the division instead of fighting what they considered to be baseless charges.

“After six years and umpteen zillion phone calls … if any of these agents was called and given a chance to testify as I am, you’d be shocked beyond belief,” Tinklenberg said.

Pierre lawyer Brent Wilbur, representing the division, asked committee members to keep in mind they were hearing only one side of the story Monday.

“And 99 percent of what you heard today was hearsay,” Wilbur said.

Gant said he had a number of questions he hoped the Division of Insurance could answer when it returns in October.

He wants to know whether the agency will consider not sending letters to insurance companies about agents it is investigating until their cases are resolved.

And he wants to know how the division settles on appropriate fines. Bohall said he originally was told he would have to pay $6,500 to settle charges against him, a figure that ultimately was reduced to $600 and then dropped altogether.

“What are the parameters for settling cases as far as fines that the division negotiates?” Gant asked. “And should letters be sent to insurance companies only after convictions?

“I guess I want to hear about the policy changes they are willing to do, and the ones they aren’t willing to, and the rationale behind both.”

Copyright 2005, Argus Leader

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