Missouri Auditor to Review State-created Insurer

By ALAN SCHER ZAGIER | August 15, 2011

A state-created company intended to help small businesses get workers’ compensation insurance has agreed to a review by the Missouri auditor’s office.

Missouri Employers Mutual Insurance Co. agreed to what it calls a “voluntary” review after the auditor’s office threatened to file a public records lawsuit. The insurer is a quasi-public company founded by the state in 1993 to help businesses get workers’ compensation insurance at reasonable rates.

The St. Louis Post-Dispatch first reported the auditor’s decision on Friday.

By Friday afternoon, the company had posted its past three annual statements on its website, as well as its two most recent independent financial audits. Missouri Employers Mutual separately provided reporters with a list of its 10 highest-paid employees – with no names attached to the salary figures – as well as a tally of compensation provided in 2010 to six current and former board members and a compensation comparison report prepared by an outside company.

The company had previously asserted that it was exempt from state public records laws as an “independent public corporation.”

“MEM welcomes this unfettered access and review of our operations and is confident that the results will satisfy our policyholders and demonstrate that MEM is a company that operates with integrity,” said Jim Owen, the insurance company’s chairman and interim chief executive.

Owen added CEO duties to his role as board chairman after the insurance company’s previous chief executive, former Gov. Roger Wilson, was placed on administrative leave in May and then fired without explanation one month later.

Wilson has declined to discuss the reasons for his departure. He became president of the Columbia-based company in January 2010 after serving on an interim basis for about eight months.

Despite its state affiliation, the insurance company had typically conducted its business far removed from public scrutiny. But Wilson’s sudden departure drew mounting attention, as did the federal indictment in March of former board member Karen Pletz, who stands accused of embezzling more than $1.5 million from the Kansas City medical school where she was president.

Another board member, former chairman Douglas D. Morgan, was indicted in April in a separate federal case on allegations that he defrauded a bank in a casino deal.

Both former board members have pleaded not guilty. Insurance company records released on Friday show that Morgan received $29,483 in compensation last year, while Pletz collected $6,750. Those payments are consistent with insurance industry averages in the Midwest, a Hay Group report released by the company concluded.

The company’s most recent independent audit showed $364 million in assets at the end of 2010, a $13.2 million increase from the previous year. Its liabilities totaled $200.9 million, with a $163.1 million surplus.

“The company’s financial position is stronger than ever,” Owen said.

According to a written agreement signed on Thursday, State Auditor Tom Schweich will conduct a “one-time” review as a compromise until the Legislature or courts clarify the insurer’s legal status, as well the auditor’s oversight authority.

The auditor’s office review will be its first look at the insurance company’s records. In the past, the insurance company has filed annual reports with the state insurance agency that includes information about its finances, premium rates and executive compensation.

“It’s my job to ensure that there’s no fraud, waste or corruption among the state’s public bodies,” Schweich said. “There’s been a dispute whether MEM is a public entity, and a lot of allegations have been raised.”

Missouri Employers Mutual has also agreed to release board minutes for the past two years. Those records will be made available next week after company lawyers review the minutes to remove names or other information that would otherwise be exempt from public disclosure, a company spokeswoman said.

The company will come under further scrutiny on Monday, when the Senate Governmental Accountability Committee holds a hearing in Jefferson City to examine the law that created Missouri Employers Mutual as well as its process for appointing board members.

The original law allowed Missouri’s governor to appoint the company’s first group of directors to five-year terms, with subsequent appointments made by the board and policyholders.

But the company decided in 1997 to allow the governor’s office to continue making the majority of its board appointments as a way to receive lucrative federal tax breaks for quasi-public workers’ compensation insurers, the Post-Dispatch has previously reported. Company officials responded by rewriting its bylaws rather than seeking a change in state law.

(Associated Press reporter Chris Blank in Jefferson City contributed to this report.)

Was this article valuable?

Here are more articles you may enjoy.