La. Citizens to Break From Managing Agency, Board Says

October 15, 2007

Facing allegations it’s been mismanaged for years, Louisiana’s taxpayer-backed insurance company will sever its relationship with the agency that has overseen the firm since its inception, the company’s board decided Oct. 11.

The move by Louisiana Citizens Property Insurance Corp.’s board came amid a string of accusations against officials from the Property Insurance Association of Louisiana, plus a reported federal subpoena issued to Terry Lisotta, who oversaw both organizations until earlier this year. PIAL’s executives have overseen Citizens, the state’s insurer of last resort, since it was created in 2003, and managed Citizens’ predecessors before that.

The Citizens board voted to sever all ties with PIAL within a month. John Wortman, Citizens’ CEO, told board members the change will involve transferring a handful of employees who currently perform duties for both Citizens and PIAL.

The board also heard new details about allegations against Lisotta, involving expenditures including cigars, golf outings and “networking” weekends at Florida beaches. The allegations, from Legislative Auditor Steve Theriot’s office, said the trips to Sandestin, Fla., had been a tradition for the PIAL officials since 1978, though the audit only covered 2004-05 and a fraction of the $1 million spent. More audits are under way.

Citizens board members said they were astonished at the allegations.

“I think the legislative auditor has kicked over somebody’s honeypot here,” said state Treasurer John Kennedy, a board member.

The Times-Picayune reported that Lisotta has been subpoenaed by U.S. Attorney Jim Letten’s office. Neither Lisotta nor his lawyer, David Courcelle, could be reached for comment. Letten declined to comment.

Lisotta has not directly responded to the allegations, but told auditors that his expenses were approved by members of the board of PIAL and Citizens.

Dan Daigle, an assistant legislative auditor, described haphazard bookkeeping at the two companies, and at the Louisiana Auto Insurance Plan, the state’s auto insurer of last resort, where Lisotta also worked. Lisotta had an LAIP credit card which he was allowed to use for personal expenses, Daigle said.

“I can’t tell you why that was acceptable, but it was common,” Daigle said.

Auditors found records that said Lisotta charged $9,000 on that card and repaid just $5,600 – but the bookkeeping was so shoddy that it’s unclear whether those figures are accurate.

“It’s kind of up in the air what he still owes,” Daigle said.

Daigle also provided details on 17 expense reports which Lisotta submitted; auditors determined they were inappropriate for a public agency. Lisotta received approval from Citizens or PIAL board members for only 11 of the expenses.

Among the expenses was a 2004 trip to Bermuda, for which LAIP paid the airfare for Lisotta’s wife, auditors determined. Lisotta also charged $250 worth of golf fees to the LAIP card, along with $81 for cigars. In all, auditors determined Lisotta spent over $1,600 in LAIP funds on personal purposes on that trip alone.

Whether Lisotta or others broke any law could be dependent on ongoing court cases involving whether Citizens, LAIP and PIAL are public bodies that must obey state laws involving expenditures.

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