Universal Alleges Citizens Official Took Kickback; Florida CFO Gallagher Launches Fraud Investigation

September 15, 2005

Florida’s CFO Tom Gallagher announced on Thursday afternoon he has launched a fraud investigation into allegations by Universal Risk Insurance Services of Houston, Texas, that R. Paul Hulsebusch, chief operating officer of Citizens Property Insurance Corp. attempted to obtain kickbacks from insurance adjusters after last year’s hurricanes. Hulsebusch resigned last Friday, two days after Universal made the allegations.

Universal claims it has information showing Hulsebusch accepted at least $25,000 in goods as a bribe from a competing adjuster that resulted in a lucrative contract with Citizens.

“Due to the serious allegations made against former Citizens’ Property Insurance Corporation Chief Operating Officer Paul Hulsebusch, I have directed our department’s fraud detectives to immediately launch a criminal investigation and subpoena all documents related to his case,” Gallagher announced. “These developments are especially troubling because Floridians’ claims may have been mishandled as a result. We will pursue this investigation fully to ensure complete accountability for Florida’s consumers.”

Last year, after Citizens received thousands of complaints about its slow and mistake-prone phone response to handling claims from hurricanes Charley, Frances, Ivan and Jeanne, Hulsebusch was assigned to overhaul the claims operation.

Responding to calls from the St. Petersburg Times, Bob Ricker, Citizens executive director said the Citizens takes the allegations seriously and has launched an investigation.

“This claim will be thoroughly reviewed, and at the conclusion of this investigation, all necessary steps will be taken to ensure that all Citizens employees maintain the highest level of professionalism,” Ricker said.

Hulsebusch, as well as the adjuster alleged to have paid the bribe, could not be reached for comment. Messages seeking comment were left on an answering machine at a home Hulsebusch maintains in Pennsylvania and on his mobile phone. Someone answering the phone at the Pennsylvania address later Wednesday said Hulsebusch was traveling but had been given the message.

According to the Times article, the allegations come 11 months after Ricker hired Hulsebusch as a consultant to turn around Citizens’ embarrassingly sluggish claims processing after the 2004 hurricanes. In February, he was hired permanently as the chief operating officer with a $150,000 salary. An insurance executive from a New Jersey company, Hulsebusch blamed the delay in processing hurricane claims on Citizens’ network of third-party adjusters, saying they’d defected to other companies that were paying more.

But the Houston lawsuit, filed in March but amended Wednesday with the bribery allegations, offers another version of what went so terribly wrong last year when thousands of Citizens policyholders waited for months and months to get their claims processed.

Universal Risk claims it was Hulsebusch’s haphazard management and his system of rewarding adjuster contracts based on bribery that was at fault. The firm is seeking $3.6-million in lost, past and future profits and an unidentified amount of punitive damages from Citizens, Hulsebusch and Quantum Claim Services, which allegedly paid the bribe. Neither Quantum’s attorney nor company owner Rodney Harrell of Richmond, Texas, who is a defendant, could not be reached for comment.

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