Insurance Company Donations to Calif. Gov. Illegal, Consumer Group Says

September 25, 2003

A consumer group is urging the United States Attorney for the Eastern District of California to investigate a series of contributions totaling $175,000 from an insurance company, Mercury General Corporation, to Governor Gray Davis. The contributions, which have been made in the past 10 days, are a payoff for the Governor’s signature on SB 841 (Perata), according to the Foundation for Taxpayer and Consumer Rights. In August, Davis signed legislation sponsored by Mercury Insurance that consumer groups, low-income advocates and Insurance Commissioner Garamendi opposed because it violated voter approved Proposition 103. Davis vetoed virtually the same proposal last year for that reason.

“These donations are a payoff for the Governor’s signature on Mercury Insurance-sponsored legislation,” said FTCR’s senior consumer advocate Douglas Heller. “Quid pro quo policymaking cannot be tolerated.”

In a letter to the United States Attorney McGregor Scott, FTCR called for an investigation of the passage and signature of SB 841, which would allow insurers to surcharge motorists who have had a lapse in insurance coverage or no prior insurance at all. Specifically, the group identified a memo from Mercury’s chief lobbyist as evidence that Mercury and the Governor had met and may have agreed that a substantial donation would be made after the bill was signed. Such an exchange is strictly forbidden and could be prosecuted as a felony.

“We are confident that a full investigation will reveal the facts about these conversations and will likely show that the governor understood that he would be provided with a direct financial benefit – namely a sizable campaign contribution – and that Mercury understood that the company would provide such a donation if Governor Davis signed the Mercury-sponsored bill,” the group wrote.

In the memo, which was circulated to Assemblymembers, Mercury claims that the reasons that Governor Davis vetoed the bill last year “no longer exist,” despite the fact that the bill was virtually the same and did not respond to the Governor’s veto message of 2002. FTCR believes that the promise of massive financial support for the Governor’s effort to fight the recall is the real reason that Governor Davis changed his position, and the sudden infusion of $175,000 from Mercury is the catalyst for FTCR’s letter to the U.S. Attorney.

The group noted that Mercury Insurance has been close to other major scandals. In 2000, the company donated $50,000 to then-Commissioner Quackenbush two weeks after he blocked fines against the company for illegal practices and just month before he resigned in disgrace. Mercury was also associated with the corruption scandal that brought down Senator Alan Robbins and insurance industry lobbyist Clay Jackson a decade ago.

FTCR suggested that a lack of law enforcement of political corruption laws has encouraged Mercury, other contributors and some politicians to become brazen with respect to the ethical and legal obligations of public officials.

In its letter the group concluded: “The integrity of the democratic process depends upon the assurance that public policy cannot be bought and sold.”

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