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DFLers say donation to GOP got insurance company off the hook
by Michael Khoo, Minnesota Public Radio
March 5, 2003

Pawlenty chief of staff Charlie Weaver says there's no evidence there was ever an agreement for a $3.5 million settlement that was later negotiated downward by Pawlenty officials. (MPR Photo/Michael Khoo)

Officials in Gov. Tim Pawlenty's administration say there's no substance to reports that a Florida insurance company received favorable treatment in return for campaign contributions. The company -- American Bankers Insurance -- also denies any wrongdoing connected to its political donations. But Democratic leaders in the Senate say they'll press for an investigation into the matter.

St. Paul, Minn. — Former commerce commissioner Jim Bernstein says he was close to reaching a $3.5 million settlement with American Bankers Insurance over charges that the company sold illegal credit-insurance policies. But Bernstein says late last summer the company mysteriously withdrew from negotiations. Shortly afterwards, Bernstein says he came across a letter from state Republican Party Chair Ron Eibensteiner thanking the company for a substantial campaign donation to the state GOP.

An equal donation was given to DFL interests. But when the new Republican administration reached a final settlement for $2 million, Bernstein says he suspected the company had been given special treatment.

"I think we have to look at the sequence of events and look at the evidence that's out there -- certainly the letter from Mr. Eibensteiner, certainly the original consent order and the final consent order -- and say it sure looks like this is what happened. And I think reasonable people will conclude that there was a payoff here," he said.

	Sen. John Hottinger

State Republican officials were unavailable to comment on the matter, but Pawlenty chief of staff Charlie Weaver says there's no evidence there was ever an agreement for a $3.5 million settlement that was later negotiated downward by Pawlenty officials.

A spokesman for American Bankers Insurance says although proposals were traded, no one ever signed off on a final agreement until after Pawlenty took office. Furthermore, Weaver says Pawlenty's Commerce Department officials who settled the case last month were completely unaware of any campaign donations.

"He (Bernstein) has no basis to make the kind of comments he made. And he knows better," Weaver said. "Second, I think it's ironic that he complains about this settlement but he couldn't get the deal done himself. He's complaining that somehow this was a bad deal, but he wasn't able to manage to settle this on behalf of taxpayers."

But DFLers aren't ready to let the matter rest. Senate Democrats say they'll investigate the matter during as yet unscheduled hearings.

If that arena requires that we make contributions, we will do it. - Jim Sykes, American Bankers Insurance

Sen. Majority Leader John Hottinger, DFL-Mankato, says it's not enough to accept the explanations of the Republican Party, the Pawlenty administration, and American Bankers Insurance.

"I think it's our responsibility to the people of Minnesota and the integrity of this campaign system to make sure that we look more closely than that. I haven't run across in any state where I've looked that people at the first blush acknowledge that there's a connection. But the job of investigating is to get to the truth and not just accept blanket statements," he said.

Hottinger also says he's worried about the insurance company's apparent end-run around Minnesota campaign finance laws. State law prohibits direct corporate contributions to candidates and state parties. To skirt that regulation, American Bankers Insurance made separate $15,000 donations to national Republican and Democratic committees.

Company spokesman Jim Sykes says those payments were then funneled to Minnesota to benefit Pawlenty's campaign and that of his DFL rival, former Senator Roger Moe. Sykes says he doesn't believe the company violated any campaign finance laws.

"The political support process is very complex. And if you're a company like ours that has to do business in 50 states, deal with 50 regulators, we have to operate in that arena. And if that arena requires that we make contributions, we will do it," he said.

The final settlement, reached last month, charges American Bankers Insurance $200,000 in civil penalties and $1.8 million to cover the costs of the investigation. Sykes says that's a considerable amount -- and chief of staff Weaver says it's as much as three times larger than any previous settlement against an insurance company.

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