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Commerce commissioner tells his side of insurance settlement
by Michael Khoo, Minnesota Public Radio
March 10, 2003

Former commerce commissioner Jim Bernstein told the Senate Commerce Committee the GOP donation led to a smaller $2 million settlement reached last month with the new Republican administration (MPR Photo/Michael Khoo)

A former commerce commissioner now says officials in Gov. Tim Pawlenty's administration knew of a political contribution from a Florida insurance company prior to their settlement of a claim against the insurer. And he says the donation led to a smaller fine. But Pawlenty officials maintain they had no knowledge of the contribution until press reports last week and negotiated the agreement in good faith.

St. Paul, Minn. — Former commerce commissioner Jim Bernstein says the Ventura administration was on the verge of announcing a $3.5 million fine against American Bankers Insurance for illegally selling credit-protection insurance. But Bernstein says last summer the company mysteriously backed out of negotiations. Shortly afterwards, Bernstein says he was shown a letter from the state Republican Party thanking the company for $10,000 campaign donation. The company contributed a similar amount to DFL interests.

Bernstein told the Senate Commerce Committee the GOP donation led to a smaller $2 million settlement reached last month with the new Republican administration: "And I happen to believe in this case, and I will always believe in this instance, that this particular arrangement does not pass the smell test. That there is too many -- quote -- 'coincidences' to make it a coincidence. That in fact this was an arrangement, this was a deal that was done. This company received preferential treatment."

Bernstein also told committee members that new commissioner, Glen Wilson, was aware of the contribution and had seen the thank-you letter before agreeing to the smaller fine. Pawlenty administration officials have denied that claim, but Bernstein says he was personally told by DFL Attorney General Mike Hatch that Hatch had presented the letter to Wilson.

This company is now going to be out of the state of Minnesota. We didn't see that during that last administration. - Rep. Brian LeClair, R-Woodbury

A spokeswoman for Hatch says he's withholding comment until Wilson completes his testimony later this week. But Wilson categorically denied any knowledge of the contribution and he defended the $2 million settlement, which also revoked the company's license for five years.

"I was told by staff that the most important thing that we do was to have this company -- close the door on them, so that the consumers were protected," Wilson said. "That was the number one goal that we had. We got that done. I feel good about the entire settlement."

A Pawlenty spokesman says the governor stands behind Wilson.

An attorney for American Bankers Insurance also contradicted Bernstein. Tim Thornton says there was never an agreement to accept the larger $3.5 million penalty. Thornton says that the company was in fact winning its arguments in court and saw no reason to agree to such a stiff fine.

"More importantly, what Mr. Bernstein and what the press has overlooked, repeatedly, is what happened in court," Thornton said. "Again and again and again, the department lost before Ramsey County. It lost before the administrative hearing examiner. We were winning this litigation."

But committee Chair Ellen Anderson, DFL-St. Paul, says the company's legal victories didn't touch on all of the alleged infractions. She says she's concerned the final agreement with the Pawlenty administration was too light, even if it wasn't the result of influence-peddling.

"There's a lot of suggestions that have been made that this administration and this department will go easy on insurance companies even if they're breaking the law," Anderson said. "And that is a very serious concern that goes beyond whether there was campaign contribution made or not made."

	Commerce commissioner Glen Wilson

Sen. Brian LeClair, R-Woodbury, scoffs at that assessment. He notes the fine was the largest ever levied against an insurance company in Minnesota history: "Commissioner Wilson comes in and get $2 million. That's more than we could have gotten from commissioner Bernstein. And they're out of the state of Minnesota. That's the good news for the consumer. Is that this company is now going to be out of the state of Minnesota. We didn't see that during that last administration. We have that here in this administration. And I applaud the commissioner -- commissioner Wilson -- for doing it."

The committee will resume testimony on Wednesday. Pawlenty has called for a separate bipartisan investigation, but Senate Democrats have yet to accept that invitation.

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