By Jeff McDonald, THE SAN DIEGO UNION-TRIBUNE 

May 27, 2022

https://www.sandiegouniontribune.com/news/watchdog/story/2022-05-27/campaign-regulators-open-investigation-into-state-insurance-chief

Three years ago, California Insurance Commissioner Ricardo Lara issued a public apology, suspended all fundraising and returned thousands of dollars in campaign donations after The San Diego Union-Tribune disclosed that he broke his pledge to avoid contributions from people he regulates.

“I must hold myself to a higher standard,” Lara said at the time. “I can and will do better.”

 Now the state’s top insurance regulator, who oversees more than $300 billion in annual premiums, is the subject of an investigation by state campaign officials.

The California Fair Political Practices Commission confirmed that it is investigating Lara and four political committees over a series of transactions that a watchdog group says appear to show insurance industry donations were diverted to independent groups working to support his re-election.

“Please be advised that at this time we have not made any determination about the validity of the allegation(s),” the commission wrote in a May 26 letter

The complaint was filed by Consumer Watchdog, the Los Angeles nonprofit that helped pass the 1988 state ballot measure that created the position of an elected insurance commissioner.

The advocacy group is already suing Lara over his office’s refusal to turn over documents requested under the California Public Records Act.

In the lawsuit, Consumer Watchdog accused Lara and the Department of Insurance of illegally withholding records related to the commissioner’s meetings with key donors and insurers.

The state denied the allegations and the case is scheduled to go to trial in Los Angeles Superior Court in September.

According to the Fair Political Practices Commission complaint filed May 19, the LGTB Caucus Leadership Fund took in $122,500 from seven insurance companies between June 2021 and April 2022.

The leadership fund raises money to support lesbian, gay, bisexual and transgender officials. Lara, who is openly gay, is a former vice chair of the committee and remains an ex officio member.

Early this month, the LGBT Caucus Leadership Fund donated $50,000 to Californians Supporting Ricardo Lara for Insurance Commissioner 2022, an independent expenditure committee supporting Lara’s re-election.

It also gave $75,000 to the Equity California political action committee, which made two donations totaling the same amount to the independent expenditure committee working to re-elect Lara.

“The movement of this money from the insurance industry through the LGBTQ Caucus committee in virtually identical dollar amounts and in short periods of time must be investigated by the FPPC,” the complaint states.

“The fact that Equality CA and the LGBTQ Caucus committee moved the exact amount of the insurance industry contributions to the Lara IE committee on the exact same day cannot be a coincidence,” it added.

Neither Lara or his campaign responded to requests for comment about the allegations. The leadership fund treasurer also declined to discuss the case.

The Consumer Watchdog complaint spells out four statutes and regulations the transactions may have violated.

They include prohibitions against campaign money laundering; aiding and abetting a violation of the Political Reform Act; failure to report political contributions; and failure to report contributions to a campaign committee.

The complaint also notes that insurance companies donated a total of $2,000 to the LGBT Caucus Leadership Fund in the five years before Lara declared his candidacy for state insurance commissioner.

Beginning in the 2017-18 election cycle, however, when the former state senator from Bell Gardens announced he was running for California insurance commissioner, insurer donations began flowing into the fund.

Consumer Watchdog said insurance companies donated $27,500 to the LGBT Caucus Leadership Fund in 2017-18; $107,500 in 2019-20; and $122,500 in 2021-22.

The donations made in the current election cycle closely match the $125,000 that was transferred by the leadership fund to the political action committee and independent expenditure committees now subject to the state investigation.

The Union-Tribune reported in 2019 that Lara accepted tens of thousands of dollars from people with ties to insurance companies.

The political contributions were not illegal, but they have been sworn off by candidates and commissioners alike since Chuck Quackenbush resigned as the state’s first elected insurance commissioner.

Quackenbush quit in 2000 facing accusations that he allowed insurance companies to avoid up to $3 billion in claims related to a 1994 earthquake in exchange for more than $12 million in donations that insurers made to a charity he controlled.

Campaign disclosures showed that Lara accepted insurance industry donations within months of being sworn into office.

He initially denied violating his pledge. But within hours of the Union-Tribune report, Lara acknowledged the donations and announced he would return tens of thousands of dollars donated to his campaign.

Additional reporting by the Union-Tribune found that Lara accepted hundreds of thousands of dollars from donors with business interests before his office, and gave back about $80,000.

It also found that Department of Insurance officials intervened at least four times in administrative proceedings to the benefit of donors. 

In an interview with The San Diego Union-Tribune Editorial Board conducted earlier this month, Lara defended his record as insurance commissioner and said he responded to the 2019 reports appropriately.

“Three years ago, I returned contributions that didn’t reflect my values,” he said. “I fired my fundraiser and I stopped fundraising entirely for more than a year to implement a rigorous review process.”

Lara faces eight challengers in the June 7 primary election; the top two vote-getters will compete on the November ballot.