in Houston, Texas

Head of Texas windstorm agency dismissed amid state takeover and fraud investigation of TWIA

Monday, Feb 28, 2011, 09:22PM CST
By Steve Miller
Galveston after Hurricane Ike

The top leader of Texas' state-operated property insurance agency has been dismissed amid a fraud investigation of the insurer by state and local authorities.

 

Jim Oliver, general manager of the Texas Windstorm Insurance Association, will remain in his position and assist in the search for his replacement, which is to be completed "as quickly as possible," according to a resolution passed by the TWIA board at an emergency meeting Monday.

 

The agency has been in turmoil, coming under scrutiny by state lawmakers following Texas Watchdog's reporting on severance packages awarded by the agency and on legislators who have benefited from legal payouts by TWIA to resolve Hurricane Ike claims.

 

All but 25 minutes of Monday's four-and-a-half-hour meeting was spent in executive session, as the board labored under the announcement that the agency has been placed under administrative oversight by the Texas Department of Insurance. For the first three hours of the closed session, Oliver was in the room, but he left as the panel discussed his future. He was present when it was announced he would be replaced but did not comment.

 

In addition to the replacement of Oliver, the board announced it will form a committee "composed of board members to conduct or hire a consultant to conduct an investigation of claims handling practices of TWIA," said attorney Mike Perkins, of Sneed, Vine & Perry, outside counsel for TWIA.  

Additionally, the board decreed that there will no longer be in-kind payments made to employees as part of a severance package. This stems from the revelation in a Texas Watchdog story that a fired vice president, Reggie Warren, was given a 2010 Ford pickup truck in addition to $114,000 as his severance.

 

As the board decided on new policy, agents from the Department of Insurance worked at TWIA headquarters in Austin, examining records that may further its claim that the agency is riddled with serious problems.

 

The Department of Insurance decided to take over after concluding that TWIA management was not up to the job, according to a letter to Oliver:

The Texas Windstorm Insurance Association is in a condition that makes its continuation in business hazardous to the public or to its policyholders, as it appears that its management does not have the experience, competence, or trustworthiness to operate TWIA in a safe and sound manner. ... TWIA has failed to adequately address issues identified through the recent financial examination and subsequent financial analysis indicating a lack of adequate controls over accounting, personnel, and material decisions affecting day-to-day operations, as well as communications with staff, the board of directors and the Department.

Among the department's findings: TWIA paid outside claims adjusters for work that was not performed, and TWIA was aware of this and failed to report it to the appropriate state fraud unit. The finding prompted the state Insurance Department officials to refer some of their findings to the Travis County District Attorney’s office regarding possible fraud charges.

 

Today's meeting was fallout from last week’s legislative hearing before the House Insurance Committee over questionable actions at TWIA, including the murky circumstances regarding the firing of Warren and Bill Knarr, another high-ranking claims employee.

 

“Jim Oliver testified for two hours and faced harsh criticism,” TWIA board chairman Garry Kaufman said in a brief statement at today’s meeting. “Less than 24 hours later, TDI was coming to the commission to begin a targeted examination of TWIA regarding the employment of two employees, Reggie Warren and Bill Knarr.”

 

Warren and Knarr were fired at the end of December, according to committee member Craig Eiland, although Oliver has maintained they left voluntarily.

 

Warren received severance of the pickup truck and $114,000, while Knarr got $47,000, records obtained by Texas Watchdog show.

 

At last week's hearing, Oliver was asked about the circumstances of the firings, but claimed he could not discuss it because of a “confidentiality agreement” that was signed by both parties. He said the agreement was made in case the testimony of either employee would be needed down the road. TWIA is embroiled in numerous lawsuits regarding claims related to Hurricane Ike.

 

“When I was reviewing the issues that ultimately resulted in these two employees no longer working with TWIA, I sat down with claims attorneys and asked what would be the consequences of terminating these employees concerning ongoing litigation,” Oliver told the committee. “In discussing that, it was clear I needed to take the action that I took. However, it was also clear that we needed the cooperation of these two in the event that we needed them for depositions, trial and, in Mr. Warren's case, on policy issues he may have been involved with during Hurricane Ike and Dolly.”

 

Oliver said the truck and payments to the departed employees were “not uncommon" and overall, the payments and the confidentiality agreement were "the correct action."

 

Also in that committee hearing, Texas Insurance Commissioner Mike Geeslin testified about an assessment his department conducted of TWIA's operations 2006 through 2008. The department found the agency had numerous problems.

 

The report cited problems with personnel management documentation, poorly kept board minutes, mismanaged oversight of Oliver’s expenditures, failure to maintain a required log of claimant complaints, and a disaster recovery program that failed to outline the responsibilities of senior management.

Texas Watchdog began its reporting on TWIA late last year with a story on a $25,000 campaign donation from Democratic mega-donor and plaintiff's attorney Steve Mostyn's firm to state Rep. Todd Hunter, R-Corpus Christi, who mediated a slew of lawsuits filed against TWIA for Ike damage. The donation was recorded within days of Hunter being chosen as mediator, Texas Watchdog has found.

Hunter has said the donation "had nothing to do with the mediation."

Public records pointed to the firings of Warren and Knarr and their severance deals.

Texas Watchdog has also reported on the more than $620,000 in fees that Eiland, who sits on the House Insurance Committee, said he received from plaintiffs in the Ike case that Hunter mediated. Eiland has said his fees from TWIA-insured homeowners have no effect on his ability to vote fairly and impartially on measures affecting the agency.
 

***

Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.org.


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Photo of Galveston following Hurricane Ike by flickr user simminch, used via a Creative Commons license.

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