in Houston, Texas
texas windstorm insurance association
Texas windstorm agency TWIA knew of potential fraud by relative of agency official, failed to report it: State insurance investigation
Thursday, Apr 07, 2011, 11:56AM CST
By Steve Miller
Galveston after Hurricane Ike

Officials at the Texas Windstorm Insurance Association were aware that a claims adjuster -- whose brother-in-law was a high-ranking official at the association -- had filed potentially fraudulent claims, but they failed to report it to the state, according to an investigation report by the Texas Department of Insurance.

 

Instead of reporting the alleged fraud, then-TWIA General Manager Jim Oliver fired the high-ranking official and another key employee in claims handling, then consulted with a team of lawyers and asked Deloitte & Touche to audit the potentially fraudulent claims.

 

The alleged fraud stemmed from the work of the brother-in-law of Bill Knarr, catastrophe office manager for TWIA, according to a summary report of the insurance department investigation obtained by Texas Watchdog. Neither the brother-in-law, now deceased, nor his firm are named in the report.

 

The report does not confirm or refute the fraud allegations, which are also the subject of a Travis County District Attorney’s investigation. Instead, it chronicles the events that led to the firings of Knarr, Oliver and Reggie Warren, vice president of claims.

 

Warren was aware that claims being processed by the brother-in-law were possibly fraudulent by Dec. 15, when a claims supervisor came to him with concerns, according to the supervisor's written statement summarized in the investigation report. Warren failed to notify Oliver, but the claims supervisor raised the issue with him directly on Dec. 22, Oliver told investigators.

 

Among the problems with the brother-in-law's work, as documented in the supervisor's statement, was "a lack of documentation to support the claim payments and billing for services that may not have been provided by the adjuster," the investigation report says.

 

As part of the audit, Deloitte reviewed 34 of 169 claims processed by the brother-in-law. Overall, the insurance operation that employed the brother-in-law processed more than 8,000 claims, the report states. 

 

No names of individuals other than Oliver’s are used in the report; Warren and Knarr are referred to by title only. While the firm is not named, the report says that Knarr had previously been employed by the adjusting firm in question for more than 30 years before coming to work for TWIA in May 2007. A TWIA e-mail record from that year says Knarr came to the agency from GAB Robins, an international claims management company. Calls to GAB were not returned.

 

Warren did not return a call, and Knarr could not be reached for comment. Oliver said he had not seen the report and therefore declined to comment.

 

In an interview with TDI investigators, Oliver said that between Dec. 22 and Dec. 27, “he spoke to the association’s board members as well as outside legal counsel before reaching the decision to terminate” Warren and Knarr. Oliver told investigators that the reason for the firings was for failing to disclose Knarr’s family relationship with the claims adjuster.

 

The report notes that Warren received $114,273 in cash and a 2010 Ford pickup truck and Knarr got $47,289 as severance, as previously reported by Texas Watchdog. Oliver was fired late last month, and his severance will be part of business discussed in TWIA board meetings next week in Austin.

 

The report notes that despite the audit, the allegations and the firings, Oliver never reported the possibility of criminal activity to the state.

 

According to the association’s compliance handbook, “a person should report suspected fraudulent activity to the department not later than the 30th day after reasonably suspecting that a fraudulent act has been committed,” the report states. “As of February 23, 2011, a report had not been made.”

 

On Feb. 24, the Department of Insurance became aware of the troubles at TWIA and contacted the state auditor’s office “regarding the reasonable appearance of fraud, in the handling of some of the association’s claims,” the report says.

 

TWIA was placed under administrative oversight on Feb. 28. On that date, Oliver refused to sign a document provided by TDI, called a letter of representation, affirming that all documentation asked for by investigators was provided. It was not until the report was completed in late March and after he was terminated that Oliver did sign an "amended letter of representation," according to the report.

 

The Deloitte review, which has not been released, was handed over to the Travis County District Attorney’s public integrity unit and to the Department of Insurance's fraud unit.

 

The association has previously come under criticism for doing business with employees' family members. In 2009, Houston plaintiff's attorney Steve Mostyn alleged in a lawsuit that Warren had directed adjusting business to a firm where his brother and son worked, Brush Country. The lawsuit also said Warren had been offered improper gifts from adjusters. Speaking in a House committee hearing in February, Oliver said the allegations had been investigated and that Warren "did not accept any bribes."

 

***

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


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Photo of damage to Galveston from Hurricane Ike in 2008 by flickr user simminch, used via a Creative Commons license.

Ousted state windstorm chief to get year's salary, pension; TWIA head rented luxury cars, stayed at pricey hotels on agency dime
Friday, Mar 25, 2011, 07:49AM CST
By Steve Miller
table

Deposed TWIA chief Jim Oliver will receive his annual $330,000 salary for another year and is also eligible for a company pension, according to records obtained by Texas Watchdog.

 

Oliver was fired Tuesday, three weeks after his agency was placed under administrative oversight by the Texas Department of Insurance and an investigation was launched by the state and the Travis County District Attorney’s office into possible fraud at TWIA related to payouts for Hurricane Ike.

 

Also under investigation are the firings of two key claims employees, who were ousted in December with tens of thousands of dollars in severance pay, as well as a 2010 pickup truck.

 

Records show that Oliver, who came to the agency in July 2000 after working for four years at the Auto Club Insurance Association in Dearborn, Michigan, enjoyed his official status, staying at the Four Seasons in Austin, renting luxury cars and ringing up pricey restaurant tabs.

 

As TWIA tangled with trial lawyers over a class-action Hurricane Ike suit in late May, Oliver picked up the tab for a $297 dinner at Ruth's Chris Steak House in Austin, where he dined with state Rep. Todd Hunter, who was mediating the case, and two others. Three nights later, Oliver paid $311 for a meal for himself, Hunter and TWIA lawyer David Weber at McCormick & Schmick's in Houston. 

 

In Houston in June, Oliver dined with TWIA staffers and plaintiff's lawyers Steve Mostyn and State Rep. Craig Eiland at Damian’s Cucina Italia and ran up a $480 bill.

 

"That particular $480 bill was only for our staff," Oliver said in an interview Thursday. "Mostyn and Eiland paid for theirs separately."

 

Oliver stayed at the Four Seasons in Houston for two nights on two separate occasions at a cost of $552 each stay, and rented cars in Austin on several occasions.

 

The rates were favorable, he noted, $210 a night, but the decision of where to stay was his.

 

"There is no requirement [to shop rates], but we used common sense," Oliver said. "You wouldn't pay $300 or $400 a night. We got a special rate for that mediation in Houston. Now that might be someone else's choice to say that we don't stay there, but we try to set special rates."

 

In September, he rented a luxury car at a rate of $73.99 a day for four days. All of the rentals were out of the Avis outlet on Burnet Road in north Austin, 14 miles from TWIA’s offices on MoPac Boulevard. The rentals transported Oliver and staffers to board meetings, he said, and the larger-sized cars were needed to accommodate the people and papers. 

 

"These were for trips to Galveston and Corpus Christi, and I drove," Oliver said."I rented cars only when we had board meetings instead of flying, so we didn't all have to rent cars, we figured out that we saved about $800, it was a lot simpler and less expensive. And that also applies to the mediation in Houston."

 

He said his personal cars are not large enough to take four people and the files needed for the meetings. 

 

The Texas Department of Insurance is expected to issue a preliminary report on the status of the agency's administrative oversight of TWIA in the next week.

 

***

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


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Photo of 'Table Setting' by Flickr user Tracy Hunter, used via a Creative Commons license.

Texas windstorm agency fires general manager; TWIA agency in turmoil
Wednesday, Mar 23, 2011, 07:59AM CST
By Mark Lisheron
Hurricane Ike

Making good on a decision it made in February, the Texas Windstorm Insurance Association board of directors Tuesday night fired its general manager, Jim Oliver, effective immediately.

The board replaced him with Randy Wipf, vice president for underwriting and agent services and a longtime Association employee, until a permanent replacement can be hired.

Earlier in the day, the board voted to hire IPS Search Inc., a Chicago-based company with windstorm and disaster personnel experience, for a national canvass for candidates to succeed Oliver. James Evan Cook, president of IPS Search, told the board Tuesday he would return to it with a list of prospective general managers by April 11.

Oliver, who took over the helm of the 40-year-old quasi-governmental insurance agency 11 years ago, declined to discuss his sacking by the board. Board members, after meeting in closed session for five hours, voted in public to replace Oliver, but issued no statement about their decision.

The replacement of Oliver comes after a tumultuous six months punctuated by legislators questioning the legitimacy of a state-backed agency providing insurance for homeowners and businesses in the state’s 14 coastal counties. Rep. John Smithee, chairman of the House Insurance Committee, and Rep. Larry Taylor, a member of the committee, have filed bills that would significantly reform the windstorm association.

In particular, both lawmakers have expressed concerns that in the wake of Hurricane Ike, the state’s charter for the windstorm association allowed for at least $140 million in lawsuit settlements. Both bills ask for curbs on settlements and deadlines for filing claims.

An inquiry about the legal fees paid in the settlements ignited a fight between Tayor and lawyer Steve Mostyn, whose Houston law firm has been a foremost beneficiary. Taylor, a Republican insurance company owner in Friendswood, has profited from policies sold for the windstorm agency.

Mostyn’s involvement was further complicated by his donating $25,000 to the campaign of Rep. Todd Hunter, R-Corpus Christi, who was not only a former lobbyist for the windstorm association but served as the mediator for the Hurricane Ike bloc settlement of at least $140 million that drew Taylor’s attention.
 
***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org.

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Hurricane Ike satellite image by flickr user NASA 's Marshall Space Flight Center, used via a Creative Commons license.
State windstorm agency’s alleged bungling of Hurricane Ike claims detailed for legislators; insurance chairman Rep. John Smithee ponders dismantling TWIA
Wednesday, Mar 16, 2011, 11:13AM CST
By Mark Lisheron
Texas state Capitol

After listening to dozens of stories of people ignored, denied, shortchanged and defrauded, as more than one person alleged, the chairman of the House Insurance Committee wondered aloud if it wasn’t better just to shut down the Texas Windstorm Insurance Association.

Five hours of testimony, much of it provided by people bused in from all over the state, offered lurid substantiation to the claims of the chairman, Rep. John Smithee, who referred to the association at different points as a house of cards, an unworkable system and a fraternity - with apologies to some of the fraternity members Smithee knows.

What’s more, in spite of a complete board shakeup within the past year, the board recommending the general manager be fired, two top managers leaving, the Texas Department of Insurance taking over and a fraud investigation by the Travis County District Attorney’s Office, Smithee said he isn’t sure that anything has improved with the Windstorm Insurance Association.

“What we’re dealing with over there is a house of cards,” an exasperated Smithee said during the Tuesday hearing. “I’m really concerned about this whole deal. We’re dreaming to think we have any funds to pay claims for a major storm.”

John SmitheeSMITHEE
What also became clear, from the the expert witness and committee member statements, including those of Smithee, R- Amarillo, is that no one has an idea what the homeowners in 14 coastal counties would do if the quasi-government agency that is the sole windstorm insurance provider went away.

“I think the state made a significant mistake 40 years ago when it got into the windstorm insurance business,” Bill Peacock, director of the Texas Public Policy Foundation’s Center for Economic Freedom, testified. “You are never going to fix this system.”

Compounding the legislative frustration were the impassioned accounts of homeowners who told the committee they turned to lawsuits as a last resort when the association either ignored or denied their claims.

Rep. Larry Taylor, R-Friendswood, who has for months been looking into TWIA’s conduct, told a full house at the Capitol extension hearing room that in addition to at least $140 million in legal settlements so far, he had been told the association was no longer mediating claims and paying out whatever was being asked for by the attorneys for homeowners.

Taylor and Smithee have both introduced bills to reform TWIA, to curb what they say are unsustainable legal costs and to force the association to make public its management decisions and its salaries.

Larry TaylorTAYLOR
“I’ve been told that right now the mediation process is somewhat of a sham, that TWIA is paying out whatever a lawyer asks for,” Taylor said. “What I want to know, are we still giving away the store? I want to make sure the people who need to be paid are paid, but we don’t need to be paying any more than we are supposed to be paying.”

Steve Mostyn, whose Houston law firm got a substantial piece of the $140 million, organized hundreds of clients, chartered buses for them from Houston, Galveston and elsewhere and outfitted them in red T-shirts that read, “Don’t Help TWIA Commit FRAUD. Reform Them. Don’t Protect Them,” on the back.

Mostyn, whose dispute with Taylor over settlement records was decided by the Texas Attorney General’s office in favor of Taylor, hauled in a cardboard document box out of which he pulled an outline of what he said were 3,823 complaints about TWIA made to the Texas Department of Insurance.

In the slipshod or absence of appraisals, the underpayment or non-payment or outright denial of claims, TWIA carried out “the systematic defrauding of these homeowners,” Mostyn told the committee. “They fought us like nobody ever fought us. They were going to crush us, and they almost did.”

Mostyn objected to the proposals in Taylor and Smithee’s bills to use binding arbitration to settle cases rather than allowing homeowners a state constitutionally guaranteed right to a jury trial.

During the hearing, Taylor said he was willing to consider an alternative to binding arbitration. After the hearing, Smithee, too, said he was no fan of binding arbitration.

“But I know we can’t afford another round of litigation like we just had,” he said.

Steve Quibedeaux of Bridge City, said he had to wait until Hurricane Ike hit before TWIA finally paid him for Hurricane Rita damage.

Quibedeaux, who testified before the committee, said he came to think that TWIA wasn’t in the business of settling claims and making him whole, but in the business of beating him up over the terms. At first reluctantly and, finally, gratefully, Quibedeaux turned to Mostyn for help.

“I’d rather give my money to a lawyer,” Quibedeaux said, “than to have somebody steal it from me.”
 
***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org.

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Photo of Texas state Capitol by flickr user The Brit_2, used via a Creative Commons license.
Texas state legislators make big bucks off TWIA windstorm agency: Houston Chronicle overview following up on Texas Watchdog reports
Monday, Mar 14, 2011, 02:09PM CST
By Mark Lisheron
Capitol dome

The mounting woes of the Texas Windstorm Insurance Association, reported by Texas Watchdog since last fall, were recounted in an overview Sunday by the Houston Chronicle.

The filing of a reform bill, House Bill 2818, late last week by Rep. Larry Taylor follows months of investigation, legal challenges and punitive actions involving the quasi-state agency that oversaw a $158 million insurance settlement with owners of property damaged or destroyed by Hurricane Ike.

The Texas Department of Insurance has taken over the association after determining that its continued operation was “hazardous” to its policyholders. The Travis County District Attorney’s Office is investigating whether the association committed fraud in its processing of Hurricane Ike claims.

In the wake of investigations, the association board recommended that general manager Jim Oliver be fired, while two of its top employees left, taking with them handsome severance packages that included a 2010 pickup truck.

The Chronicle story focuses on the profit earned in the Ike settlements by four of the nine House members who sat on that body’s insurance committee in 2009-10, including Rep. Craig Eiland, D-Galveston, who has said he made more than $620,000 in legal fees.

The story says Eiland’s and six other law firms split another $11.5 million of legal fees awarded in a separate Ike lawsuit settlement. In an e-mail to the Chronicle, Eiland said his legal and legislative work, although concerning the matter, were not in conflict.

"I represent people individually at the courthouse, and I represent two counties collectively at the Capitol," he wrote. "Representatives of the 14 (Texas) coastal counties are vigilant regarding TWIA's funding and rate issues. Since there have been no significant storms prior to Ike, 'claim issues' have never really been a big part of the discussions."

Taylor, co-chair of the Joint Windstorm Insurance Legislative Oversight Board, is also an insurance agent who made more than $300,000 in premiums on Windstorm Insurance Association policies over a four-year period, a tally uncovered by KHOU 11 News. Taylor, R-Friendswood, has defended his business dealings from conflict of interest charges and helped begin the review of the association by asking for settlement records back in November.

Rep. Todd Hunter, R-Corpus Christi, also a committee member, earned at least $65,000 for acting as a mediator in the Ike settlement, according to the Chronicle. (Records combed by Texas Watchdog showed a lower figure, $60,000.) Hunter, the former paid association lobbyist, was chosen to mediate the case within days of receiving a donation of $25,000 from the Mostyn Law Firm, one of the leading Ike settlement law firms.

Rep. John Smithee, R-Amarillo, chairman of the insurance committee, said he was unaware and surprised by the number of the committee members with ties to the association. Smithee has filed two of his own Windstorm reform bills.

"There is a bit of a public perception problem when you have a quasi-state agency overseen by legislators and some legislators have involvements with it,” he said. "At the very least, you need total transparency where the public can go and see what's going on with their officials and perhaps have some prohibition of where a legislator could make money off of TWIA."

A critique of the Chronicle story can be found at blogHouston.

***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org.

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Photo of the Texas state Capitol dome by flickr user Kumar Appaiah, used via a Creative Commons license.
Rep. Larry Taylor files bill to rein in Texas windstorm insurer TWIA
Friday, Mar 11, 2011, 03:21PM CST
By Mark Lisheron
Texas state Capitol

Rep. Larry Taylor has filed a bill that would, along a broad front, attack excessive legal fees and force greater transparency by the troubled Texas Windstorm Insurance Association.

House Bill 2818 is the latest in a months-long effort by the co-chair of the Joint Windstorm Insurance Legislative Oversight Board to reckon with what he said have been litigation abuses and management and administrative lapses by the quasi-state agency providing hurricane coverage for some Texas homeowners.

Taylor, R-Friendswood, has lately been joined in his scrutiny of the agency. The Travis County District Attorney’s Office recently began an investigation into allegations of fraud in the Hurricane Ike claims process. The Texas Department of Insurance assumed control of the agency, expressing a lack of faith in its commitment to its policyholders.

Texas Watchdog investigations into TWIA revealed that several state legislators had profited handsomely from the windstorm association settlements, and that two former top claims employees had received severance packages totaling $160,000 plus a pickup truck. Under fire, the TWIA board sacked its general manager, Jim Oliver, last month, pending a final vote in a couple weeks.
Larry TaylorTAYLOR

Taylor’s own insurance company made hundreds of thousands of dollars selling policies from the insurer, which raised questions of a conflict of interest that Taylor has vigorously denied and labeled political. Taylor has said the fees, set by the state, are high because of inefficiencies at TWIA.

Taylor said his bill was necessary to restore credibility to the windstorm association and insure that its trust fund is solvent.

In light of the budgetary crisis that confronts the Texas Legislature, all aspects surrounding the payout of hundreds of millions of dollars in insurance losses must be scrutinized if Texas policymakers are to make sound fiscal decisions going forward,” Taylor said in a statement announcing the filing of HB 2818.
 
***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org
.

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Photo of money by flickr user athrasher, used via a Creative Commons license.
State windstorm insurer TWIA doled out bonuses to vice president weeks before his firing and to agency head, set to be replaced
Thursday, Mar 10, 2011, 09:44AM CST
By Steve Miller
cash

As the Texas Windstorm Insurance Association paid out tens of millions in a Hurricane Ike lawsuit last year, records show it handed out five-figure bonuses to the same officials who had overseen the agency and its claims process - a process so flawed it cost the agency $158 million in the settlement with policyholders.

 

According to TWIA records on bonuses for 2010 obtained by Texas Watchdog:

  • Claims Vice President Reggie Warren received a bonus of more than $22,100 on Dec. 10, less than three weeks before he was fired.

  • General Manager Jim Oliver received $88,100, an additional 25 percent over his base pay of $330,000 and the largest bonus awarded. He is set to be replaced, pending a final board vote this month.
  • David Weber, vice president of legal, received $10,300 for his work, which included meeting with plaintiff's and TWIA legal teams to negotiate the multimillion-dollar Ike settlement, after policyholders successfully argued they had been shortchanged by the insurer.

Many private companies also have such plans, though TWIA is a quasi-public agency. As with private plans, the method for determining the bonuses at TWIA is based largely on market comparisons, according to documents received by Texas Watchdog.


But the bonuses came shortly before a period of crisis for TWIA, with the Travis County district attorney investigating possible fraud at the agency and the Texas Department of Insurance taking it over after concluding the insurer lacked the experience and trustworthiness to serve policyholders. TWIA has come under scrutiny by state lawmakers following Texas Watchdog's reporting on severance packages awarded by the agency and on legislators benefiting from TWIA's legal disputes following Hurricane Ike.


The Department of Insurance had found management and oversight problems at the agency as early as 2009, in a report which noted a sharp drop in income "due to substantial loss and loss adjustment expenses incurred from Hurricanes Dolly and Ike." 


But the agency doled out cash bonuses in December as if things were sailing smoothly.


If a company is on the brink of possible financial trouble, “what you should be doing is throwing a life preserver, not paying a bonus,” said Paul R. Dorf, managing director of Compensation Resources Inc., a New Jersey-based compensation consultancy.


Dorf said his company designs incentive plans with a “circuit breaker” that kicks in when a company is on a watch list. “And in the case of some kind of financial meltdown, they are not allowed to pay bonuses."


Warren's bonus was more than double his $10,600 payment for the previous year, and was approved shortly before a claims adjuster reported possible problems with payments Warren approved, according to the Department of Insurance.


Oliver said that Warren was rated by the established bonus criteria, and his bonus reflected that. Oliver said the circumstances that led to Warren's dismissal were uncovered in the weeks after he received the bonus.


“He was under fire by plaintiff lawyers, but we have to take some of that with a grain of salt,” Oliver said, referring to court filings that hinted at pay-to-play schemes and gifts offered by claims adjusting companies. Oliver has said those allegations were false.


“So we rated him according to the criteria we have, the processing of claims and so on," Oliver said. "The actual issues with integrity were not uncovered until, well, December 15th is when the examiner raised them, and the 22nd is when they were reported to me.”


Warren was dismissed Dec. 27.


Warren and another claims employee, Bill Knarr, were fired in December and given severance packages, including a 2010 Ford truck for Warren. Knarr did not receive a bonus in December, though he did for 2009, records show.


According to documents received by Texas Watchdog, the payments have been determined since 2003 through an Austin consultancy group, Compensation and Organization Solutions


On its website, the group features words of praise for its work from Oliver, who was forced from his position last week pending final TWIA board approval. The owner of the compensation group, Constance Mullen, could not be reached for comment.


The objective of the bonus plan is “to support TWIA’s continued ability to attract, motivate and retain productive employees by ensuring that TWIA’s salaries and benefits are market competitive as well as appropriate for the organization’s strategic objectives, structure, employee demographics and structure,” according to the documents.

 

***

Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.orgRead all of Texas Watchdog's reports on the troubled Texas Windstorm Insurance Association. Search TWIA at texaswatchdog.org.


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Photo of money by flickr user aresauburn, used via a Creative Commons license.

Travis County DA investigating allegations of fraud at state insurance agency TWIA
Monday, Mar 07, 2011, 02:36PM CST
By Steve Miller
Hurricane Ike

The Travis County District Attorney’s public integrity office, together with two state agencies, is probing possible fraud stemming from payments following Hurricane Ike by the Texas Windstorm Insurance Association.
 
The office, with the Texas Department of Insurance fraud team and the Texas State Auditor’s office, is looking into allegations that a Hurricane Ike claims adjuster was paid for work that was not done, and that claims were paid based on that outside adjuster’s say-so, an assistant DA confirmed in an interview. The investigation is also seeking specifics on the dismissals in December of two high-ranking claims employees at TWIA, Reggie Warren and Bill Knarr.
 
Both employees were given generous severance packages, first reported on by Texas Watchdog. TWIA boss Jim Oliver last month told the Texas Legislature’s House Committee on Insurance that the packages – which included a 2010 Ford pickup truck for Warren -  were to ensure the two would cooperate in any lawsuits against TWIA or other issues down the road.
 
Oliver initially said the two resigned, but others have confirmed that they were fired.
 
The investigation is focused on Ike claims, but a broader look at the office is also part of the sweep.
 
“Right now, it is most likely this investigation is dealing with Ike claims, but we do need to look at the whole thing,” said Gregg Cox, assistant district attorney in the public integrity unit. “We’re looking at all possible wrongdoing that might have occurred.”
 
Last week, TWIA was placed under administrative oversight by the state insurance department, which uncovered the potentially fraudulent payments. The TWIA board announced that Oliver would be replaced, pending a final vote later this month.

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

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Photo of Hurricane Ike path by flickr user eschipul, used via a Creative Commons license.
Galveston Mayor Joe Jaworski mediating Ike cases involving county, state property insurer TWIA
Monday, Mar 07, 2011, 11:24AM CST
By Steve Miller
Galveston after Ike

Galveston Mayor Joe Jaworski has mediated two cases in which Galveston County sued the Texas Windstorm Insurance Association over Hurricane Ike claims, and he is positioned to mediate a number of other county claims against the insurer if they go to court, the head of TWIA said.


Jaworski received two checks totaling $3,000 for Galveston County cases settled earlier this year, records obtained by Texas Watchdog show -- making him the latest high-profile official to benefit from the legal fallout of Hurricane Ike.

 

In cases currently in negotiation, the county is represented by state Rep. Craig Eiland, and Jaworski is also a party, said Jim Oliver, general manager of TWIA. If the cases turn to legal action, Jaworksi is in place as mediator.

“Yes, he would be a mediator for that, the mayor of Galveston,” Oliver said in an interview last week. “He has been the mediator on some cases, and he could be on those.”

Jaworski is on a list of 10 possible mediators for Galveston County cases, according to district clerk's records. He did not return calls to his cell phone and office.

Oliver said the county has not filed suit, but "we have been discussing that case with the lawyer involved, Mr. Eiland. We are really just meeting with Eiland and his adjuster ... and talking about what we think might be wind damage that remains that we didn't pay for.


"I can't give you details because we do have an agreement not to disclose."

Joe JaworskiJAWORSKI

Jaworski comes from a long and storied political traditionHe won the mayor's post last May, after a failed 2008 state Senate bid and three terms on the Galveston City Council.

But the Democrat is not the only political heavyweight who has benefited financially from the legal wrangling in the wake of Hurricane Ike.

 

A multimillion-dollar lawsuit boosted the fortunes of other power brokers: Eiland says he made more than $620,000 in fees as a plaintiff's lawyer; Republican state Rep. Todd Hunter raked in $60,000 in fees by mediating the case; and Democratic mega-donor Steve Mostyn numbered among the plaintiff's lawyers paid a total of $87 million, though it's not clear what Mostyn made individually.

The legal troubles come at an already rough time for TWIA, an insurer of last resort along the state's Gulf Coast. The beleaguered agency last week became a ward of the Texas Department of InsuranceInsurance officials concluded that the agency "does not have the experience, competence or trustworthiness” to operate on its own in the wake of a TDI investigation that raised the specter of fraud.

Ike claims still coming in from $11 billion storm

Oliver agreed that the combination of Eiland and Galveston County is formidable.

"I would tell you that having a state rep against you with the county, the deck is stacked against you," Oliver said. "And I've not been to a mediation with Jaworski, but my people tell me he does a good job and is pretty fair and doesn't show any prejudice one way or the other."

 
Including the Galveston County cases, Jaworski has mediated Ike cases against TWIA resulting in 76 payments and earned more than $120,000 since 2009, according to data provided by TWIA. In many of those cases, Eiland served as plaintiff's attorney.

Eiland, whose district was in the path of Ike, was one of 64 plaintiff's attorneys taking part in mediation last year that resulted in the $158 million settlement between TWIA and property owners.

Eiland, D-Galveston, helps oversee TWIA in his role on the House Insurance Committee and said he was paid $627,000 for his work on 15 Ike cases. Eiland has said his fees have no impact on his ability to vote fairly on matters concerning the agency.

 

Eiland said the county has questioned the payments on several buildings, which have been in the process of being reinspected since January. Asked whether he was representing the county, Eiland said no suit had been filed.

"There are no negotiations at this time. ... Mr. Jaworski has been present on most occasions to facilitate the discussions with the experts and lawyers to discuss the reinspections," he said via e-mail.

The city of Galveston and Galveston County were given hundreds of millions of dollars in federal aid after Ike, but a number of wind-damage claims at the county level linger -- and claims are still being filed.


"We have no idea why this is happening, this flow of claims," said Mark Hanna, a spokesman for the Insurance Council of Texas, which represents 500 insurers in the state. "Two years after a storm, and there are still claims. This baffles us."


The Federal Emergency Management Agency estimates that the 2008 storm inflicted $11 billion worth of damage to Texas’ coast.


State approval required for TWIA expenses


Last week the TWIA board met in an emergency meeting to announce the intervention of the Department of Insurance. After a four-hour closed session, the board announced that Oliver would be replaced pending a final resolution at its March 23 meeting.


In its investigation, the Insurance Department reviewed the dismissal and severance packages of two high-ranking claims employees, first reported by Texas Watchdog last month, and found that TWIA knowingly paid an outside claims adjuster for work that was not performed and paid claims based on that adjuster's recommendation. TWIA failed to report the potential fraud to Insurance officials, the department said in a letter to Oliver. The department has referred its findings to the Travis County district attorney's office.

The takeover of TWIA will have an effect on settlement payouts, a spokesman for the Insurance Department said. Because TWIA is now under administrative oversight, all expenditures must be reviewed and approved by the state.

"Our role under admin oversight doesn't put us in the position of directly handling these lawsuits or the mediations, but the Commissioner's Rep under the admin oversight does have to approve expenditures before they're made," spokesman Jerry Hagins said by e-mail. "We're putting together a process to ensure that the Commissioner's Rep has enough information so she can quickly evaluate whether to allow TWIA to enter into a settlement agreement."

Editor's Note: This story was updated March 8 to include comments from Rep. Craig Eiland that were received after the initial publication of the story.

***

Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.orgRead all of Texas Watchdog's reports on the troubled Texas Windstorm Insurance Association. Search TWIA at texaswatchdog.org.


Keep up with all the latest news from Texas Watchdog. Fan our page on Facebook, follow us on Twitter and Scribd, and fan us on YouTube. Join our network on de.licio.us, and put our RSS feed in your newsreader. We're also on MySpaceDiggFriendFeed, NewsVine and tumblr.


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

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.


Keep up with all the latest news from Texas Watchdog. Fan our page on Facebook, follow us on Twitter and Scribd, and fan us on YouTube. Join our network on de.licio.us, and put our RSS feed in your newsreader. We're also on MySpaceDiggFriendFeed, NewsVine and tumblr.


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

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