Wednesday, December 31, 2008

Part I: My Days at the Department of Insurance; The Present Left By Governor Kernan and How Governor Daniels' Office Let Down This Republican

In November of 2006, I started my dream job at the Indiana Department of Insurance. I, along with another attorney, was named head of the newly-created Title Insurance Division of the Indiana Department of Insurance. It was our job to create a regulatory structure for title insurance in the State of Indiana. Up until that time, title insurance had gone virtually unregulated, a problem that people in the title insurance industry wanted changed. They had gone to the Indiana General Assembly which passed a law providing that each title insurance policy contain and additional $5 charge that would fund the division. Our job was to invent the wheel. During my 10 or so months at the Division we went from being the worst regulated state in the country to receiving calls from states all across the country asking about the regulatory model we had created. That and the staff we assembled is what I am most proud of.

The Department of Insurance was and is still headed by Jim Atterholt, a former state legislator. I had known Jim from Republican politics for years. We both had been to each other’s houses and had ran for the Indiana General Assembly in adjoining legislative districts. Jim was not only a political ally, I considered him a friend.

Over the course of the next several months I had the opportunity to get to know how the Department of Insurance operated. The people almost to a person are impressive, dedicated public servants. I miss them dearly.

There was and is a glaring exception at the Department of Insurance though. My division, the Title Insurance Division, fell within another larger unit in the office. That unit was headed by a Chief Deputy Commissioner who is directly below Commissioner Atterholt. Because, unlike Atterholt, this person is not a public figure, I will give her the pseudonym “Shirley” for the purpose of this column.

Shirley is the only Democrat holdover from prior to Governor Daniels’ election in 2004. The story around the office was that Shirley was appointed as Gov. Kernan was going out of office, knowing that she would create problems for Governor Daniels and the new Republican head of the Department of Insurance. It was a story that I totally came to believe was true. In fact, several months into my employment I ran into several employees of the Attorney General’s Office who confirmed the problems she had created at the AG’s office before going to the Department. Fortunately for the AG, she was not in a supervisory role there.

Shirley is like no other supervisor at the Department of Insurance. (I am writing in the past tense though she is still at the Department and I have no reason to believe things have changed.) She would come in late virtually every day, was gone probably a 1/3 of the time traveling the country on trips of dubious value at taxpayer expense (she is supposed to be going on a taxpayer-funded trip to Hawaii in 2009), and would show up at staff meetings late. She would discipline employees within her unit and not notify state personnel, a violation of state personnel rules. She would move employees away from the position for which they were hired to other positions, again a violation of state personnel rules. She was permitted to keep dirt on employees in files separate from their state personnel files which are audited, another violation. Atterholt was repeatedly told about these problems by a former liaison to IDOI from state personnel and me. His response was to do nothing.

After several months passed, the Title Insurance Division was in need of secretarial help. A person applied for the position of Title Insurance Division Secretary and was hired. The person was immediately moved by Shirley to another part of the office and Title was not allowed to use her. I pointed out to the Commissioner that moving such an employee was a violation of state personnel rules and, further, that it was a violation of state law to use the title insurance dedicated fund to pay an employee’s salary who was not allowed to work in title insurance enforcement. Again, Atterholt's response was to do nothing.

Later I learned that Shirley had dipped into the title insurance fund to pay an “office planner” several thousand dollars to design new offices for her unit and was planning to use the title insurance fund to remodel her offices after the Title Division moved to another floor. I pointed to the Commissioner a specific statutory prohibition on Shirley using dedicated funds for purposes unrelated to their intended purpose, and that it could also result in a falsification of the reasons for the expenditures in for state budget documents, which, since those documents are signed under oath, could be a felony. He told me he was not concerned. Later a former supervisor at the Department of Insurance told me that Shirley has for years been permitted to spend dedicated funds (the Bail Bond and Title Insurance dedicated funds are within her control) for purposes unrelated to their intended purpose.

Link to Part II
Link to Part III


Diana Vice said...

Who has jurisdiction over these alleged crimes? Has the SBOA performed an audit? If so, was it forwarded to the AG's office?

I wonder if one reason that these appointed executives don't seem to care when laws are broken is the fact that the AG's office has declared (repeatedly) that they don't have jurisdiction over such matters. In essence, they've all been given a "Get Out of Jail Free" card, so they continue with these practices knowing that there won't be any consequences. Only this isn't Monopoly money that is being misused. It's the money of hardworking taxpayers.

I wonder how lawmakers feel knowing that the laws they pass are for naught.

I'm sorry to say that this story does not surprise me. Indiana is becoming more and more like Illinois. What is surprising about this situation is the fact that Paul Ogden had enough integrity to say wrong is wrong rather than to take the go along to get along approach. Unfortunately, it cost him his job, but nothing will ever get fixed unless more people follow Ogden's example.

You've earned my respect, Paul. Keep up the good work.

Paul K. Ogden said...

Not all the legal violations were "crimes," Diana. Some were violations of the Indiana Code, which violations were not necessarily criminal, and there were numerous violations of personnel rules. There were some matters though that bordered on violations of the criminal code. In fact, it's a crime, albeit a misdemeanor, to fire a state employee for whistleblowing.

Certainly Commissioner Atterholt has a responsibility to make sure his employees follow Indiana law and state personnel rules. As far as I know, there are no other problems at the Department when it comes to supervisors. It's just this one rogue supervisor, "Shirley," a Kernan appointee, who Atterholt allows to run wild and do whatever she wants without consequences.

After Commissioner Atterholt, the Governor's Office has a secondary responsibility to supervise the state agencies and ultimately the buck stops in his office He appoints liaisons to the agencies to help monitor what is going on. The Governor's people though do not seem to want to take any sort of active in supervising agencies.

I totally agree with the approach of delegating authority to good people and stepping back and letting them do their job. But when a person steps forward and points out problems at the agency, the Governor's Office needs to be proactive in investigating those problems and trying to get them resolved. That was not done with respect to my situation and I understand has been a problem with other agencies. I believe in fixing problems at agencies before they become front-page stories in the Star. Unfortunately that has not always happened.

FYI, that was only Part I. Two more to go. Beleive me, I tried to be brief, but there was so much there.

Diana Vice said...

" was a violation of state law to use the title insurance dedicated fund to pay an employee’s salary who was not allowed to work in title insurance enforcement."

This is the part that I was referring to in my earlier comments. Why are lawmakers wasting their time writing laws that no one even intends to obey?

"Where there is no punishment, there is no law."

Paul K. Ogden said...


Regarding dedicated funds being spent on areas for which they were not intended, I doubt the IDOI is alone in that. Doesn't make it right. Tracking the expenditures is quite complicated and confusing. My understanding is that you can't spend money directly out of dedicated fund accounts. The money has to be transferred to the general fund then paid out. That is only the short version. It gets a lot more complicated than that. Obviously if the money were paid directly from the dedicated account to the vendor, it would be easier to trace.