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California Quake Insurance Scandal Jolts Former Commissioner's Aide
By John Millrany - January 21, 2001

The first criminal charges to emerge from former California Insurance Commissioner Chuck Quackenbush's quake scandal, has landed a top aide on the hot seat.

 George Grays, a former deputy insurance commissioner and Quackenbush campaign associate, pleaded guilty Jan. 16 to taking $170,900 in kickbacks for diverting money from a $12 million insurance settlement fund. Grays' injudicious actions could result in a 30-year prison term and more than $1 million in fines.

The charges stem from Quackenbush's establishment of nonprofit funds financed by insurers accused of mishandling claims filed resulting from the 1994 Northridge earthquake, the most costly natural disaster in U.S. history-an event which ultimately cost Quakenbush his commissioner's seat.

Pleading guilty to two counts of mail fraud and conspiracy to commit money laundering, Grays illegally directed $263,000 from California Research and Assistance Fund (CRAF) to Skillz Athletic Foundation, then received $170,900 from Skillz in a kickback caper, according to prosecutors. Skillz Operated a sports camp attended by Quackenbush's children.

Grays, who resigned his aide post last spring, heard from U.S District Court Judge David Levy that sentencing has been set for April 12.

Meanwhile, Quackenbush's future could be facing a whole lot of shaking as well. According to Grays' attorney Bill Portanova, his client is cooperating with extensive state and federal probing of Quackenbush's activities.

According to Associated Press reports, the former California commissioner authorized start-up of CRAF, which was funded by $12 million in insurers' payments. Insurers contributed to the fund rather than face far-higher penalties (more than $3 billion) to resolve alleged Northridge claims-handling violations uncovered by Quackenbush's auditors.

Authorities said Grays, though not an officer of CRAF, controlled the fund's spending through his office at the Department of Insurance. The companies maintained they were pressured to contribute to CRAF, which was supposedly set up to foster quake research and assist claimants in resolving quake-related issues.

However, according to officials, CRAF plowed $6 million into programs that had little or nothing to do with quake issues or consumer aid-including at least $3 million in TV ads, which ultimately benefited Quackenbush politically.

Under threat of impeachment, Quakenbush resigned his elected office last summer, following weeks of legislative hearings pertaining to his conduct. A combined state-federal investigation continues into his and former associates' activities.

 
 

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