Agencies Join Up to Probe CA State Fund

By Kelly Johnson
Sacramento Business Journal

Three separate government agencies have formed a task force to probe allegations of potential misconduct by former employees of the State Compensation Insurance Fund.

The California Highway Patrol, the California Department of Insurance, and the San Francisco District Attorney's Office announced Wednesday they will cooperate in this investigation of the state's largest provider of workers' compensation insurance. The carrier is based in San Francisco and employs more than 800 people locally.

The Department of Insurance, which has regulatory oversight of State Fund, has been conducting what it calls "an exhaustive top-to-bottom review" of the insurer since April. That audit and investigation will continue independently from the task force. The Department is expected to release its findings in the fall.

The joint-agency probe was prompted by findings from State Fund's own internal investigation. That information, which government officials received in May, raised concerns about potential improprieties of former employees, a Department of Insurance news release said. State Fund has been cooperating fully with investigators.

The task force has created a confidential toll free tip line at 877-620-2345.

The quasi-public workers' compensation insurer has been under investigation since March by the Department of Insurance and other entities for alleged fraud in the handling of its group programs. At issue are allegedly inflated "administrative fees" policyholders paid to State Fund and the administrators of these groups.

Two top executives were fired in March and two board members resigned last November, sparking an ongoing fraud probe by the DOI and other state officials. Department of Insurance spokeswoman Jennifer Kerns told the Los Angeles Times in late May that alleged fraud at State Fund might have involved $600 million or more, but State Fund officials later said that's impossible, because only about $550 million has moved through the industry-specific group programs under scrutiny over the past decade.

State Fund provides insurance to 230,000 employers in California, and wrote more than $6 billion in business last year.

Chris Rauber of the San Francisco Business Times contributed to this story.

From: Sacramento Business Journal (www.bizjournal.com)