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Details of bribe charges smack state-run insurer

The former top executive at Citizens is accused of accepting a motorcycle and not divulging relevant business ties.

By JONI JAMES
Published September 16, 2005

TALLAHASSEE - A $28,095 motorcycle driven by a top executive of a state-run insurer triggered a criminal investigation Thursday into possible bribery in the upper echelons at Citizens Property Insurance Corp.

The motorcycle was purchased by an adjuster hired to work last year's hurricanes for Citizens, which insures property owners statewide who cannot find coverage on the open market. The motorcycle was given to the man who decided which adjusters were hired after the four-hurricane disaster: Citizens former chief operating officer, R. Paul Hulsebusch, state officials said Thursday.

It's also alleged Hulsebusch, who resigned from Citizens abruptly Sept. 9, never told his boss at Citizens that he had sold a business to that same adjuster for $200,000 and still held a note for $100,000.

The details shed insight into allegations first disclosed Thursday in the St. Petersburg Times.

The Times reported that Hulsebusch's resignation came just two days after Citizens received information that an adjuster, Texas-based Quantum Claims vices, had questionable ties to Hulsebusch. Quantum is owned by Paul Harrell of Richmond, Texas. Citizens has refused requests so far from the Times to view the information, saying its attorneys are reviewing whether they are subject to public record. The state-created insurer obtained the information from another adjuster involved in a Texas lawsuit.

However, Florida Chief Financial Officer Tom Gallagher said the documents include a receipt indicating that Hulsebusch's motorcycle was purchased by Quantum. Gallagher, a 2006 Republican gubernatorial candidate, launched the criminal investigation Thursday under his authority to weed out fraud in the insurance industry.

The controversy comes as Citizens battles increased public scrutiny and frustration from its policyholders. Key state politicians, including Gov. Jeb Bush, who appoints two of Citizens' board members, were clearly angered Thursday that they learned the allegations only through a newspaper report.

"I've asked for my office to inquire," Bush said. "That was news to me, and it shouldn't be news to me, to be honest with you. I shouldn't read it in the paper, which I did."

Citizens' officials have declined to discuss other specific details, but said Thursday they have taken the allegations seriously. They hired former South Florida U.S. Attorney Marcos Jimenez and Miami accounting firm Lewis B. Freeman & Partners to investigate the allegations last week. Citizens' board holds its monthly meeting today in Orlando.

"It would be inappropriate to reach any conclusion until all the facts are known," Citizens executive director Bob Ricker said in a prepared statement. "At the completion of our investigation, Citizens will make a full disclosure of the results. We also welcome the investigation by the Florida Department of Financial Services."

Citizens said it first learned of the allegations last week from a former vendor who filed an initial lawsuit in March against Citizens, Hulsebusch, Quantum and Harrell in a Houston court.

Universal Risk Insurance Services amended the lawsuit Wednesday to include the bribery charges against Hulsebusch. Universal says its refusal to pay similar kickbacks caused Hulsebusch to strip away some of its business and give it to the adjuster who bought the motorcycle. The firm is seeking $3.6-million in lost, past and future damages and unspecified punitive damages.

Gallagher said Universal provided Citizens with a copy of the motorcycle receipt.

Reached Thursday, Hulsebusch, 39, referred all questions to his attorney, Steve Durrant of Jacksonville. Durrant couldn't be reached for comment.

Neither Harrell, Quantum's owner, nor a company attorney could be reached for comment.

"I don't think there is any question that (the motorcycle purchase) happened," Gallagher said. Hulsebusch "was driving it."

"Whether there were kickbacks involved and whether he was requesting kickbacks, that's to be determined," he said. "We're going to find out the whole story."

Hulsebusch, required to fill out a full disclosure form at the time he was hired by Citizens, also didn't disclose he had sold a business previously to Harrell, Gallagher said. "He might not have been hired if he had," said Gallagher.

He said he learned of the bribery allegations late Wednesday from his staff, who in turn were told about them by a Times reporter. Prior to July 1, Gallagher appointed all Citizens board members. Now under a new state law, he appoints two of them.

Rudy Garcia, a Republican state senator from Hialeah who chairs the Senate Insurance Committee, said he wondered if Citizens would have ever disclosed the information had it not been reported. "There needs to be a serious shakeup of this process," he said.

By law, Citizens must charge the highest rates in the market. After last year's hurricane season, Citizens' policyholders complained more about customer service than any other company's. Now they're facing, on average, a 23 percent rate hike.

What's more, all Florida property owners will see a 7 percent surcharge on their annual premium this year to help Citizens recover from a $515-million deficit caused by hurricane claim payouts. The cost for someone with a $1,300 premium is roughly $90. The hiring of Hulsebusch in October 2004 was actually designed to help quell some controversy. Ricker, Citizens executive director hired Hulsebusch, who last worked for a New Jersey insurance company, to overhaul the claims operation after receiving thousands of complaints about sluggish response after hurricanes Charley, Frances, Ivan and Jeanne. Four months later, he was hired as the permanent chief operating officer at a $150,000 salary.

Gallagher said so far he continues to have confidence in Ricker's leadership. He has heard no evidence to believe anyone but Hulsebusch was involved, he said.

Had Hulsebusch not resigned, Ricker would have fired him, Gallagher said.

"You see the handwriting on the wall, you resign before you're fired," Gallagher said. "Otherwise he would have been fired for cause."

Times staff writer Steve Bousquet contributed to this report. Joni James can be reached at jjames@sptimes.com or 850 224-7263.

[Last modified September 16, 2005, 01:45:53]