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Scrutiny rises for Citizen execs

A business plan to start a private insurance firm came under review last month by the state's insurer of last resort.

By JONI JAMES
Published September 17, 2005

Sept. 17 - TALLAHASSEE - The former chief operating officer of Florida's state-backed insurer at the center of an emerging bribery investigation came under scrutiny just last month in connection with a plan to launch a private insurance firm.

R. Paul Hulsebusch and two other high-ranking executives at Citizens Property Insurance Corp. were questioned by the company's general counsel for a possible conflict of interest. Only Hulsebusch, 39, kept his job afterward. His two prospective partners in creating a new company, chief financial officer Jessica Buss and controller Corey Neal, resigned from Citizens and started the company. They still work for Citizens as paid consultants.

Less than a month later, on Sept. 9, Hulsebusch left Citizens under a different ethical cloud. As first reported Thursday in the St. Petersburg Times, Hulsebusch resigned amid allegations laid out in a Texas lawsuit that he took bribes - including a $28,095 boutique-brand motorcycle - from an adjuster that had a Citizens contract.

The potential defection of three top Citizens' executives to form another company became public Friday when Citizens released Hulsebusch's personnel file, responding to a public records request from the Times.

Hulsebusch's resignation has cast a new shadow on Florida's second largest property insurer.

State-backed Citizens, which writes policies for owners who can't find coverage on the open market, is under fire for skyrocketing rates and mistake-prone claims processing in the wake of last year's hurricanes.

A former New Jersey insurance executive, Hulsebusch was in charge of improving Citizens' troubled claims unit, deciding which adjusters got the company's business and which didn't.

Hulsebusch's 31-page personnel file included a three-page memo dated Aug. 23 from Citizens general counsel Susanne K. Murphy detailing her review of potential conflict of interests for Hulsebusch, Buss and Neal.

Her memo said Florida insurance regulators had been "made aware" of a business plan to create an insurance company. In a section on officers and directors, the plan included three unnamed biographical sketches that had been deduced as being Hulsebusch, Buss and Neal.

The memo said the business plan hadn't been filed with the Office of Insurance Regulation, nor had efforts been made to implement the plan. "The purpose of this memorandum is to summarize the status of each employee and to assure that appropriate action for each has been taken," Murphy wrote.

Murphy's memo did not indicate who told her about the business plan or when. Buss, reached late Friday, said she doesn't know. She said Hulsebusch was not part of Homewise Insurance Co., Buss' and Neal's newly formed firm that is awaiting approval to began servicing wind-only policies in the Citizens pool. Buss said she is president; Neal is chief financial officer.

Buss declined to discuss Hulsebusch's role in the business plan Friday, referring questions to Citizens.

Murphy couldn't be reached for comment. Citizens released the personnel file after its monthly board meeting in Orlando ended Friday. Citizens executives have declined to discuss specifics in the case.

The memo spells out that Murphy interviewed all three employees about the business plan. Only Buss had informed Bob Ricker, Citizens' executive director, of "plans to pursue other employment with an insurer" as required by Citizens' conflict-of-interest policy that employees must sign, the memo said. Buss resigned Aug. 12 but remains a consultant.

Neal, the former controller, told Murphy he was interested in joining the proposed insurer if it was formed and tendered his resignation effective Aug. 19. He also remains a Citizen consultant. Details on how much Citizens are paying Buss and Neal were not available Friday.

According to the memo, Hulsebusch told Murphy he had only talked with Buss "in a casual way (about) his possible interest in joining a new insurer at some future time," and he wasn't aware a business plan had been drafted nor had he authorized his name to be associated with it. "Paul has consistently reaffirmed his commitment to remain at Citizens for at least one year (February 2006)," the memo read. Murphy wrote Hulsebusch wasn't in violation of the conflict-of-interest policy.

But fresh disclosures in the past week have prompted Florida Chief Financial Officer Tom Gallagher to launch a criminal investigation into Citizens' inner workings. Citizens has hired an outside attorney and accountant to investigate.

Hulsebusch's resignation came just two days after Citizens received information that one of its vendors, Quantum Claims Services, had bought a motorcycle for Hulsebusch from a Panama City dealership in the spring. Quantum is owned by Rodney Harrell of Richmond, Texas.

The information came from a Texas adjuster for Citizens, Universal Risk Insurance Services, which filed suit in Houston in March against Citizens, Hulsebusch, Quantum and Harrell.

On Wednesday, Universal Risk amended its complaint to allege that Quantum paid kickbacks to Hulsebusch, which caused the chief operating officer to strip business from Universal and give it to Quantum.

Universal is seeking $3.6-million in lost, past and future damages and unspecified punitive damages.

Hulsebusch, reached Thursday, referred questions to his attorney, Stephen Durant of Jacksonville. Durant couldn't be reached for comment Friday. Nor could Harrell or Quantum's attorney be reached for comment.

The purchase of the motorcycle for Hulsebusch would have come just weeks or months after Hulsebusch, hired by Citizens as a consultant in October 2004, was named its permanent chief operating officer Jan. 31.

Gallagher said Thursday he was investigating Hulsebusch for allegedly selling a business to Harrell or Quantum for $200,000. He holds a $100,000 note for the sale, Gallagher said, and never informed Citizens, even though he was required under Citizens policy to disclose such a relationship.

Tony Whiteside, manager of Big Bike Superstores in Panama City, said Friday that Hulsebusch was with Harrell in the spring when Harrell bought two Big Dog Motorcycles for Hulsebusch and himself.

Hulsebusch chose a "Pitbull" model of the niche brand while Harrell chose a "Ridgeback" model that retails for about $30,000. Whiteside said he couldn't remember the exact date the men came shopping.

Hulsebusch "was kind of an old cowboy from Texas, the way he acted, to me," Whiteside said. "Mr. Harrell, he was very professional."

Florida motor vehicle records show Harrell obtained a permanent tag for his motorcycle in May.

The personnel file released Friday by Citizens was missing Hulsebusch's resume, which Hulsebusch referred to under the "employment" and "education" portions of his job application. A Citizens spokesman said the resume was apparently misfiled and it is being looked for.

It appears Hulsebusch worked as a self-employed consultant before joining Citizens and recently worked as an executive for GAB Robins in Parsippany, N.J., a large adjustment firm. Hulsebusch maintains a home in nearby Pennsylvania.

Citizens spokesman Justin Glover said Friday that Ricker hired Hulsebusch after he was recommended by Quin Netzel, then-Citizens chief operating officer, who had worked with Hulsebusch while he was consulting for Citizens. Netzel, reached Friday, declined to comment.

The personnel file included a Jan. 27 e-mail from Ricker to the staff. Hulsebusch "is uniquely suited to assume the position of COO for Citizens, with 17 years of experience in the insurance industry claims, underwriting and operations," he wrote.

[Last modified September 17, 2005, 15:26:02]