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Shrewd, but too personal?

TOM GALLAGHER: Supporters tout his business background; critics argue his interests are too personal.

By JONI JAMES
Published July 30, 2006



TALLAHASSEE — Tom Gallagher was in a Minnesota taxi in August 1992, on his way to deliver a speech about the innovative short-term investment program he’d implemented as Florida’s treasurer, when his brick-sized mobile phone rang.

Hurricane Andrew had decimated Homestead. Forget the speech, head to the airport, his staff said. You’re scheduled to survey the damage by air tomorrow.

That day, Miami-Dade County looked like New Orleans after Hurricane Katrina, save for the flooding, the 62-year-old Republican gubernatorial candidate said this month on the campaign trail.

With $16.5-billion in insured losses, Andrew was, at the time, the most costly national disaster ever.

“The only difference was there was no 24-hour cable TV news, no communications,” said Gallagher, who oversaw insurance regulation at the time. A standoff between then-Democratic Gov. Lawton Chiles and the administration of former Republican President George Bush delayed aid much as it did last year in Louisiana.

“People had no food; they had no water,’’ Gallagher said. “You couldn’t drive anywhere, or if you did, you got a flat tire because of all the roofing nails.”

How Insurance Commissioner Gallagher performed over the next 18 months, as Florida’s insurance market teetered on disaster, etched his name in the memory of thousands of Floridians.

He exploited the limits of his executive power and banned insurance companies from canceling or not renewing policies.

For homeowners whose insurers went bankrupt, he stretched the definition of state law to establish a residential insurer of last resort to provide coverage so banks wouldn’t call homeowners’ mortgages. And he pushed through a state-supported reinsurance fund to backstop insurance companies.

The twin institutions are credited with keeping Florida’s economy — particularly its robust housing market — humming for another 12 years and able to weather eight hurricanes in 2004 and 2005.

But the same business acumen that has brought so much praise over the years to Gallagher, who boasts on the campaign trail that he’s the only candidate who isn’t a lawyer, has also generated some political baggage. His instinct to behave as a private business executive rather than an elected public official has led him to readily award lucrative state work to friends and, as was recently discovered, to personally invest in companies with business matters before his public office. On Friday, the Florida Ethics Commission said some of those investments may have violated state law.

***

Tom Gallagher was Republican before Republican was cool, as his campaign staff likes to put it.

A former library-furniture salesman turned mortgage insurance broker, Gallagher won a seat in the state House on his second try during a 1974 special election.

His district was Coconut Grove and Coral Gables and three-quarters of his constituents were Democrats. When he arrived in Tallahassee, he was only the 43rd Republican out of 120 House members.

Over the next 13 years, Gallagher earned a reputation as a Republican who could work with the Democrats in charge. In the GOP caucus, he became a point person on budget matters and business issues, particularly when it came to issues of banking reform.

“There was nothing that would have cleared of any significance on the issue of commerce that he would not have had a hand in,’’ said former state Rep. Pete Dunbar, R-Dunedin, a longtime Gallagher friend.

His Democratic colleagues considered him a moderate — a label that Gallagher now rejects. He calls himself the most conservative candidate in the race for governor.

“The guy currently calling himself Tom Gallagher isn’t the same guy I knew and liked and served with,’’ said former House member Steve Geller, D-Hallandale, who is now a state senator. “Tom Gallagher was always known as a moderate.”

Throughout his legislative career and during his first three runs for governor in 1982, 1986 and 1994, Gallagher opposed private school vouchers and supported the Equal Rights Amendment.

In 1994, he backed a plan to add a penny to the sales tax to build prisons. He also was characterized as “supporting legalized abortion,” a position he now disavows.

A Catholic, Gallagher said he always opposed abortion but vocalized it only after meeting his second wife, Laura, who encouraged him to speak his conscience.

Today, he notes that in 1986, he supported legislation, eventually struck down by the courts, that required parental consent before a teenager could obtain an abortion.

Gallagher now also supports private school vouchers, saying his conversion occurred on the job in 1999 when, in his newly elected position of education commissioner, he was charged with distributing the first vouchers to students from a pair of failing public schools in Pensacola.
On the campaign trail, he says: “Shouldn’t a single mother have the same options for their children as you or I do?”

Eight years after he first won his House seat, Gallagher made a brief run for governor. He tried again in 1986. When he lost the Republican primary to eventual Gov. Bob Martinez, he accepted a job as Martinez’s secretary for Business and Professional Regulation. Less than two years later, in a special statewide election, he won the post of treasurer.

Supporters see that win as the beginning of the governor-in-the-making. To them, Gallagher is a public servant of unparalleled experience, one who inspires confidence and exemplifies competence and courage.

Today, many of Gallagher’s public responsibilities aren’t obvious. As the state’s chief financial officer, Gallagher is in charge of the state’s purse, which means he writes all the state’s checks, balances accounts, manages cash flow and oversees, in the broadest sense, all state contracts.

Much of this work he has done for years, even though the CFO position was only created in 2003, when the constitutional jobs of treasurer and comptroller were merged.

 Twice before, he’d served as treasurer, from 1988-1994 and 2001-2003. (The insurance commissioner’s job, formerly part of the treasurer role, now rests with an appointee of the governor and Cabinet, of which Gallagher and his primary opponent, Attorney General Charlie Crist, are two of three members).

Gallagher’s long tenure allows him to point to significant successes. With former Democratic Education Secretary Betty Castor, Gallagher launched the popular health care insurance program for low-income families called Healthy Kids.

Other states have mimicked a short-term investment program that Gallagher’s Department of Financial Services established in 1990. The program uses outside money managers to maximize the state’s short-term investments through the purchase of bonds and certificates of deposit.

Started in 1990, the program, the first of its kind, is credited with grossing the state nearly $5-billion  in additional investment revenue — money that flows into the state’s general revenue fund.

In his watchdog function, Gallagher also has made headlines, including validating financial irregularities in the state’s corporate income tax voucher program. The investigation, prompted by stories in the Palm Beach Post, eventually led to criminal convictions.

More recently, Gallagher’s shop has clashed with the Department of Management Services over the mistake-riddled implementation of the state’s new payroll system, known as People First and operated by Convergys. Gallagher’s staff withheld payments to the company until auditors were convinced the contract’s terms were being met.

But detractors, and there are many, see a career politician whose interests are purely personal.

Former Republican Comptroller Bob Milligan, the retired three-star Marines general who was on the Cabinet with Gallagher from 1999 to 2003, is not a fan. The two clashed repeatedly in 2002 as state lawmakers decided how banks and insurance would be regulated once the new chief financial officer post was created. Milligan’s view — that both should be under the Cabinet — eventually prevailed.

“He wanted to have everything under his control and direct supervision, and that was exactly what I was trying to get rid of,’’ Milligan said. “In my opinion, he is nothing but a self-serving politician.”

Gallagher said he’s surprised by the remarks, noting that during his tenure as education commissioner, his office willingly heeded Milligan’s request to review contracts before they were signed. Gallagher said he thought a single elected insurance official would be more accountable.

Other critics complain Gallagher hasn’t hesitated to funnel state work to his friends. Jon Shebel, former president of the business trade group Associated Industries, said he has had serious concerns about Gallagher’s appointees over the years.

“Tom has a lot of friends, and a lot of them are very good people,’’ said Shebel, who is supporting Crist. “Why he selected some of them, however, is beyond me. They got him into trouble.’’

The most recent controversy over Gallagher associates came last year, when it was revealed that one of his appointees to the unpaid board of Citizens Property Insurance Corp., the state-backed insurer of last resort, had discussed forming a new insurance company with two Citizens executives. The company would have qualified for lucrative takeout bonuses from Citizens.

Ed London, the former board member, insists he did nothing wrong and the company never got off the ground. But Gallagher acknowledged London, his longtime friend and investment partner, had crossed a line.

 It was the second time Gallagher had tapped London. In 1992, London earned $342,874 in consulting fees from the state for overseeing a troubled Jacksonville life insurance firm the state had seized. London later was retained by the company at $2,000 a day.

Another example Gallagher critics cite is Jim Bax, who spent two years as chairman of Citizens’ predecessor, the Joint Underwriting Association. He resigned after an affiliate he created, Shared Market Insurance Services Inc., came under investigation for misappropriating funds.

Bax recently reiterated he had done nothing wrong. “I gave two years of my life for JUA for no pay,’’ he said. “I’m out of politics now.’’
Wilbur Brewton, another Gallagher appointee, sees the criticism as much ado about nothing. Brewton, a longtime Tallahassee lobbyist, is general counsel to a state fund to settle medical malpractice claims involving newborns.

 Brewton said his firm is paid $150 an hour for its legal work, totaling nearly $2-million in the past 12 years. Five other legal firms also work for the fund. “When you’ve got a fund with a half-billion dollars, you want a friend there to oversee it,’’ Brewton said.

Gallagher agrees. When appropriate, he said, his agency puts contracts out for bid. But often his agency must make a quick decision, such as when failing insurance companies must be taken over immediately.

“I pick someone I believe will act in the shareholders’ or state’s best interest and in every case, that is what has happened,” he said.

Times staff writer Kris Hundley contributed to this report. Joni James can be reached at (850) 224-7263 or jjames@sptimes.com.

[Last modified July 30, 2006, 21:25:03]


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