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Insurance company accused of prying

It tried to impede state business by hiring a private investigator to glean personal details of an insurance regulator, an official says.

By LUCY MORGAN

© St. Petersburg Times, published March 24, 2000


TALLAHASSEE -- State Insurance Commissioner Bill Nelson formally charged Bankers Insurance Co. of St. Petersburg Thursday with attempting to subvert, manipulate and undermine insurance regulators by hiring a private investigator to pry into the private life of a state official.

"I know of nowhere in the country where an insurance company has attempted to influence the ability to regulate insurance as this company has done in Florida," Nelson said. "It threatened the state's ability to protect the public."

Calling the company's conduct "egregious," Nelson said Bankers could be forced to pay a heavy fine or stripped of the right to do business in Florida.

"Every consumer in Florida has reason to be outraged by such activity," Nelson said.

The administrative complaint, filed with the state Division of Administrative Hearings, gives Bankers Insurance Co. and affiliates Bankers Life Insurance Co. and Bankers Security Insurance Co., 21 days to respond to the formal charges.

Bankers is accused of hiring a private investigator in April 1995 to look for information that might cause Nelson to fire Kevin McCarty, an employee of the department's regulatory division.

Robert Ulrich, a spokesman for Bankers, said the company already has admitted that hiring the private detective was inappropriate and has apologized.

"Nothing illegal was done by Bankers or its management," Ulrich said.

Ulrich said Bankers thought it was the target of unfair and unlawful actions by the Department of Insurance and will fight the charges in court.

"When the employee's actions were reported, nothing was done to correct the problem," Ulrich said. Bankers hired an attorney and an investigator to conduct a "completely legal investigation" in an effort to determine the reason for his actions.

"Bankers is deeply disappointed by what it believes are politically motivated actions against a proven and professional management team," Ulrich said. "Bankers fully cooperated with the proper legal authorities."

Ulrich, a former St. Petersburg mayor, said the state and federal law enforcement agencies that investigated Bankers and the illegal wiretap found no reason to continue an investigation. He said the company thinks Nelson's decision to file charges is politically motivated by the company's support of his opponent in past elections.

The decision to investigate McCarty's personal life was approved by Robert Menke, chairman of the board at Bankers, with the knowledge of David Meehan, president of the company, Nelson said.

They hired Edwin Blanton, a Tallahassee attorney, so he could retain the services of a private investigator.

In a letter to Blanton, Bankers asked for "a full blown investigation of Mr. McCarty to include any current romantic involvements."

Blanton sent Bankers a preliminary report on May 27, 1995, which included McCarty's confidential banking and telephone records as well as information on his supervisor at the department, Nelson said.

When the initial information did not damage or undermine McCarty's credibility, Bankers escalated its effort with covert surveillance, Nelson charged. As a result of following him around, Bankers began to focus all of its effort on McCarty's sexual orientation and planned to videotape him engaging in homosexual activity.

"Only the logistics of such an endeavor prevented the videotaping from occurring," Nelson said.

At the time McCarty was followed, it was not public knowledge that he was gay. The subsequent arrest of the private investigator caught illegally wiretapping him and a civil suit McCarty filed against Bankers led to his sexual orientation being outed in a very public way.

Banker's investigation of McCarty was disrupted on Aug. 18, 1995 when a telephone company employee discovered an illegal wiretap on McCarty's home telephone and called the FBI.

Meehan and Kris Delano, general counsel at Bankers, repeatedly have denied knowledge of the illegal wiretap, but admitted hiring the private investigator in June 1996. They said they thought the state agency was unfairly taking action against the company and hoped to develop information that would cause Nelson to fire McCarty.

As a result of that admission, Nelson opened an investigation into the company's actions in 1996 but has spent four years trying to force officials at Bankers to testify. Nelson said the decision to file the formal charges came after a federal judge unsealed documents in McCarty's civil suit against Bankers.

Those records disclosed the extremely personal nature of Bankers' investigation of McCarty, who was in charge of the department's residential property and casualty joint underwriting authority at the time. McCarty since has been promoted to deputy director of insurer services.

The state-operated Joint Underwriting Authority provided hurricane insurance for thousands of Floridians who could not obtain coverage from private companies as a result of Hurricane Andrew. To provide policies to homeowners, the JUA entered into contracts with private companies like Bankers.

In 1995, when McCarty was placed under surveillance, Bankers was seeking 100,000 policies from JUA, a measure that would have given the company an $8.8-million bonus.

In addition to filing charges against Bankers, Nelson said he has to be certain that the company's policy holders are protected. Once an administrative hearing officer makes a recommendation on what should happen to Bankers, it will be up to the state insurance commissioner to decide what happens.

Nelson predicted Bankers will spend the rest of the year attempting to stall the proceedings so he will no longer be in office. Nelson is running for the U.S. Senate and will leave state office at the end of the year.

State insurance officials say Bankers offers 88,000 homeowners insurance policies in Florida, making it one of the top 20 companies doing business in the state.

Bankers and its affiliates write about $140-million a year in Florida insurance premiums.

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