Attorney General Lockyer is Joined by New Insurance Commissioner in Seeking to Void Certain Insurance Company Settlements That Resulted in Payments to "Nonprofit" Group

(SACRAMENTO) – Attorney General Bill Lockyer was joined today by new Insurance Commissioner Harry Low in asking the court to void certain insurance company settlements that resulted in donations to the nonprofit California Research and Assistance Fund, whose expenditures have been under scrutiny.

The First Amended Complaint filed in Sacramento County Superior Court now seeks to dissolve the nonprofit corporation and void the administrative settlements arranged by former Insurance Commissioner Chuck Quackenbush with 21st Century Insurance Company; Allstate Insurance Company; State Farm, Farmers Insurance, and affiliates of these insurance companies.

The amended complaint contends that Quackenbush lacked the authority to enter into the settlements that provided for the creation of a nonprofit corporation and diversion of funds to CRAF to support activities unrelated to the regulatory enforcement responsibilities of the California Department of Insurance. The challenged settlements also resulted in another nonprofit group, the California Insurance Education Project, receiving a payment from Farmers.

The Attorney General earlier this year filed a complaint in Sacramento County Superior Court seeking to dissolve CRAF, contending that the organization was a sham nonprofit corporation. Pending its decision, the court ordered the assets of CRAF be frozen and any expenditures be subject to court review.

In addition to challenging the settlements, the amended complaint alleges that CRAF board members Ronald Weekley and Eric Givens, and former Deputy Insurance Commissioner George Grays, a de facto board member of CRAF, breached their fiduciary responsibility in the operation of the charitable trust. Damages are being sought for this alleged violation.

The amended complaint also seeks damages for self-dealing and the diversion or distribution of charitable assets by Weekley, George Grays and as yet other unnamed defendants. The complaint states that Grays and Weekley "used their positions as directors of CRAF to wrongfully appropriate, divert, convert and distribute charitable assets of CRAF for their own personal, private benefit." The alleged payments included $18,000 to Weekley's sole proprietorship, Community Connections, and at least $149,000 to Grays through the Skillz Athletic Foundation.