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Tuesday, May 1, 2012

State: Local Government Center acted “unethically” in withholding millions

CONCORD – The Local Government Center acted “unethically” and “unscrupulously” in holdings tens of millions of dollars in reserve that rightfully belonged to property taxpayers, the state’s lead lawyer claimed Monday.

LGC’s top hired attorney, William Saturley, countered by arguing the state Bureau of Securities Regulation’s case against his client was filled with “misguided and misleading” charges.

The state’s claim the LGC kept improperly large reserves and owed taxpayers and other parties more than $100 million opened formally for a two-week proceeding before hearing officer Donald Mitchell.

While day one offered little in the way of new evidence, it confirmed this will be an acrimonious proceeding between regulator and nonprofit about the complex conduct of so-called pooled risk management programs.

The LGC and its satellite entities provide health, workers compensation and property liability insurance coverage for cities and towns along with the New Hampshire Municipal Association, which acts as its lobbying arm.

Andru Volinsky, the private lawyer the state hired to lead its case, said in opening arguments that boxes and boxes of documents for this case will show the LGC intentionally kept more money than it needed principally in its Health Trust that supplies health coverage.

“The evidence will show the LGC acted intentionally, they acted unethically and they acted unscrupulously,” Volinsky said.

Saturley countered that LGC Executive Director Maura Carroll, her board of directors and predecessors followed to the letter advice it got from insurance actuaries and lawyers advising them about the management of these plans.

“I need to respond to what I consider to be misleading and misguided characterizations of my clients, so distorted and so taken out of context so as to create a fiction as to what has occurred over the past decade,” Saturley said.

For nearly nine months up to this point, lawyers for the state and LGC have jousted before Mitchell on a myriad of combative issues. Attempts to settle this matter before it came to this high-profile hearing failed.

Meanwhile, the Bureau of Securities Regulation reached an agreement with LGC’s two biggest competitors – Primex and School Care – that had the pair refund to communities and school districts more than $20 million in excessive reserves.

“There is no selective prosecution in this case, and the LGC can’t hide behind the actions of others,” Volinsky said.

Saturley said the bureau’s prosecution of this case has gone far beyond the state’s legal authority making assumptions about financial arrangements that are not covered under state law.

“This hearing is a criticism of the decisions made over the past decade,” Saturley said. “There is no other detail in the statute as to what reserves should have been set other than set them as appropriate.”

Meanwhile, the Legislature is reviewing a Senate-passed bill, SB 212, that if adopted would sanction much of the decisions LGC officers made during the 2007 to 2010 time frame that governs this case.

Originally, the state’s case had listed executive director Carroll and 10 others as individual defendants. Over the weekend, state officials reached an agreement to dismiss charges against former executive director John Andrews; it was revealed when Andrews left, he was given a five-year “no work” consulting contract.

The agreement is in its third year, and Volinsky said Andrews has not performed any consulting work.

As part of the agreement, Andrews has agreed to pay the latest $20,000 installment back to the LGC by the end of this year.

State regulators also have dismissed charges against seven other individuals, most past or current members of the LGC board.

The only remaining individual defendant other than Carroll is Peter Curro, a board member and business administrator for the Londonderry School District.

In his opening statement, Mark Howard, Curro’s lawyer, said the state has not even alleged an illegal act his client performed.

He called Volinsky’s opening full of “hyperbole” and “histrionics.”

“They have not identified one single action that he took or one single proposal that his vote made any difference whatsoever,” Howard said.

Kevin Landrigan can reached at 321-7040 or klandrigan@nashuatelegraph.com. Also, follow Landrigan (@KLandrigan) on Twitter.