More From The Local Government Center Hearings

More Wednesday from the House committee taking testimony on the problems created by the Local Government Center when they illegally registered as for profit corporations in Delaware. In addition to the two other risk pooled management programs, there was testimony from the Department of Labor, the Insurance Department and William Gardner who heads the Secretary of State’s office.

A few weeks ago committee woman Senator Forrester who was appointed by then Senate President Peter Bragdon (now executive director of the Local Government Center’s Health Trust) chided the Local Government Center (LGC) and the Bureau of Security Regulations (BSR) for not being able to work out an agreement. Yet in testimony from the other two risk pools (Primex and School Care) we hear that they were able to come to an agreement with the BSR in a matter of weeks and returned millions of dollars to their members. They have also agreed to a number of suggestions by the BSR which allows for more transparency of their pools for their members. And they have entered into agreements with the BSR.

So why no agreement with the LGC. Because the LGC continues to believe that the rules don’t apply to them. Shame on Senator Forrester for jumping to a conclusion before hearing testimony from all the parties involved. As I’ve written in a previous blog, I believe Senator Forrester has no business being on this committee. She was appointed to the committee by the current executive director (Senator Bragdon) of the LGC (now Health Trust) after he had already decided to take the job.

There was much interesting testimony today and the bulk of it focused on who should be overseeing the State’s risk pools. The BSR or the Insurance Department. Yet what I found most interesting was the testimony by the Department of Labor.

Here’s why. Because regardless of who the regulator is for the risk pools and their various trusts, it is the Department of Labor that has the oversight for Workers Comp programs. And it was the LGC’s Workers Comp program that was in the red. The LGC’s other programs were doing fine. In fact they were doing so well that instead of the LGC returning the surplus from those programs, as required by law, they used that surplus to prop up their failing Workers Comp program. 

We heard from the Insurance Department that if you are paying out more in claims then you are collecting in premiums it should be fairly obvious when reviewing the books that there is a problem. This, as I understand it is what happened to the LGC’s Workers Comp program. They artificially lowered premiums to be more competitive with a rival risk pool. They then needed to prop up their Workers Comp program, so they raided the other Trusts surpluses at the same time they claimed they needed to increase their reserves. In essence they were stealing money from their Health Trust members to put a competitor out of business.

So where does the Department of Labor fit in. One has to ask why they didn’t pick up on the fact that the premiums the LGC’s Workers Comp members were being charged did not cover the cost of their claims. Regardless of where the infusion of cash was coming from it seems that an audit would have shown that the premiums were too low to cover expenses for claims. So what happened? 

Here’s whats happening. While the LGC is lobbying to remove control of the BSR as the regulatory agency for risk pools and move oversight to the Insurance Department, the Workers Comp program will still be regulated by the Department of Labor. The LGC’s ploy to remove the BSR from regulating them has nothing to do with more effective oversight and everything to do with changing the rules to allow them to legitimize their illegally formed LLCs.

So if there is no difference when it comes to who regulates the risk pools (Insurance or the BSR) because their Workers Comp program still would fall under an entirely separate regulatory agency (Labor) why is the BSR being chastised for failure to regulate the risk pools?

And again I’ll tell you why. Because the LGC continues to hold out hope that through appeals, by dragging the state through multiple court cases, by hiring even more lawyers and attempting to malign the BSR, they hold to the hope that they can stall and muddle the implementation of the administrative order long enough so that they will be able to change RSA 5-B and be able to legitimize their illegally formed corporations. 

When the LGC went to Delaware in 2003, to reorganize, they did so without the knowledge of their board of directors. They did this after seeking opinions from the Secretary of State’s office and the Attorney General’s office that informed them that their reorganization would not pass muster under New Hampshire law. So what did the LGC do? They went to Delaware and didn’t tell anyone. So until it was noted that they hadn’t kept current with registering as a corporation in New Hampshire, there was no reason to assume that the LGC had even changed their corporate structure. Never mind illegally registering out of state and illegally registering the corporation as for profit entities.

The real issue isn’t who should regulate the LGC and the other risk pools. The real issue is how do you deal with bad players. Unless we want to live in a totalitarian state bad actors will always find a way to pervert the system. It is important to remember that the only reason we have laws is because there are bad people out there. If everyone played fair we could establish some ground rules and that would be that. 

But the folks at the LGC who went off the reservation had only one thought on their minds. They wanted to crush a competitor and they didn’t care how many laws or rules they had to break to do it. They felt and continue to feel that laws and rules just don’t apply to them. They’re like the kid who has everything and yet they still want more. 

So as this saga continues to unfold the members of the LGC’s Trusts (and their members' communities) continue to be on the hook for millions of dollars in unnecessary legal fees. And just who are these members? Government entities. Cities and Towns. Firefighters, teachers and retirees. 

They continue to have huge conflicts within their organization as one Trust owes another Trust $17.1 million. And as they head to the Supreme Court the Trust that is owed the money will  hear their lawyer argue that the Trust that owes the money shouldn’t have to repay it.

The legislative committee has a tough job ahead of them. Do they need to amend RSA 5-B, does it need to be rewritten, or is it fine the way it is? Who should oversee the State’s risk pools? If the LGC’s appeal to the Supreme Court is thrown out does that set a precedent and provide the BSR with the regulatory authority they need to clamp down on bad players?

The Legislative Committee has three more meeting before they must report back to the House. They have a lot of work ahead of them. They have pages of testimony and pages and pages of background information to pour over. I’m optimistic that as they discern fact from fiction they will follow the exhortations of BSR counsel and be mindful of the law of unintended consequences as they move forward.