Garamendi’s Millstone

By Geoff Metcalf
October 11, 2006

The horrific Executive Life debacle is a humongous millstone around the neck of Garamendi and still, to date (with the election just around the corner) he has failed to adequately address significant questions about what he did and did not do as Insurance Commissioner.

Some 15 years ago, in his capacity as California Insurance Commissioner, Garamendi seized the assets of the Executive Life Insurance Company. That wasn’t the big deal. That he allowed/permitted/co-conspired with a disreputable junk-bond player and a French government-owned bank to make a gargantuan windfall while at the same time many annuities and policyholders were ‘hosed’ by slashed benefits IS a big deal.

What is especially galling is Garamendi’s refusal (or inability) to even craft an adequate excuse for conduct that suggests malfeasance, ineptitude or complicity.

After a decade and a half of stonewalling, Garamendi STILL refuses to answer (or even acknowledge) the tough questions. He even failed to make a showing at a congressional hearing to answer questions. For a guy who is famous for exploiting any and all photo opportunities offering limelight AND a spotlight, his silence and absence is deafening.

Garamendi’s opponent in the Lt Governor’s race is squeaky clean straight talker Tom McClintock, the guy who impressed even his critics during the Recall election.

McClintock’s camp says Garamendi’s diffidence is because “the Executive Life mess involves Enron-style mismanagement and questionable conflicts of interests.”

Frankly, if the McClintock claims are hyperbolic, Garamendi should be screaming for the opportunity to ‘clear up’ his role in the Executive Life scandal. However, the silence is still deafening.

The Executive Life civil case became one of the largest in state history, and by the time it came to trial.

In his second term as Insurance Commissioner, John Garamendi, and his chief deputy, should have recused themselves from future Executive Life matters since they were named in lawsuits. As principle players involved in the case, they ‘should’ have removed themselves from their central role.

How or why would a state officer with a fiduciary responsibility try to quickly settle the lawsuit out of court for way less than the civil lawsuit called for? Come on….$600-million instead of $4-Billion is kinda sorta out of wack?

The Executive Life Action Network claims the case has been a 'cash cow' for the Department of Insurance and its secretive Conservation & Liquidation Office. That office is supposed to manage the billions of policyholders' money as it 'unwinds' (massages) the assets of the company…supposedly for the benefit of its policyholders.

The funds drawn out over the past 13 years belong to the policyholders and ‘should’ have been spent for their benefit or distributed to them.

There are a lot of questions that Garamendi NEEDS to answer before he should ever ask for anyone’s vote:  What happened to the millions spent to supposedly assist policyholders to recover the billions lost in this blatant case of fraud?  Why did Garamendi charge the policyholders millions of dollars for consulting fees with top investment bankers to set a value on Executive Life's junk bonds, when he never disclosed their finding? This allowed him to tell the court that ‘he didn't know the value of the bonds’ and to sell them to Credit Lyonnais and Leon Black at fire sale prices.  What happened to a report that his own department staff completed that set a face value to the bonds but was never made public?

John Garamendi accepted big bucks campaign contributions from law firms that the Department of Insurance retained to litigate the Executive Life case. Was the money a gratuity or an incentive?

Executive Life remains a monster iceberg for Garamendi’s Titanic campaign.

A lot of good, honest, innocent people lost a lot of money in the Executive Life fiasco. Executive Life was so complex, so big that people overlook even the most basic problems that have risen out of the case.

Before John Garmendi asks ANYone to vote for him, he has a responsibility (which he is callously avoiding) to answer the long list of questions about Executive Life and what he did and didn’t do and why.

For Big John to plead ignorance is kinda like the Burgermeister saying “We didn’t know about those camps on the outside of town….”