California's insurance regulator has sent in criminal investigators and auditors to probe the state's workers' compensation insurer of last resort over allegations of improper spending, an official said.

The California Insurance Department has three teams in place examining the State Compensation Insurance Fund, according to Jennifer Kerns, a department spokesperson.

SCIF--the nation's largest comp insurer, which annually takes in $6 billion in premiums--is being examined by personnel from the department's Fraud Division, an audit team and a financial examiner, Ms. Kerns said.

She explained that the financial examiner had already been on site at the San Francisco-based SCIF doing a separate examination, and his term had been extended.

Insurance Commissioner Steve Poizner "has ordered an audit from the top down, in addition to an audit that the state fund is undertaking on its own," said Ms. Kerns.

"We're investigating any potential misuse of funds related to administrative fees," she continued, explaining that the fees are aid monies that business associations or individual employers can receive for mitigation and safety programs in the workplace.

The concern, she said, is there may have been funds paid by the quasi-public SCIF that did not go for the items they were supposed to cover.

Additionally, the spokeswoman said the department is looking at "other organizational issues, which could include management issues, structural and operational issues. The state fund has a history of mismanagement for the past decade. We're interested in getting that organization back on track.

On March 20, SCIF's board--after what it said was an internal investigation--removed its president, James Tudor, and vice president, Renee Koren. Lawrence E. Mulryan has been installed as interim president.

In the past under the previous commissioner, John Garamendi, the relationship between the department and SCIF has been "strained" with legal jousts between the two entities, according to Ms. Kern, but she said Mr. Poizner had met with Mr. Mulryan and "had positive discussions. The commissioner feels the state fund is being responsive."

She said Mr. Poizner expects to get a report from Mr. Mulryan shortly on the situation at SCIF.

Special Reports /

Calif. Regulator Sends Criminal Probers To SCIF

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