The scandal-scarred board of Rhode Island's state-sponsored workers' compensation insurer has suspended two top executives, but has yet to drop its objections to a search of company computer records, a company spokesman said today.
His comments came in the wake of Friday's action at the Beacon Mutual Insurance Company board meeting in Warwick, R.I., which saw one of its members resign along with a vote to suspend–with pay–Beacon's chief executive officer and vice president of underwriting.
The board had called its meeting after a demand by Gov. Republican Gov. Donald Carcieri that all board members in place since 1994 resign and that they fire CEO Joseph Solomon and Vice President for Underwriting David Clark.
In a letter last Thursday, the governor said the board's refusal to meet with him that afternoon "demonstrates its continued lack of understanding of the severity of this situation and its responsibilities to its policyholders and the state."
His demand to the board came after a special independent committee issued a report finding a raft of abuses had been permitted at Beacon–the non-profit enterprise which insures 90 percent of the state's employers.
The committee was called in to investigate after a whistleblower alerted auditors to a variety of problems involving employers with close ties to Beacon management who were given unjustifiably low rates for coverage.
Among the companies was Paul Arpin Van Lines–whose chief financial officer, Edward Braks, a Beacon board member, resigned Friday. The committee said Beacon gave his company credits that were "unearned and unwarranted due to a history of losses."
Among other businesses spotlighted in the report were a temporary personnel concern owned by Beacon's former board chairman, Sheldon Sollosy, and a contractor who did work at below cost on the home of Mr. Solomon–the suspended CEO.
Mr. Sollosy resigned in February after an investigation found that he kept Beacon contract auditors from properly evaluating the risk at his firm.
Bill Fischer–a special spokesman called in to handle the crisis at the company–said the suspensions of Mr. Solomon and Mr. Clark were pending further review of the material in the 116-page special committee report and would be taken up at the board's meeting on Wednesday.
Appointed interim CEO was Clifford Parent, Beacon's vice president of claims, who has been with the company 14 years, according to Mr. Fischer.
Mr. Fischer said the board had voted in principle to adopt the recommendations in the report, which called for the appointment of an ethics officer and various changes in oversight and reporting.
Beacon for months now has been locked in a court battle with the State Department of Business Regulation, which sent in a team of forensic auditors in an expanding market conduct exam. The auditors had asked for the computer hard drives of Beacon employees, which the insurer refused to turn over.
The board decided Friday, Mr. Fischer said, to review the information on the hard drives in question. "That matter is still pending. I can't tell where that's going to go. It's on the table."
Richard Berstein, executive counsel for the DBR, noted that the material sought in the market conduct exam is much broader in scope than the material examined by the special committee for its report.
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