The state’s acting comptroller released a searing report against an insurance firm founded by Democratic South Jersey power broker George E. Norcross on Tuesday, accusing Conner Strong & Buckelew of violating disclosure laws and improperly influencing public contracting processes.
Acting Comptroller Kevin Walsh said Conner Strong & Buckelew and affiliated firms steered public contracts toward themselves via conflicts of interest. A spokesperson for Norcross called the report politically motivated and vehemently denied wrongdoing.
“There is no clearer conflict of interest than when a company writes the RFP, reviews the bids, and then steers the contract to itself,” Walsh said in a press release. “What makes this worse is that the vendor concealed from the State and its public entity clients that it was operating on all sides of contracting processes that are supposed to protect taxpayer funds.”
Conner Strong & Buckelew is one of the country’s 20 largest insurance brokerage firms. The comptroller’s office said the findings came after a routine review of HIF procurement proposals. The HIFs at the center of the investigation represent some 40,000 local government employees and about 109,700 total enrollees.
The report says municipalities in the state are allowed to form health insurance funds (HIFs) to provide health insurance to employees and pool risk across a whole region to lower costs. The report found Conner Strong & Buckelew and its “alter ego,” PERMA, “improperly gained control” over HIFs’ contracting processes, allegedly competing for and winning the same government contracts they helped write.
“CSB and PERMA purport to be separate, independent entities linked only by a parent company. CSB generally serves as program manager, acting as broker and underwriter for insurance funds, while PERMA is contracted as the administrator, managing day-to-day operations for HIFs. … [The report] found, however, CSB and PERMA function as one entity, with PERMA under CSB’s supervision, sharing leadership and employees,” the report’s announcement states.
The report also accused Conner Strong & Buckelew of fabricating the existence of a public insurance entity billed Hi Fund.
Daniel Fee, a spokesperson for Norcross, compared the comptroller’s report to the criminal indictment of Norcross last year by state prosecutors, who charged him and others with racketeering and official misconduct. A state judge dismissed the indictment in February, and the state has since appealed that ruling.
“Stop me if you’ve heard this before: an under-qualified, politically ambitious government appointee decides to look at an extremely complicated issue and finds a grand conspiracy with George Norcross at its center,” Fee said. “But this time, it’s not [Attorney General] Matt Platkin whose well-known obsession with Norcross we are speaking of, but rather his stalking horse, State Comptroller Kevin Walsh.”
Norcross, then the executive chairman of Conner Strong & Buckelew, took a leave of absence from the insurance firm after the indictment.
Fee said the report is “rife with factual inaccuracies” and shows a misunderstanding of insurance markets. He said state HIFs have undergone audits from the Departments of Banking & Insurance and Community Affairs for three decades “without issue.” Fee also said Matthew Boxer, the comptroller who served from 2007 to 2013, “reviewed” the system.
“This new report should be seen for what it is: an investigation conducted by a politically motivated Acting-Comptroller for his own self-promotion on his way out the door,” Fee said.
A group of HIF chairs also issued a statement criticizing the report, calling accusations within it “false and unfounded.”
“Despite the submission of extensive documentation and detailed legal analysis, the OSC’s report is replete with inaccuracies and reflects a misunderstanding of the New Jersey insurance market, TPA functions and how HIFs operate,” they said. “Even though the HIFs sought the OSC’s participation on crafting the proposed procurements so that the HIFs could issue them, the OSC has decided to issue its report, deny the HIFs permission to issue their proposed procurements, and in turn have prevented savings to taxpayers and public workers.”
Walsh, a frequent target for the state’s politicians, has served as acting comptroller for more than four years and will likely not be confirmed by the end of Gov. Phil Murphy’s term. Walsh has defended his office’s work, saying he’s helped recoup far more in tax dollars than his office has spent.
The comptroller’s office referred alleged ethics violations and disclosure failures to various agencies, including the Department of Banking and Insurance and the Office of the Attorney General. The report also recommended that the state Legislature enact tighter regulation of the state’s insurance brokers and markets.
“At a time when more public entities are relying on health insurance funds to provide coverage, it’s critically important that the State ensure insurance funds and vendors who receive taxpayer money act ethically, avoid conflicts of interest, and comply fully with the law,” Walsh said.
This article was updated with comment from HIF chairs.
