Listen to this articleThe basics:
- OSC alleges Conner Strong & Buckelew and PERMA improperly influenced HIF contracts
- Report cites undisclosed conflicts and a fake government entity
- The firm calls the report false, politically motivated and misleading
- OSC recommends increased oversight, corrective plans and potential legislation
A new state comptroller report makes strong accusations against insurance firm Conner Strong & Buckelew. Founded by South Jersey businessman and powerbroker George Norcross III, the firm is vehemently defending itself in response.
The report, available here, examines health insurance funds.
“Since the 1990s, New Jersey municipalities and schools have been permitted to form health insurance funds (HIFs) to provide health benefits to employees and their families,” OSC wrote in a press release announcing the report. “The goal of these public entities is to lower costs and improve efficiency while maintaining governmental control and compliance.
“But in a 34-page report published today, OSC found one insurance firm, Conner Strong & Buckelew (CSB) and its ‘alter ego,’ PERMA, improperly gained control over public entities’ contracting processes, influencing how multimillion dollar contracts are written, awarded, and priced—even while they compete for (and win) some of these same government contracts.”
Routine review
OSC said its findings came to light during a routine review of proposed public procurements by three health insurance funds.
“While reviewing the proposals by the Schools Health Insurance Fund (SHIF), the Southern New Jersey Regional Employee Benefits Fund (SNJHIF), and the Municipal Reinsurance Health Insurance Fund (MRHIF), OSC found CSB and PERMA have longstanding undisclosed conflicts of interest, improperly controlled contracting processes that led to them being awarded contracts, and invented a fake government entity to attract more customers,” OSC alleges. “All of it occurred with limited, if any, awareness by state regulators or the local officials overseeing HIFs who are charged with protecting taxpayer funds.”
“There is no clearer conflict of interest than when a company writes the RFP, reviews the bids, and then steers the contract to itself,” said acting State Comptroller Kevin Walsh. “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.”
Walsh alleges that the arrangement violates conflict-of-interest rules and public contracting laws to prevent corruption and safeguard funds.
“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,” OSC alleges.
‘Stop me if you’ve heard this before’
OSC says it made recommendations and referrals to the Department of Banking and Insurance, the Department of Community Affairs, the Office of the Attorney General’s Division of Consumer Affairs and School Ethics Commission. It also directed the three HIFs to submit corrective action plans within 60 days, which will require the trustees who bear responsibility for the funds to take public votes.
Additionally, the agency urged all insurance funds to conduct reviews of their vendor relationships and procurement practices. OSC called on the Legislature to consider legislation to require greater oversight and regulation.
“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,” said Walsh.
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.
– acting State Comptroller Kevin Walsh
The response to the report has been forceful.
Dan Fee, a spokesperson for Norcross said, “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. But this time, it’s not [state Attorney General] Matt Platkin whose well-known obsession with Norcross we are speaking of, but rather his stalking horse, State Comptroller Kevin Walsh.
“The similarities between the Attorney General and the Comptroller don’t end with their obsession, however. Like Matt Platkin’s case against Norcross and his allies in rebuilding Camden – a case which was quickly dismissed by the courts – today’s Comptroller report is rife with factual inaccuracies and evinces a fundamental lack of understanding of the issues, here how insurance markets work.”
Gone fishing
As NJBIZ reported, earlier this year, a judge tossed a racketeering case brought by the OAG’s office against Norcross and several other prominent business leaders from Camden. Platkin is appealing.
Conner Strong & Buckelew and PERMA said in a statement, “The OSC has waged a years-long, baseless assault on PERMA, Conner Strong & Buckelew, our professionals, and various Health Insurance Funds. After dragging this process out for over a year, the OSC has released a report riddled with lies, falsehoods, and blatant inaccuracies. This is not oversight – it is a calculated abuse of government power.
“The OSC’s report falsely claims the Funds operate with little oversight, insulting the work of volunteer Fund Commissioners and exposing the OSC’s bias. What began as a routine review of RFP’s for TPA services secretly morphed into a full-scale fishing expedition, complete with fabricated interpretations of state law.”
After dragging this process out for over a year, the OSC has released a report riddled with lies, falsehoods, and blatant inaccuracies. This is not oversight – it is a calculated abuse of government power.
– statement by Conner Strong & Buckelew and PERMA
The chairs of several HIFs – including the School Health Insurance Fund, Central NJ Health Insurance Fund, Southern NJ Health Insurance Fund, Northern NJ Health Insurance Fund, Gateway BMED Health Insurance Fund, and Municipal Reinsurance Health Insurance Fund – also released a statement.
“The recently issued report from the NJ Office of the State Comptroller makes false and unfounded accusations regarding health insurance funds,” the statement said. “These allegations reflect a fundamental misunderstanding of how joint insurance funds operate and why they have been successful for New Jersey taxpayers.
“Furthermore, the OSC’s position that we as Chairs and Commissioners of various HIFs are unaware of the operations of these programs is an insult to the tremendous work we apply to deliver high quality, affordable benefits for public workers and their families.”
TBD
Conner Strong & Buckelew and PERMA called on the governor and other government leaders to appoint a special counsel to review whether any referrals by the OSC to criminal and civil enforcement agencies during Walsh’s tenure “improperly contained or relied on attorney-client privileged information.”
“Conner Strong & Buckelew and PERMA are exploring all legal remedies available to address these politically motivated attacks and reckless conduct,” their statement continued. “Meetings are also being scheduled with the Department of Banking and Insurance and the Department of Community Affairs to ensure the truth is heard and the Funds are protected.”
The OSC did not immediately respond to a request for comment to the pushback on the report.
Gov. Phil Murphy received a question about the situation during his regular call-in show on WNYC Wednesday night.
“What’s your take on this – what are you going to do about it?” host Nancy Solomon asked Murphy, after running through the particulars of the report.
“To be determined. By the way, violated state laws – I actually don’t know that,” said Murphy. “We’re in the process of actually running that down – Department of Community Affairs, Division of Banking and Insurance. And there’s been pretty strong pushback on that assertion already.
“But I’ll put that to the side, because that’s something that I’m not qualified at this sitting to respond to,” Murphy continued. He said it feels to him like a situation where transparency is lacking. “And my view is, if the Legislature wants to pursue that – in terms of shining the light on this industry – count me in to be a part of that process.”
Independent for a reason
As Solomon pressed her questioning, Murphy noted that the OSC is independent.
“And that’s the way it should be – and that’s the way it always has been,” said Murphy. “So, he’s not checking with me on. ‘How do you feel about this or that?’ I’ve never had one conversation with him [Walsh] about this. And that’s the way it should be, by the way.”
Murphy said, “This is too early to tell where this leads. But my gut, again, my quick read of this is that if a lot brighter light were shined on this whole industry, it would address a lot of the concerns that have come out of this. But I’m going to defer judgement until we all get a chance to dig in on this. And we will.”
