Oxendine donor gets key position

The businessman whose companies funneled $120,000 to Insurance Commissioner John Oxendine’s campaign for governor has chaired a powerful behind-the-scenes insurance board for the past decade — after being appointed and repeatedly reinstated to the post by Oxendine.

Delos “Dee” Yancey III, CEO of State Mutual Insurance Co. and its subsidiary, Admiral Life Insurance Co. of America, has headed the state-mandated Georgia Life and Health Insurance Guaranty Association since being appointed for his first three-year term in 1999. Before that, Yancey’s father, Delos Yancey Jr., headed the group.

The association, set up as a safety net for the insurance industry, manages the operations and assets of troubled insurance companies to make sure consumers don’t lose out on their policies.

By state statute, the association can raise millions from insurers, take over assets of troubled insurers and assume policies of failed insurers. As of 2006, the most recent data available, the association reported assets of about $140 million.

None of the meetings of the unpaid board have been open to the public. The board’s minutes and correspondence have not been available for public examination. The association maintains it is not subject to Georgia’s Open Records Act.

Being association chair gives Yancey influence and power within the state’s insurance industry. It gives him access to financial information of troubled insurance companies. It gives him a say in who gets the policies of failed companies and who gets hired to handle insurance liquidations and other matters.

Neither Yancey nor Oxendine has been willing to discuss their longstanding relationship —which has included at least one hunting trip to Mexico together paid for by State Mutual officials —since the story about the donations broke.

Last week, Yancey declined to speak to The Atlanta Journal-Constitution about his role in the association, his relationship with the insurance commissioner or why his companies gave the money.

Oxendine, who has been the state’s insurance commissioner since 1994, declined to discuss Yancey or Yancey’s work at the association.

Asked about Oxendine’s relationship with Yancey, Jeff Breedlove, Oxendine’s chief campaign strategist, told the AJC that “Mr. Yancey is a respected business leader in Georgia who has earned the trust and respect of many elected officials in both the Democrat and Republican parties.”

Breedlove said Oxendine was “honored to know this outstanding community and business leader.”

On at least one occasion, in 2006, Oxendine traveled on a hunting trip to a Mexican resort as Yancey’s guest. This week, Breedlove acknowledged that trip took place.

Earlier this month, the AJC reported that records showed Yancey’s insurance companies made payments of $14,000 to each of 10 Alabama PACs in 2008. The PACs were all set up by a director of State Mutual and Admiral Life. The PACs then each made $12,000 donations to Oxendine’s campaign. Georgia law prohibits contributions from companies to officials who regulate them. It also limits the amount that one individual or business can contribute to a candidate in an election cycle. The current limit is $12,200 in a normal election.

The day after the AJC story ran, Oxendine announced he would return the money, pending an investigation by the state Ethics Commission. The money accounted for more than 10 percent of all the money Oxendine’s campaign had raised by January of this year.

In an e-mail, a State Mutual official told the newspaper that the decision to contribute to Oxendine’s campaign was made by the PACS that received money from Yancey’s companies. The official would not comment on why they donated the money.

Regarding the contributions, Oxendine issued a statement: “When this matter was brought to my attention, and questions were raised with respect to facts not known to me, I immediately decided to err on the side of caution.”

Asked about why Yancey’s companies gave Oxendine $120,000 through the PACs, Breedlove said, “This is a question best directed to the PACs.”

Donald Watkins, the State Mutual director who set up the PACs, told the AJC in an e-mail that the 10 PACs all independently decided to send $12,000 to Oxendine’s campaign.

From 1998 to 2008, Yancey, Yancey relatives and Yancey-controlled companies directly gave Oxendine campaigns at least $44,800, according to campaign finance reports filed with the state. Those separate donations were all within the contribution limits set by Georgia law.

Since Oxendine first appointed Yancey to the chair of the Georgia Life and Health Insurance Guaranty Association in 1999, the two have had regular contact on a range of financial and regulatory issues facing the state’s insurance industry. The chair and the board receive reports from the commissioner’s office about the financial status of troubled companies, according to the association’s executive director, Michael Marchman.

The association was set up in 1992. Every state has one, though governing legislation differs slightly from state to state. Generally, such insurance associations raise money through assessments on members, seized assets of troubled companies and investments. Marchman said he could not provide detailed information to the public on the group’s finances. Asked if he could provide information about the association’s finances to an insurance company member who was not on the board of directors, Marchman said, “I’d have to check on that.”

Under state law, the board members are all appointed by the commissioner for three-year terms. The association’s business operations are handled by the Marchman-Steele Agency Inc., a for-profit company that also administers a similar insurance pool for property insurers.

Marchman, the head of the company and the association’s executive director, said the seven-member board of insurance executives makes all financial decisions. He said he makes recommendations, but the board is in charge.

The board can assume control of policies and transfer them to other companies. If a company is determined by the state to be financially unstable, liquidation proceedings are filed with a state court and the association is notified.

“Once a liquidation order is signed, we are very proactive in how that gets resolved,” Marchman said.

The board has the authority to assess funds of its members, which are any licensed insurers operating in Georgia, as needed. Some years, the association makes no assessments at all. Since Yancey took over as chairman, the association raised about $3.3 million from association members, according to financial information provided to the National Organization of Life and Health Insurance Guaranty Associations. However, it reported in 2006 — the most recent data available — it was servicing about $71 million in previous obligations, and had expenses of about $5 million annually.

The association has handled the accounts of 40 insurance companies since its inception, according to its Web site. The National Organization of Life and Health Insurance Guaranty Associations reports the Georgia association has raised more than $106 million from assessments during its existence.

Marchman said the board today oversees a rainy day fund of about $80 million “for future events.”

Peter G. Gallanis, president of the national organization of these guaranty associations, said so far no life insurance company in the country has fallen into liquidation during the current recession. Marchman said the recession has hit insurance companies as it has hit everyone else, so insurance companies could have problems.

“It is certainly possible that we could be busier, but I do not look for a tsunami or a tidal wave,” he said.