Rhode Island Gov. Says Beacon Mutual Review Shows That Problems Were Worse Than Originally Suspected

Rhode Island Governor Donald L. Carcieri has issued the following statement regarding the completion and public release by the Department of Business Regulation of the Market Conduct Examination of Beacon Mutual Insurance Company.

“Nearly a year and a half ago, I first informed the public about allegations of mismanagement by the former leadership of Beacon Mutual Insurance Company,” Governor Carcieri said. “This study of Beacon Mutual’s conduct demonstrates that the problems went much deeper than even I suspected. In short, it is a damning indictment of Beacon Mutual’s behavior as the state’s dominant workers compensation insurer, and insurer of last resort.”

“As I said at the time, Beacon Mutual was chartered by the state as a nonprofit, public corporation to provide affordable workers compensation insurance to Rhode Island employers,” Carcieri continued. “Beacon’s mandate is to function for the good of the people of our state, and to maintain the public trust by providing services to all Rhode Island policyholders on a fair and nondiscriminatory basis. The extent to which Beacon Mutual’s former leadership violated that important public trust is now crystal clear.”

“Specifically, this market conduct examination shows that Beacon Mutual’s former leadership fostered a corporate culture that suffered from weak management and controls; inappropriate producer, agency and vendor relationships; favoritism and bias in pricing; inappropriate and lavish spending; and a total disregard for public oversight and for Beacon’s public mission and purpose,” the Governor said. “In short, Beacon Mutual’s conduct was completely inappropriate and reprehensibly abusive of the public trust.”

“Last year, I quickly moved to overhaul Beacon Mutual’s leadership by appointing Brendan Doherty, now Superintendent of the State Police, and Sister M. Therese Antone to replace two board members who resigned in the wake of the scandal,” Carcieri said. “I also attempted to remove two other board members who had helped preside for years over Beacon’s mismanagement.”

“I’m pleased that Beacon Mutual’s fresh leadership has begun to chart a new course for this critical Rhode Island institution,” the Governor said. “In particular, Beacon Mutual’s recent rate reductions – which total over 20 percent – and dividends to shareholders are very positive developments for Rhode Island businesses. Companies throughout our state can also be much more confident that the rate they pay Beacon Mutual will no longer be determined by their connections to the company or to the State House.”

“With these positive developments in mind, I’m satisfied with my original decision to publicly reveal the scandalous behavior of Beacon Mutual executives,” Governor Carcieri said. “I am equally happy that I successfully opposed those same executives’ plans to change state law in an effort to reduce public oversight and to shield their misdeeds from public scrutiny.”

“With this report in hand, it is now up to the Attorney General and the United States Attorney to determine what, if any, crimes were committed and what prosecution might be, or might not be, appropriate,” Carcieri said. “The Department of Business Regulation is providing both those law enforcement officials with copies of all the background material that was compiled during the course of their investigation.”

“Finally, I want to thank the career professional insurance investigators at the Department of Business Regulation who conducted this examination. They do a terrific job day in and day out for the Rhode Island public,” Governor Carcieri concluded. “I also want to thank Department of Labor and Training Director Adelita Orefice for originally bringing these concerns to my attention. Her decision to inform me about what was going on at Beacon Mutual is a tremendous testament to her integrity and intelligence. Without her decision to blow the whistle, the misdeeds of Beacon’s former leadership might have continued unabated for years.”

Source: Rhode Island Governor

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