March 23, 2005

Mike Hatch, American Bankers and The Media - Part 3

I'm re-running my series on Mike Hatch and the American Bankers controversy, first published in the summer of '03. The story is back in the news - if below the fold - due to the continued prosecution of State GOP chair Ron Eibensteiner.

Part 3: The Meeting

After a tumultuous campaign season, Tim Pawlenty was elected governor of Minnesota in November of 2002. He appointed Glenn Wilson to the post of Commerce Commissioner. Wilson's main experience was in the mortgage industry - Ronald Reagan had appointed him president of the Government National Mortgage Association ("Ginny Mae") in 1985.

On January 6, Tim Pawlenty was inaugurated, and his cabinet (including Wilson) were sworn in.

The January 6 Meeting

After the inauguration, according to the transcript of Attorney General Hatch's deposition to the Legislative Auditor as well as the auditor's report [warning - big PDF file], he had dinner at the Oceanaire (a restaurant in the Minneapolis Hyatt).

Hatch described the meeting in his testimony to the auditor:

So we met at the Oceanaire. It's Jerich, some guy named Harry at American Bankers [Harry Bassett, Senior Vice President of Government Relations for American Bankers] and myself. He makes the offer exactly like the August 7th settlement, except they said the three and a half goes to chairty. I said fine, I want this presented to the Commissioner immediately. Because I wanted to get it on the table. I wanted to get the bar set. I met on January 8, I believe it was the 8th, it was on a Wednesday. I told them, I wanted either Jerich or Thornton in my office at 11:00 on January 8th, whatever the Wednesday is, to make that offer. I wanted the offer on the table...
This set the stage for the January 8th meeting between Hatch and Wilson that we'll get to in a moment here.

Such settlement are, of course, illegal under state law. The legislative auditor noted this in their report:

We were asked to examine the Attorney General’s actions because state law prohibits a diversion of settlement money to a charity (Appendix M). Moreover, Minn. Stat. §16A.151, Subd. 1(b) makes it illegal for state officials—including the attorney general—to even "pursue" such a diversion. The key provision of law says:

(b) A state official [defined to include the attorney general] may not commence, pursue, or settle litigation, or settle a matter that could have resulted in litigation, in a manner that would result in money being distributed to a person or entity other than the state.

How serious was this illegal proposal? Apparently, according to the Auditor's Report, seriously enough to report:
Attorney General Hatch reportedly told people attending a task force on mental health access that he might have a donor for the Community Behavioral Health Trust Fund. The Attorney General asked Dick Niemiec, a senior vice president at Blue Cross and Blue Shield of Minnesota, and Mary Brainerd, Chief Executive Officer of HealthPartners to come back to his office to discuss the possible donation to the trust fund with the new commissioner of Commerce.
So - according to the Auditor on the case, Hatch convened a meeting among a couple of people who would be key stakeholders in a diversion of American Bankers' fine to charity, broached the idea, and then walked over to his office to meet with Glenn Wilson.

The January 8 Meeting - Wilson meets Hatch

On January 8, Glenn Wilson had been in office for two days. According to a source familiar with the issue, Wilson had gotten a call on January 7 from Hatch, calling a meeting for the eighth. The meeting was supposed to be "primarily a meet and greet", according to the source, as well as a letter from Ken Wolf (Commerce Department Reliability Administrator) to Legislative Auditor Jim Nobles, dated June 18, 2003 - "On January 7, 2003, the day before the January 8, 2003 meeting between Commissioner Wilson and Attorney General Hatch, Commissioner Wilson told me that he was going to meet with Mr. Hatch. I asked the nature of the meeting and he said he was invited over for a courtesy visit to meet Mr. Hatch".

But according to the source, there were some indications that Wilson had no idea this meeting was to be anything but a "meet and greet" between two men that hadn't worked together before; Wilson, who reads with glasses, left his reading glasses at his office. And when officials go to meetings with substantive issues on the table, they very often take associates, or at least notebooks. Wilson took neither, according to my source. He went alone.

According to the source, "It was a setup".

Hatch presented to Wilson the proposal - the $3.5 million dollar settlement would go to a charity for the mentally ill (the "Community Mental Health Trust") According to the source, Wilson asked if it was a "done deal", and Hatch replied that it was one of the options on the table.

At that point, says my source, Dick Niemiec (an official from Blue Cross) and Mary Brainerd (from HealthPartners) were brought into the meeting. Wilson, says the source, thought they'd been brought in to endorse the contribution. Ron Jerich also entered the meeting - it was the first time Jerich and Wilson had met, according to my source.

According to my source, the entire meeting took about twenty minutes. Wilson went back to his office, and told members of his senior staff "I can't believe this." My source tells me that Wilson felt befuddled by the situation - he had no familiarity with American Bankers Insurance, or the issues involved, and he wondered "why should I be able to choose where the money [from the settlement] goes?" The deal was presented to Wilson, says my source, as "Zero to the taxpayer, $3.5 million to a charitable entity that Hatch was arguably the inventor of," alluding to the Attorney General's propensity for installing his own people on the boards of non-profits with which his office becomes involved (which we'll discuss in next Wednesday's installment).

Although my source spoke on background, the details of his account are corroborated by the letter from Ken Wolf.

Mr. Wilson frowned and said, "I was set up." I asked what he meant by that. He repeated his previous comment to me that it was just supposed to be a courtesy visit. However, he told me Mr. Hatch called other people into his office to present an offer of a settlement of $3.5 million to go to some charity to settle some case that the Department had outstanding against some insurance company.

Commissioner Wilson was taken by surprise by the issue and returned to his office to investigate the situation. He told me he didn't yet know his lines of authority. However, he clearly stated that he felt it was inappropriate for the Attorney General, the Commissioner, or any other individual to decide what charity should be the recipient of settlement money. He felt any fines or penalties should go to the general fund.

The Meeting - according to Hatch

Hatch described the meeting in his deposition to the Legislative Auditor's office:

I invite Dick Niemiec of Blue Cross, and Mary Brainerd of HealthPartners. I tell everybody, you know what? This company is about to make a three and a half million dollar offer. They want to give it to a charity. Maybe they can give it to this group [the mental health charity]. What a fine thing. I tell these two, come along to the meeting. I'll introduce you to the new commissioner, who is their regulator. And so they come to the meeting. I make them wait in the lobby. By that time Jerich is there, pursuant to our discussion, and so he's there. Those two are there. They are in in the lobby. I go into the meeting with Wilson and Chief Deputy Eiden [Kris Eiden, deputy Attorney General and a former law partner of Hatch's]. She gets the letter. She kept the letter. Gives him a copy of the letter. He's reading the letter. I go over the mischief. I go over the whole nine yards what I've explained to you. This thing is bad. They tried to influence the [pauses] this proceeding by contributing to both the Democrats and Republican Candidates. You are going to get hit by political people on this thing. You make damn well and sure you don't cave in to it. This is extraordinarily unusual. This is not a good company. It's disreputable. You don't want to start off with this kind of a case.
Jerich enters the picture again. He had asked [pauses] I said that Jerich, representing American Bankers, was in the lobby. They are going to make an offer along the lines of August 7th, except that it goes to a charitable organization. I also told him that there were two executives from insurance companies that propbably have two thirds of the health care in this state. That he's going to be very much involved in because health care is a huge issue in this state. And we had a mental health problem in this state. If it's okay, I would like to introduce you to the two of them and then they can tell you want they're doing in mental health. SO I bring them in. They spend ten minutes to saying that they are doing mental health and what a fine thing. I bring in Jerich and I tell Jerich, okay, make your presentation. He makes the presentation along the lines of August 7th. He agrees. It's the same thing as August 7th, except for it goes to a charity and wouldn't that be great. And you two over there, what a fine charity you've got if it could go there. Kick 'em all out, so now we're getting to noon. The meeting is going over. I tell the commissioner to meet with our lawyers. That you can't [pause] there's a problem here. There's a fly in the ointment, and that is it can't be done to a charity. But talk [pause] My recommendation was that he talk to the political people and tell them up front what he can't do. Tell them about our conversation. And that our lawyers will brief ou with regard to what can and cannot be done with this money. He then leaves the meeting. The Legislative Auditor noticed the inconsistency between the two accounts - one of their findings read:
We received conflicting and irreconcilable testimony on whether Attorney General Hatch told Commissioner Wilson on January 8, 2003, about the campaign contribution American Bankers Insurance made to the Republican Party.
And noted:
Asked whether Attorney General Hatch discussed a campaign contribution from American Bankers to the Republican Party or showed him a letter from Mr. Eibensteiner to Mr. Jerich, Commissioner Wilson said: "I don’t believe that happened." Asked whether he was sure it did not happen, he said: "It didn’t happen." Asked whether it was possible that the conversation occurred as Attorney General Hatch described it, but that it did not register on him, Commissioner Wilson said: "I don’t believe so." Asked if he could reconcile his recollection and testimony about the meeting with that of Attorney General Hatch, Commissioner Wilson said: "No, sir.".


  • So what did Wilson know, and when did he know it?
  • Did Hatch show Wilson the form letter from Eibensteiner at the January 8 meeting, or not?
  • Was it an Ambush?
  • Did Hatch call Niemiec and Brainerd to the meeting because, as he said, he wanted them to meet the man responsible for regulating them - as he confronted the same man with the letter from Eibensteiner? Or was it to nail down the specifics of the contribution to the Community Mental Health Trust?
  • And did the Commerce Department actually give American Bankers a better deal based on their contribution to the national party?
  • Why is Attorney General Mike Hatch bringing his client, Commerce Commissioner Glenn Wilson, into a meeting with a representative of his client's adversary (Jerich, representing American Bankers) and presenting allegedly incriminating evidence about the Client (Wilson) without (Wilson says) informing the Client about it first?

We'll talk about all of this in Monday's installment.

[Previous - The Check]
[Next - "Confusing, deceptive, inappropriate, inconsiderate"]

Posted by Mitch at March 23, 2005 05:01 AM | TrackBack
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