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Supporting The Texas Observer with every transaction. You Know Me \(with a few Get real estate help from someone you know. Call me today! The Kinney Company, Real Estate Services, Austin, TX Larry Hurlbert, Realtor 512.431.5370 [email protected] The Kinney Company GROWNUP GIFTS FOR KIDS OF ALL AGES AUSTIN NEW STORE NORTH SOUTH RESEARCH E. RIVERSIDE STASSNEY 832-8544 443-2292 502-9323 441-5555 707-9069 NEW STORE!! SAN MARCOS 512 392-4596 SAN ANTONIO NEW STORE EAST CENTRAL EVERS MILITARY WEST AVE 654-8536 822-7767 521-5213 333-3043 525-0708 stilt OF HAPPINESS NEW STORE! IN AUSTIN CESAR CHAVEZ 3111 E. CESAR CHAVEZ \(East of Pleasant Valley 247-2222 WHEN SIBLEY began representing Universal Insurance Exchange, he took on a client that exemplified many of the flaws in the way Texas regulates its insurers. Universal sells auto insurance to cab companies and to some of the Metroplex’s poorest motorists. The company had been on the department’s watch list even before Kourosh Hemyari acquired it in 1995. The company had run amok for years before the Insurance Department put it under supervision in 2002, the same year the company hired Sibley. After regulators came to Universaland while the governor’s ally was being paid so handsomely the problems continued. An Insurance Department analysis of auto-insurer complaints in 2004 found that Universal had a complaint index that was 31 times higher than the industry norm. A department examiner reported in 2005 that Universal improperly denied insurance claims and gouged customers with unauthorized premiums and fees. At new Commissioner Geeslin’s request in 2006, a state judge put Universal into receivership. Geeslin hired private contractor Harold Koehler as the “special deputy receiver,” whose job was to shore up Universal’s business and either return it to its old owners, sell it to new owners or shut it down with a minimal impact on policyholders and creditors. A veteran of the federal Resolution Trust Corp.’s cleanup of the 1980s savings-and-loan debacle, Koehler says he uncovered evidence that Universal had taken $3 million in allegedly improper fees from its customers. Koehler says he settled millions of dollars’ worth of lawsuits against Universal and put the company on a firm financial footing. Then, in late 2007, Geeslin fired Koehler “without cause.” Beryl Goldman, the computer consultant who still works for Universal, says that over the years he developed a low opinion of the ethics of Universal’s managementand of the industriousness and intelligence of Insurance Department regulators. Goldman says he helped Koehler uncover Universal’s allegedly improper fees when he saw that he was “a bright light” who “really tried to straighten out the company,” even though Koehler had cut Goldman’s pay. “A property casualty company license is a license to print money,” Goldman says. “Those guys [at Universal] give you the [policy] paper, but when you have a claim, they string you on for months. There are tens of thousands of insureds who get cheated.” That did not change, he says, on the Insurance Department’s watch. One of Koehler’s chief criticisms of the department is that it failed to pursue evidence that Universal took millions of dollars in improper policyholder fees. Department attorney Rachel Giani says she can’t say whether the agency referred evidence of possible criminal activity at Universal to prosecutors. The Travis County district attorney’s office says it received an anonymous, unsubstantiated tip about alleged misappropriations at Universal several years ago and passed it on to the Insurance Department. When prosecutor Susan Oswalt followed up in July 2008, she says that the outside counsel the department assigned to Universal, Brian Riewe, told her the company was in receivership and there was nothing more for prosecutors to do. If the department didn’t move on criminal complaints, the agency did eventually take civil action. On the last day of 2009, the deputy receiver whom Geeslin FEBRUARY 5, 2010 hired to replace Koehler filed a lawsuit in state court. It alleges that Hemyari and several of his Universal associates stole $4.8 million in improper fees from policyholders and failed to report this income to regulators. So why was Koehler fired? The insurance department said in regulatory court filings in 2008 that Koehler served at the pleasure of the commissioner. But agency officials say that Koehler is the only deputy receiver that Commissioner Geeslin has axed, and that Koehler never committed any egregious blunders. They say it was decided that a new deputy receiver could do a better job completing Universal’s marathon mop-up. Koehler believes his firing was another example of the shady way that insurance regulation works in Texas. He was fired, he says, because he pressed Geeslin to investigate Universal’s hefty payments to a lobbyist with close ties to the governor. “I had been doing this type of work for 15 years, and I never saw a company under TDI supervision and control make payments to a lobbyist,” Koehler says. “It was policyholders’ money.” 121 Andrew Wheat. an Observer contributing writer, is research director at Texans for Public Justice. a nonpartisan watchdog group. he governor told reporters he was tired of being viewed as the insurance industry’s “whore-boy.”