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'Report: LGC owes $100 million to cities, towns'

Last modified: 8/3/2011 12:00:00 AM
State regulators said yesterday that the Local Government Center owes municipalities more than $100 million in surplus money from insurance programs.

In a report on an investigation into the Concord non-profit organization, an attorney for the Bureau of Securities Regulation said the LGC violated state law by failing to return surplus from pooled risk programs that provide cities and towns with health and property insurance. Staff attorney Earle Wingate told reporters he believes the LGC owes municipalities more than $100 million.

'If you have a surplus, you're supposed to give it back to cities and towns,' Wingate said. 'You're not supposed to hang onto it.'

The report charges that the LGC improperly used money from the health and property insurance pools to subsidize a workers compensation pool. It also charges that the organization failed to follow state law when it reorganized in 2003. The matter now heads to an administrative hearing.

Officials with the LGC said the organization acted properly and that they look forward to presenting their case in a formal and public setting. They said decisions about reorganizing were made in consultation with attorneys and that reserve levels for the insurance pools were set at a conservative level.

The report faults the LGC for returning surplus money to municipalities through lower rates over several years, rather than immediately dispensing the money among policy holders. But officials with the LGC said members prefer the money to be used to stabilize rates.

'We feel as a board that returning surplus through rate reductions over a three-year period allows us to try and provide as much stability and predictability,' said Karen Liot Hill, a board member and Lebanon city councilor.

In his report, Wingate demands the LGC return $40 million in surplus to municipalities who paid into the risk-management pools between 2003 and 2011; that it repay $20 million to communities from the workers compensation pool; that it explain $27 million in distributions from the risk-management pools to the LGC; that it explain spending not directly related to the mission of the pools; and that it return the cost of LGC membership to municipalities that were forced to join to buy insurance coverage.

The LGC said in a statement that the demands are unsupported. LGC board member Peter Curro, who chairs the organization's finance committee, said paying $100 million would force the organization to raise rates substantially or consider closing. Wingate said securities officials have debated whether the LGC could repay the money and survive.

The findings of the final report are consistent with those of an interim report released in October 2010. The investigation started with complaints received by the bureau in 2009, when lawmakers first gave the bureau authority to oversee pooled risk funds.

(Karen Langley can be reached at 369-3316 or klangley@cmonitor.com.)


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