The board of state-run insurer Citizens approved a $6.4 million contract for a West Palm Beach law firm with ties to an ally of Gov. Rick Scott — a deal one state lawmaker at Friday’s meeting blasted as a “sham.”
Records requested by The Palm Beach Post show former Citizens president Tom Grady listed the Ackerman, Link & Sartory P.A. firm of West Palm Beach as a source of income in a state financial disclosure as recently as 2010. Grady, a neighbor and friend of Scott, ran Citizens when bids were put for out an earlier contract that the law firm won, putting it in a strong position to win the larger deal approved Friday.
Afterward, a former state insurance consumer advocate called deals like this one, with fees up to $525 an hour, “wildly inappropriate.”
Board member John Wortman, appointed by Scott, made a motion to approve the deal, which he said “made sense.” The vote, 4-1 with two members abstaining, approves the money over three years to Ackerman, Link & Sartory to serve as coordinating counsel for claims litigation, with an optional fourth year.
State Rep. Frank Artiles, R-Miami and a public adjuster, questioned not the only the need and the cost of the deal but said it was “tainted” for other reasons.
“Table this item,” Artiles urged the board at its meeting in Winter Park. “I believe more investigation and more information is needed.”
Citizens executives defended the arrangement, saying they followed proper rules for bidding contracts. President Barry Gilway advised the board to approve the deal as financially “responsible.” Company officials argued the firm had helped the company on sinkhole claims earlier, which Gilway called “the most cost-effective vote the board has ever made.”
Board member Juan Cocuy of Wellington, who eventually voted for the deal, asked what the company was getting for its $6.4 million.
Citizens general counsel Dan Sumner responded that if a third of the 10,000 pending non-sinkhole cases were resolved earlier on terms the company considers favorable, it could save $97 million in litigation costs over the life of the contract.
Two board members abstained, including Tom Lynch of Delray Beach, an insurance agent who said he did business with the law firm.
Artiles said he has had trouble getting information he considers reliable from Citizens about how much it is spending on attorneys, but estimated Citizens could save $50 million a year just by paying the claims policyholders submit, rather than paying layer upon layer of lawyers to fight them.
Gilway said plaintiff attorneys would love that but it would only encourage more lawsuits and raise costs to all policyholders.
The coordinating counsel job does not necessarily involve direct courtroom work, but rather helping oversee strategy for lawyers the company already pays. Company officials said effective management can mean identifying cases to settle quickly and winning more often in cases that do go to trial.
Attorney Scott Link is set to receive $525 an hour and more than $1 million a year in estimated fees, Citizens documents show.
Since 2012, Ackerman, Link & Sartory has served as coordinating counsel for sinkhole lawsuits, and is now positioned to play that role for all claims litigation. It reached the billing limits on a previous $1.5 million deal on sinkhole work, seeking an additional $100,000 per month in March, records show.
Company documents making the case for the firm’s value showed average payouts from lawsuits have recently dropped near $120,000 from about $140,000, among other gains. But Artiles said documents he saw showed the company still losing more than half of 11 cases that recently went to trial, hardly a compelling case.
Artiles said more investigation was needed on such issues as whether bidding requirements for both the first and second contracts favored the Ackerman firm. Citizens officials said the process was fair and open, with nine firms bidding on the first contract and 15 on the second.
Grady has been described in records as being “of counsel” at Ackerman, Link & Sartory in the past, which can mean a lawyer is employed for consultation or work on particular cases without necessarily being a partner or associate. Attempts to reach Link and Grady for comment were not succcessful.
Sumner said Grady’s relationship to the firm was terminated at the time bids went out and Grady confirmed in writing to company officials that he would not receive any residual compensation.
The Citizens claims committee chose not to endorse the $6.4 million deal before sending it the full board.
One of the criticisms of another deal this spring — one that approved up to $52 million to start-up insurer Heritage to take Citizens customers after it gave $110,000 to Scott’s Let’s Get to Work committee in March — was that it bypassed the company board’s committee system. One board member called it a bonus most other companies did not get.
“The giveaways to allies of Rick Scott at Citizens just keep coming, and they all seem wildly inappropriate,” said Sean Shaw, a Tampa attorney who sues insurers and a former state insurance consumer advocate. “The $525 an hour Citizens is trying to pay this attorney might be better spent launching an investigation into how Citizens continues to disrespect policyholders and taxpayers.”
Staff researcher Niels Heimeriks contributed to this story.
How they voted
Citizens board vote Friday on $6.4 million coordinating counsel contract:
Yes: Chairman Chris Gardner, Gary Aubuchon, John Wortman, Juan Cocuy
No: Don Glisson
Abstaining: Tom Lynch, Freddie Schinz