'Consumer' Group Reaps Big Salaries

JUNE 10, 2011

Last week, the Assembly passed AB 52, which would require health insurance companies to seek permission from a state regulatory board before increasing premiums. In essence, AB 52 would give the state’s elected insurance commissioner and the Department of Managed Health Care the power to reject “excessive” increases in rate hikes. Regulators also could modify rate increases.

Proving that politics does indeed make strange bedfellows, AB 52 is supported by Consumer Watchdog founder Harvey Rosenfeld. A story written by Consumer Watchdog President Doug Heller on the Consumer Watchdog website reports, “Consumer Watchdog called on California lawmakers to enact AB 52 (Feuer), which would authorize the commissioner to review rate hikes and reject excessive increases before they take effect.”

In a letter sent to Blue Shield CEO Bruce Bodaken on January 20th, Consumer Watchdog called on the insurer to make key data about the company and its rate hike publicly available. (A full copy of the letter is available here.)

The group is pushing hard to include “intervener fees” into the bill. And why not? This is one lucrative business.

Rosenfeld is also the author of Proposition 103 in 1988, which voters approved. It forced an immediate 20 percent reduction of insurance premiums, and established the statewide, elected position of Insurance Commissioner.

Written into Prop. 103 was a provision which granted the Insurance Commissioner the authority to review and approve insurance rate increases on auto and property insurance. AB 52 includes a similar provision, which bodes very well for Rosenfeld’s consumer “watchdog” organization.

The Department of Insurance website reports how much compensation these “interveners” have made in since 2003, with Consumer Watchdog (CW) receiving more than $7 million in “intervenor compensation”:

Intervenor Compensation 2010

Date	Insurer	Intervenor	Paid by Insurer	Paid by CDI Prop. 103 Fund	Matter Type
1/7/2010	Topa (Auto)  PA-2008-00018 IP-2008-00021	CW	$41,885.00	$0.00	(rate) prior approval
4/9/2010	Fireman’s Fund (EQ)  IP-2007-00002 PA-2007-00019	FTCR	$620,996.60	$0.00	(rate) prior approval
6/30/2010	Pay As You Drive Regulations	CW	$0.00	$162,096.09	rulemaking/regulations
9/13/2010	State Farm (Auto) (Corrected)  PA-2008-00021 IP-2008-00017	CW	$78,581.00	$0.00	(rate) prior approval
9/10/2010	Progressive Choice(Auto)  PA-2008-00020 IP-2008-00022	CW	$39,283.00	$0.00	(rate) prior approval
12/10/10	Mid-Century (Auto)  PA-2008-00031 IP-2008-00032	CW	$38,935.00	$0.00	(rate) prior approval
2010 Total			$819,680.60	$162,096.09

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The intervenor compensation listed on the Department of Insurance website includes the Foundation for Taxpayer and Consumer Rights (FTCR), a Consumer Watchdog sister organization, the Greenlining Institute, National Council of La Raza and money from the Prop. 103 fund.

Interestingly, the story written by Heller clearly showed their support for AB 52. And linked in the story was a letter from Consumer Watchdog to Blue Shield’s CEO, demanding to know how much compensation Blue Shield top management received in 2010.

Rosenfeld’s $641,111 Paycheck

Consumer Watchdog, a California nonprofit corporation, makes a regular practice of targeting corporations for political contributions and compensation. But it does not not willingly share its own compensation information, other than on its IRS filings;  nor is its donor list available.

The Consumer Watchdog IRS Form 990, currently on file with the California Attorney General, shows that Rosenfeld was paid more than $641,111 in compensation in 2009 — the last year a report was filed. The report lists an additional $100,000 in salary from the Consumer Education Foundation, a sister group Rosenfeld set up. Its purpose seems to be working as an intervenor, and making grants to Rosenfeld’s other organization, Consumer Watchdog.

Locating the names of the donors to Consumer Watchdog has been impossible. Doing a Google search of “donors to Consumer Watchdog” only brings up stories about how Consumer Watchdog blasts political campaign donors.

While Consumer Watchdog has made a business out of skewering big business and many politicians over financial information, Consumer Watchdog keeps the names of its donors private. And I haven’t been able to locate any membership list or donor list for Consumer Watchdog.

The nonprofit spends a great deal of money on attorneys and lobbying, and the top watchdog officials are paid very nice salaries hawking “consumer protection.” The watchdog organization even wrote on the 990 IRS form, “Consumer Watchdog provides a voice for consumers in an era when special interests dominate public discourse.”

But not everyone sees the organization as a sincere consumer watchdog. A recent news story in the legal periodical, Los Angeles Daily Journal, reported that at a recent hearing, Judge William F. Highberger vehemently criticized Consumer Watchdog, and blocked an attempt by the group to intervene in a case. Highberger accused the group of “engaging in ‘an opportunistic piece of objecting’ designed either as a ‘public relations exercise’ or as an attempt to get paid by delaying the settlement’.”

Opportunism

The newspaper reports that the judge “called it ‘another regrettable example of opportunism’.” He told ConsumerWatchdog.org, “If this was such a good case, why didn’t you guys bring it seven or eight years ago?” Another attorney lashed out at the group, saying Consumer Watchdog only objective was “to derail what has to be one of the greatest class action settlements of all time, given the hurdles.”

The Journal even reported that Consumer Watchdog usually partners with trial lawyers, which many speculate make up the watchdog organization’s donor base.

Sacramento Democratic political consultant Steve Maviglio wrote in a recent story on Fox and Hounds, “ConsumerWatchdog.org refuses to provide any transparency or accountability about its operations. It refuses to disclose its donors. Unlike other consumer organizations, such as Consumers Union, it has no members either. As noted here last week, Mr. Rosenfeld personally received more than $641,000 in salary and payments in one recent year for his work ‘protecting’ consumers.”

A 2009 story from Techrights criticized Consumer Watchdog and called the group a “bulldog for hire” after Techrights found that Microsoft may actually have paid Consumer Watchdog to lobby against Google. “Someone has just informed us that Consumer Watchdog is apparently a lobby used by Microsoft (mostly to attack Google), so we decided to investigate this. Having already found some Microsoft-backed anti-Google lobbies in the past [1, 2, 3, 4, 5], we took a look at this latest company’s background and dug a lot deeper. Let’s see what Consumer Watchdog says about Microsoft and what Consumer Watchdog has to say about Google. What a striking difference.

Techrights linked to Google search pages showing story after story of glowing reports by Consumer Watchdog about Microsoft, and bashes against Google.

It’s not illegal, nor is it unheard of, for groups to lobby on behalf of the highest bidder. But a group that bills itself as a “consumer watchdog” and is registered as a not-for-profit organization is expected to fulfill its promise.

With the state attempting to control health insurance, Consumer Watchdog stands to financially benefit greatly from one small clause deep within the bill, and the interesting relationships the group has been building.

And this is what’s wrong with politics in California.

Katy Grimes