After opting to rein in its practices, Citizens faces firestorm over big pay hikes

February 21, 2013 

Government often comes under sharp criticism for operating outside the efficiency and productivity standards found in the private sector. Public entities should function like businesses, citizens assert. Corporate America, though, follows some practices that would make taxpayers cry foul. Like lavish spending by executives. And fat raises, too.

A Fortune 500 company might spend millions on top-tier hotels and resorts, the most expensive wine and entrées, and limousine service hither and yon. Bonuses and salary increases for the most valued employees. Stockholders might be fine with those perks as long as executives deliver profits and stock dividends.

Measures of success for most public entities are most likely found in the opposite direction -- with scrupulous and tight-fisted spending of taxpayer money.

Yet Citizens Property Insurance Corp. -- the state-operated insurer for 1.2 million Floridians with a $15 billion portfolio and more than $6 billion in cash -- has been operating like a private enterprise. Until now.

Manatee County property owners have a considerable investment in that bank account through the 27,500 policies for both residential and commercial buildings.

With scandalous spending on travel and meals as well as inferior contracting practices, Citizens came under fire from lawmakers, regulators and investigators recently. Last week the insurer agreed to operate more like a government agency and adopt travel policies in line with those that cover state employees.

Citizens long argued that it should function outside state restrictions on travel and dining, ignoring auditors who have attacked the insurer's reasoning since 2006. But Citizens receives hundreds of millions of dollars in taxpayer money and has the unique power to levy "hurricane taxes" on Floridians -- certainly hallmarks of a government agency and something that demands accountability.

An appalled Gov. Rick Scott ordered his inspector general to investigate, and the resulting harsh report convinced the recalcitrant Citizens to abide by state travel rules. That report prompted this reply from Citizens President Barry Gilway: "As guardians of public funds, we must hold ourselves to a more rigorous standard."

Fresh on the heels of this development last week, this week the Herald/Times Tallahassee Bureau revealed additional big spending by the insurer -- in the form of tremendous salary increases for select staff. Citizens' chief financial officer and chief insurance officer received 14 percent boosts, or $31,000 apiece, pushing their pay to $255,000 this year. The company's chief information officer got a 16.5 percent hike, $29,750, moving up to $210,000.

Citizens defends these raises as necessary to compete with the private market and notes several executives took on additional responsibilties, as outlined in the rebuttal by Carlos. A. Lacasa, the chairman of insurer's board of governors (online link in rail at right).

That reasoning could apply to many state employees, denied pay hikes for six consecutive years now. And Scott's not buying into the insurer's justification.

The governor reacted with outrage Wednesday after learning of the exorbitant raises, berating top Citizens executives for "foolish" behavior and calling for the wage increases to be rescinded. We expect the vast majority of Floridians would agree; we most certainly do.

While Citizens was doling out oversized raises, allowing lavish spending by executives and minimizing price negotiations on hundreds of millions of dollars in contracts to private companies, the insurer was raising rates on homeowners, denying mitigation discounts and reducing coverage.

The contrast is startling. Executives receive the royal treatment while customers dig deeper into their wallets.

Plus, Citizens was paying out five-figure severance packages to executives who resigned while embroiled in misconduct accusations. The internal investigators who blew the whistle on the big payments -- and falsified documents -- got fired after exposing the misdeeds.

Citizens can no longer escape accountability after all this outrageous conduct. The governor and Legislature should place the insurer under the highest ethical standards in order to ensure the public trust. Citizens must act like a government agency and be good stewards of what must be considered public funds, not a honey pot for executives.

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