Corporate cauldron of misconduct alleged at Citizens Property Insurance

Published Nov. 21, 2012

TALLAHASSEE — At Citizens Property Insurance Corp., a corporate culture plagued by inter-office scandals, sexual impropriety, lavish spending, alleged coverups and big severance checks for disgraced employees has simmered under the radar for years, according to hundreds of internal documents obtained by the Times/Herald.

The corporate cauldron of misconduct boiled over this year when internal investigators tracked the trail of scandal up to the highest levels of the company, drafting a scathing 73-page report that highlights a laundry list of improprieties.

Last month, the investigators were terminated, their report was gutted, and Citizens' Office of Corporate Integrity was shuttered.

As Citizens has become notorious throughout the state for hiking homeowners' insurance rates and slashing their coverage, the company's internal scandals and corporate excess now offer a new reason for infamy.

For the second time in three months, Gov. Rick Scott is calling for an investigation into Citizens' highest levels of senior management.

"Citizens is committed to ensuring the highest level of ethics and welcomes a full investigation," said president Barry Gilway, who has requested a special hearing next week to discuss the recent developments with his board of directors.

There will be much to discuss, including the following allegations, unearthed by the now-fired investigators:

• Susanne Murphy, chief administration officer at Citizens, served as a legal adviser to the company for years, despite not being a licensed attorney in Florida. When it was discovered, top officials at the company altered incriminating documents and allowed Murphy to resign in August while continuing to receive salary and benefits until December.

• Citizens paid more than $80,000 in severance to an underwriting executive accused of having an affair with a subordinate and helped him receive unemployment benefits after he resigned from the company. The company declined to pursue an investigation.

• Citizens executives showed favoritism to certain employees, firing one employee who used company resources to promote a line of sex toys, while barely disciplining an executive who drunkenly slipped off her bra during a company retreat and promoted a side-business on company time.

• The company outsourced several internal investigations to private law firms. In some cases, the firms cleared high-level employees of charges without considering crucial pieces of incriminating evidence.

A Citizens spokeswoman declined to comment further on the various allegations prior to next week's hearing.

Scott said he was concerned that Citizens terminated the very employees that discovered these improprieties.

"In light of this report, the timing of the firings raises new concerns," Scott wrote in a letter this week, calling on his chief inspector general to investigate. "Given the appearance of impropriety, I request that you conduct a thorough review of the terminations to determine whether any of them were retaliatory in nature."

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Executives at Citizens said that members of the Office of Corporate Integrity were terminated as part of a company restructuring, aimed at "avoiding unnecessary redundancies" and beefing up fraud detection.

Scott, who had earlier called on his investigators to examine reports of lavish spending by Citizens executives, is no longer satisfied with that explanation.

He wants his chief inspector general, Melinda Miguel, to conduct a deeper inquiry into why four corporate watchdogs were terminated.

Miguel is likely to find that the Citizens' investigators had drafted an explosive report before they were sacked, documenting evidence of botched internal investigations, employee favoritism and generous severance packages for executives involved in office scandals. The report — which features hundreds of pages of exhibits — comes on the heels of a Times/Herald investigation documenting lavish spending by company executives, including $600-a-night hotel stays.

Hush money alleged

The anonymous tipster that set off a four-month investigation by the Office of Corporate Integrity was particularly concerned that Citizens was wasting money on questionable severance agreements with disgraced employees.

"When they are afraid they can't protect certain employees or are afraid an employee will report these mishandlings, they pay them $$$$$ to keep this quiet and ask them to resign," the employee wrote in a posting to the company's complaint system.

Investigators uncovered more than $750,000 in severance payments to employees, including large five-figure separation checks to executives who resigned amid scandal.

A former underwriting vice president resigned after an inter-office sex scandal blew up, with allegations that the executive had asked an underling for $5,000 to help cover up an affair he was having with another employee.

The executive received nearly $80,000 in severance pay, along with another $40,000 in accrued annual and sick leave time. An investigation into the alleged sex scandal was never carried out, and Citizens helped the executive collect unemployment benefits.

The Office of Corporate Integrity's draft report found that Citizens gave out five-figure severance payments to several high-level employees who left the company after being investigated for misconduct.

The employees who received severance-type payments after being investigated include a former chief insurance officer ($41,046), vice president of claims ($66,983) and a Tampa area vice president ($22,810).

External law firms

Some of the more embarrassing allegations against top executives were outsourced to private law firms to investigate.

Repeatedly, those law firms found that the allegations against the executives were "unsubstantiated."

But when the Office of Corporate Integrity went back to review the external investigations, it found cases where the law firms had been less than thorough in their inquiries.

In one case, Citizens hired an outside law firm to investigate an anonymous tip that Murphy, the chief administration officer, had been misrepresenting herself as a lawyer for years. While the law firm determined the allegation to be "unsubstantiated," a later investigation by the Office of Corporate Integrity found that the law firm failed to include relevant information. When investigators unveiled documents showing that Murphy—who is not a member of the Florida Bar—had identified herself as "corporate counsel," and "attorney," she resigned.

Playing favorites

Some Citizens employees caught up in scandals were given a slap on the wrist when they should have been fired, investigators found.

A Citizens underwriter was fired after supervisors discovered that she was using her company computer and the mailroom to promote "Pure Romance," a female sex toy business. The employee would regularly accept packages at work, and would disappear for long periods of time. Images of various sex toys — and their prices — were found on her company computer.

But two other employees who were also caught promoting side-businesses while on the clock at Citizens were not disciplined.

Both were members of the human resources department, and one had been involved in an earlier scandal in which she got drunk after a company event in Ybor City, stripped off her bra and danced on top of a table at the Coyote Ugly bar. She was given a warning.

Restoring trust

The various scandals unearthed by the Office of Corporate Integrity represent yet another black eye for Citizens, which has had more than its fair share of public hiccups this year.

The company has sparked widespread consumer outrage with its unpopular home re-inspection program, reports of exorbitant corporate travel spending and a plan to transfer $350 million to private insurance companies in low-interest, forgivable loans.

The chairman of Citizens' board of directors, Carlos Lacasa, said Tuesday that restoring public trust in the company is tantamount. In a letter to Gilway, Lacasa agreed to a request to address the various controversies at the next board meeting.

"Given these factors and the need to set the record straight with respect to matters concerning the public, it is vital that we make every effort to restore the public trust as quickly as possible," he wrote.