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Florida whistleblower alleges ‘fixed’ contracts, big payouts at state-run insurer

“State laws may have been violated,” at Citizens Property Insurance, the person apparently wrote. Citizens denies the allegations.
Barry GIlway, president of Citizens Property Insurance Co., pictured in 2012.
Barry GIlway, president of Citizens Property Insurance Co., pictured in 2012.
Published Dec. 23, 2020
Updated Dec. 24, 2020

TALLAHASSEE — A longtime employee for Florida’s state-run insurance carrier has accused board members of steering contracts to particular vendors and choosing whom the insurer hired.

In a whistleblower complaint filed last year, the employee claimed that contracts were “fixed” by Citizens Property Insurance board members, who are appointed by elected officials, and that the insurer was awarding unusually large payouts and raises to top-level employees.

“State laws may have been violated,” the person wrote, according to court filings.

Specific details on the whistleblower and the person’s allegations, which were denied by Citizens, are not known. The person was denied whistleblower status by Citizens’ inspector general Mark Kagy last year and has sued Kagy to overturn his decision. Whistleblowers have special confidentiality and privacy protection under state law.

A judge granted the whistleblower a temporary restraining order to keep the person’s name a secret — at least until January — when Leon County Circuit Court Judge Angela Dempsey has set a hearing in the case.

The allegations come during a turbulent year for Citizens, a not-for-profit and tax-exempt property insurer created by the state in 2002 to cover policies considered too risky for private companies to cover.

While Citizens remains healthy, it has seen its number of policies jump to its highest point in years, to more than 530,000, in part because private carriers have stopped renewing policies in riskier parts of the state. Its eight-year CEO, Barry Gilway, is believed to be nearing retirement, and he incurred controversy this summer by handing out $159,000 worth of pay raises to a handful of top employees.

Gilway personally heard the whistleblower allegations last year. Through a spokesman, he denied them to the Times/Herald.

“Citizens denies the allegations brought forth in the whistleblower complaint and looks forward to the release of the Inspector General’s report, which we hope will resolve the issue,” Citizens’ spokesman Michael Peltier said in a statement.

Kagy has fought the employee’s requests for records and efforts to depose witnesses in the case, moves the employee claims will show they deserve whistleblower protection. Because the lawsuit has not been resolved, Kagy has refused to release records related to the whistleblower’s allegations to the Times/Herald.

Some information can be gleaned from the court filings.

The person is a longtime employee for Citizens, which is managed by a CEO who is overseen by a board of directors appointed by Florida’s governor, chief financial officer and the leaders of the state House and Senate. Kagy, the inspector general, is appointed by the governor and state Cabinet and reports to the head of the board.

The person made the initial allegations during a June 2019 meeting with Gilway and Citizens’ chief of human resources, Violet Bloom. The next day, Gilway wrote to the employee that he was upset with the person’s work performance and that employment “is contingent upon ... meaningful improvement.”

A few days later, the employee wrote Gilway a five-page letter laying out a number of issues dating back to 2011 “that have caused me concerns about how Citizens operates.”

Those concerns included board members improperly steering contracts to certain companies.

“State laws may have been violated,” the employee wrote, according to one of the filings.

Another allegation was the insurer’s awarding of severance packages, retention bonuses, salary increases or other benefits to “certain employees,” which the employee apparently described as “misuse and gross waste of public funds.”

The employee hand-delivered the memo to Florida’s chief inspector general, Melinda Miguel, the same day, according to the court records.

Kagy followed up by interviewing the employee a few weeks later. During that interview, the employee went into more detail, claiming that some Citizens contracts were “fixed” by board members who “directly or indirectly” instructed Citizens’ selection committees to pick certain vendors. The employee claimed to witness it by serving on those selection committees.

The person also claimed that the payments to current and parting high-level employees were “inconsistent” with the insurer’s normal practice of providing such payments.

The person identified as someone whose job is to “identify risk” for Citizens and “do what you can do eliminate risk.”

About a week after that interview, Kagy informed the employee that the claims did not merit whistleblower protection under state law. The claims didn’t pose a danger to the public, did not include any violations of state or federal laws, rules or regulations, Kagy determined.

Besides, the employee’s “participation” in the contract procurements and employee hire allegations disqualified him from protection, Kagy wrote.

Kagy investigated the claims anyway, but his report is kept secret because of the court case.

The court records don’t mention the employee’s claims against specific board members, but the person has requested a trove of records from Citizens to support the whistleblower claim.

The requested records include competitively-bid contracts Citizens has signed with private law firms for legal services over the years. In one 2016 procurement, the insurer initially chose three law firms to provide legal services, then rejected all three two weeks later. Citizens officials then started a whole new procurement process that resulted in just one of the three companies being chosen.

Gilway, a longtime chief executive before leading Citizens in 2012, has seen his pay skyrocket over his tenure, from $350,000 to just over $589,000. He said the pay raises he handed out this summer, including one to the human resources chief, Bloom, were justified because those people took on expanded roles during a top-level reorganization that saved the insurer $275,000.

Only two members of Citizens’ board, Marc Dunbar and former Florida Lt. Gov. Carlos Lopez-Cantera, voted against the raises. Lopez-Cantera said the raises were a poor look during the pandemic, and because the new positions should be publicly advertised.

Correction: An earlier version of this story incorrectly stated the number of people who voted on the raises due to a reporting error.