Local Government Center has yet to meet terms set by Secretary of State
"We really are trying to do the right thing here," LGC interim Executive Director George Bald said. "We are committed to following the order and focusing on our members."
"They have complied with some of the, perhaps, easier matters to handle," said the regulator, Barry J. Glennon of the Bureau of Securities Regulation, which is an arm of the Secretary of State's Office.
But LGC has yet to meet some of the "more difficult" parts of the 21-part order and a reorganization LGC underwent failed to meet the spirit of the order, Glennon said.
When the order was handed down in August following contentious hearings, LGC was ordered to split its organizations "into a form that provides each program with an independent board and its own set of written bylaws."
Bald said LGC has done so, forming separate boards for its Property and Liability Trust, which administers coverage for workers' compensation as well as property and liability insurance, and HealthTrust, which provides health insurance for member towns, cities and school districts. Each has its own bylaws, which are available on LGC's website.
However, Glennon said, the boards are not purely independent, given that the overall LGC Board of Directors, which has six members, has two of its members on the Property and Liability Trust Board and two others on the HealthTrust Board. Further, many of LGC's employees, including top executives and LGC's in-house lawyer, are shared by each entity and do not exclusively work for one.
"We strongly believe each of the boards should be separate and act independently of each other," Glennon said. "They really should operate separately. They have separate interests."
The new makeup is "really the old structure that existed before," he said.
Bald said one of the goals he has in the four months he has left in his role as interim executive director is to propose a further reorganization of LGC's operations. He said he will factor in Glennon's feedback.
"If the bureau feels like it's not enough the way it is, I will do my best to propose something more consistent with what he'd like to see," Bald said.
Bald said LGC has adopted a resolution to repay $33.2 million to communities enrolled in its HealthTrust that the order said was held in excess reserves. That resolution is despite an appeal LGC filed with the state Supreme Court to try to overturn the entire order. Bald said the money will be repaid whether LGC's appeal is successful or not. Bald said an intervening motion by some towns who left HealthTrust before the August 2010 effective date in the order - they are seeking a return of money as well - has held up the payment.
"The board would still go with us making that payment," he said. "The communities expect it and it's the right thing to do."
However, LGC has yet to present a plan for two other repayments: $3.1 million to members of the Property and Liability Trust from excess reserves and $17.1 million that the order deemed was improperly transferred to the workers' compensation program by other risk pools.
Glennon and Bald each said the order to return the $17.1 million - Property and Liability Trust does not have enough assets to cover the amount - is the most difficult part of the order. LGC has until Dec. 1 to return the money to members of the HealthTrust pool.
"They haven't really demonstrated to us what they plan to do," Glennon said of LGC. "I don't want to find myself in November of this year asking them what they're going to do."
LGC officials have said the workers' compensation program could fail if that part of the order isn't modified or overturned.
"We are looking at all means of how we might comply with the order," Bald said.
Bald said LGC's insurance provider is willing to cover legal fees, but not the order amount.
"We are working diligently on that," he said. "We're not going to be in a position of being in November and not having an answer."
Bald said LGC has gone beyond the order by opening up its operations. For years, LGC refused right-to-know requests seeking financial audits and other information until the state Supreme Court in 2010 ruled that LGC is a public entity covered by state right-to-know laws. Since Bald came on board in February, LGC has posted meeting minutes, financial audits and other information on its website.
"The issue of transparency is something we don't need to keep working on," he said. "I think everyone here is on board with it."