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Lawyer says LGC effort to repay taxpayers lacking in credibililty

New Hampshire Union Leader

April 24. 2013 2:35AM

CONCORD - The New Hampshire Local Government Center has made a "less than credible effort" to comply with an order to repay taxpayers $17.1 million that was used to subsidize its workers' compensation program, a New Hampshire Bureau of Securities Regulation lawyer said.

Meanwhile, LGC officials said the organization is earnestly working to comply with that portion of a 21-part BSR order and that LGC has since arranged meetings, starting last week, with prospective lenders to try to arrange financing.

Andru Volinsky, an attorney representing the bureau as it tracks LGC's efforts to comply with an order issued in August by a hearing officer that, in part, calls for the $17.1 million repayment to members of LGC's health insurance risk pool, said the only move he's seen LGC make is an "oral application" with Citizens Bank late last year.

Late last year, the bureau asked to see what LGC, which has a deadline of Dec. 1 to make the payment, had tried to do to meet the order.

The only thing Volinsky said he received from LGC was a one-page, three-paragraph letter from Citizens Bank Senior Vice President Jeffrey Tatro declining LGC's request for a loan. He said he asked to see any application materials and was told LGC had applied verbally.

"It was a less than credible effort," Volinsky said. "As far as I'm concerned, this is a non-event."

"Attorney Volinsky can make any comment he'd like," LGC interim Executive Director George Bald said. "We are making a good-faith effort to make sure we do our part to comply with the order."

Tatro's letter, written to LGC Deputy Executive Director and Chief Financial Officer Sandal Keeffe, said Property and Liability Trust, the parent organization for LGC's workers' compensation program, was denied a "credit facility" because of insufficient collateral and because of a "lack of reasonable assurance of the borrower's ability to repay the loan from operations."

Keeffe said last year's application involved several conversations with bank officers and providing the bank with financial information. However, she said, LGC submitted no paper application.

"I would call it credible," Keeffe said.

Chris Riley, a spokesman for the bank, said he couldn't comment on the LGC application.

Secretary of State William Gardner said his office, which oversees the Bureau of Securities Regulation, became concerned about LGC's ability to repay the money after he saw that the organization committed more than $11 million last year to provide the Department of Labor with a secure guaranty that ensures all future workers' compensation claims would be paid.

That amount was increased to more than $14 million last month. LGC cannot access the money without the blessing of the Department of Labor.

The workers' compensation program, which since its inception in 2000 has lost money and is only afloat because it was subsidized by other LGC programs, has no cash reserves and Property-Liability Trust, used its reserves, which are primarily held in investments, to secure the guaranty.

Bald said the guaranty is immaterial to the order, as those reserves were set aside to cover workers' compensation claims. He said LGC couldn't have used those funds directly to pay the order amount, or use them as collateral for a loan for another purpose, such as paying the order.

The order came down partly because LGC was using money from its health insurance arm, HealthTrust, to subsidize the workers' compensation program. Because the towns, cities and organizations in the different risk pools do not match, taxpayers in some communities were, in effect, subsidizing programs for taxpayers in other communities.

LGC has appealed the order to the state Supreme Court. The Supreme Court denied LGC's request for a stay of the order and LGC has since complied with some parts of it, including adopting a resolution to repay more than $33 million to members of its HealthTrust health insurance program from surpluses that the hearing officer, Donald Mitchell, ruled were in excess of what was required.

Bald has said the $33 million will be repaid even if LGC wins its appeal.

Since the hearings began last year, LGC has spent about $2.2 million in taxpayer funds on legal defense.

Volinsky said he does not believe the $17.1 million will be repaid.

"I've seen no moves by LGC to set premiums that would allow repayment," he said. "They're not planning to pay this. I don't see how they're planning to pay this."

Besides the loan application, the LGC board has adopted a resolution of a promissory note to repay the money to HealthTrust. However, Volinsky called the promissory note "a specious effort" because it sets no terms for repayment.

Bald said he has sent banks letters "outlining our needs" and has lined up meetings with several lenders. The first meeting was last week, though Bald said he has not supplied Volinsky or Gardner with information yet about those efforts.

"Our hope is that we can satisfy the regulators that we are making a good-faith effort," he said. "We want to be in a position in the not-too-distant future to deal with all the parts of the order."

LGC officials have maintained that they will not force member communities in the workers' compensation pool to repay the money.

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