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Bragdon taking LGC helm raises concerns about conflict of interest

State House Bureau

August 13. 2013 3:21PM
Peter Bragdon, of Milford, the once owner and publisher of a weekly newspaper, was operations manager at Comp-Sigma, Ltd., a third-party administrator for self-insured workers' compensation trusts. He has served 17 years on the Milford School Board. (Union Leader)

LGC appeals $50M refund to member towns

CONCORD - The New Hampshire Local Government Center has filed a brief with the state Supreme Court that continues its appeal of a state Bureau of Securities Regulation order to return more than $50 million to its members and sets benchmarks for how much LGC's risk pools can keep in reserves.

LGC argued that the state law giving the Secretary of State oversight of LGC, RSA 5-b, does not give the Secretary of State the authority to compel LGC to return the money, which a hearing officer deemed was held in excessive surplus, or to limit LGC's reserves - the order says LGC can keep reserves of 15 percent of claims or a risk-based capital ratio of 3.0, whichever is lower.

"In fact, RSA 5-B neither references such standards nor provides other guidance as to how or at what level reserves must be set. Instead, as detailed below, the statute leaves the setting of reserve levels to the business judgment of a risk pool's board of directors," according to LGC's brief, which was filed Monday.

For the last six months, interim Executive Director George Bald, who is being replaced by state Senate President Peter Bragdon, had said LGC wanted to comply with the order and withdraw its appeal.

"I had hoped during my tenure to be able to reach a full settlement of the appeal with the Bureau, but that did not come to pass," Bald said in a statement. "Even while we appeal these very important issues, LGC, HealthTrust and Property-Liability Trust, are currently in full compliance with the Order, and working tirelessly to serve the needs of our members. We will, however, continue to work with the Bureau to see if we can work out a settlement that allows us to withdraw our appeal."

In a release, LGC argued that "The LGC and its risk pools feel strongly that the business judgment exercised by the Board with the advice of qualified national risk pool experts was not considered sufficiently by the hearing officer. They also feel that the new requirement limits the reserve levels to potentially unsafe levels."

- TIM BUCKLAND, New Hampshire Union Leader

CONCORD – Senate President Peter Bragdon will lead the embattled Local Government Center its board announced Tuesday morning.

The Milford Republican will retain is leadership position in the Senate saying "there are always the usual conflicts with volunteer legislators with a variety of appointments."

He said like other lawmakers he will disclose any potential conflict of interests and will not vote on any issue that could be related to his position.

Bragdon begins his new job Wednesday at a salary of $180,000, but he is not resigning his role in the Senate, he said. According to his contract, Bragdon's appointment will "initially" be one year, but will be automatically renewed for one-year terms.

Bragdon replaces acting executive director George Bald, the former long-time Department of Resources and Economic Development Commissioner.

"(Bragdon's) strong management, organizational and people skills will be instrumental in guiding the LGC and its risk pools into the future," said Tom Enright, LGC Board chair Tuesday morning. "Senator Bragdon will be able to build on the strong foundation that George Bald set in motion during his tenure here."

Bragdon's selection was announced prior to the boards of LGC and its respective arms - HealthTrust and Property and Liability Trust - voting to approve it and that didn't sit well with some.

At Tuesday morning's meeting, HealthTrust board member Cathy Ann Stacey objected to the process and voted against Bragdon's appointment.

"As a member of this board, I have a real problem that press releases are going out before votes are being taken," she said. "People shouldn't be jumping the gun before these boards meet."

LGC offer letter to Bragdon sets pay at $180,000/year

Others also expressed concern about the one-year appointment of Bragdon.

Andru Volinsky, special counsel to the Bureau of Securities Regulations for the LGC case, said the appointment raises many questions, including claims by Bald that he wanted to bring transparency to the organization.

"And here out of the blue they have named the Senate President as their next interim executive director," Volkinsky said. "That suggests to me either Mr. Bald not being truthful with the public or the LGC was lying to Mr. Bald in saying it supported his interest in transparency."

Volinsky questioned when the search for a new executive director began and if the LGC board sought someone with health insurance expertise.

"This announcement undermines the respect we should have for an institution like the New Hampshire Senate and the respect we should have for the state's largest health insurer," Volinsky said. "If this is an effort to rebuild trust, it is an incredible stumble and once again one must wonder who is in charge of the LGC."

Former Senate President and current Senate Minority Leader Sylvia Larsen, D-Concord, expressed reservations about Bragdon taking the position saying there is real question if he can separate from the position as the second in charge of the state as Senate President and the director of the LGC, which is one of the strongest lobbying forces in the State House.

"He needs to answer and we need to be certain there is a fair line of demarcation," Larsen said, "or he needs to think about what is most important to him."

She recognizes the state has citizen legislators with other careers, "but something this sizable raises a lot of questions," Larsen said.

The LGC, which includes most of the state's municipalities, ran into legal difficulty several years ago over its handling of its separate trusts and their incorporation under Delaware's corporate laws. About a year ago, a Secretary of State hearings officer found the LGC had violated several state laws, starting in 2003 and continuing through 2010.

The officer found the LGC failed to distribute excess earnings and surpluses to member towns, cities, school districts, counties, and local special districts on an annual basis; improperly transfers money from the Health Care Trust and Property Liability Trust to the Workers Compensation Trust, and transferred the Health Care Trust's and Property Liability Trust's interests in real estate to the Local Government Center Real Estate Inc., without compensation.

The order found the activities reduced surpluses that should have been returned to LGC members on an annual basis. The LGC was ordered to distribute $33.2 million from the Health Trust and $3.1 million from the Property Liability Trust to cities, towns, schools districts and counties that were members of the programs on Aug. 16, 2012. Several communities that left the LGC prior to that date sued because they will not receive refunds.

David Lang, president of the Professional Fire Fighters of New Hampshire and a long-time critic of how the organization handled its trust accounts, said he believes continuing with one executive director for the different trusts violates the hearing's officer's order.

He said his organization represents the state's fire fighters on specific issues and having Bragdon as the head of the LGC is not going to change that dynamic.

Last session, lawmakers voted to establish a committee to oversee the hearings officer's report on LGC. Bragdon appointed Sen. Jeanie Forrester, R-Meredith, to be the Senate member of the committee before he was named executive director.

"I have not talked to her and have not interacted with the committee," Bragdon said, but Volinsky questioned the appointment of Forrester before Bragdon began negotiating with the LGC for its top spot.

"Was he doing the LGC's bidding or the people's bidding," Volinsky asked.

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