State Comptroller Matthew Boxer yesterday issued a scathing report on patronage abuses and insurance practices at the Delaware River Port Authority. These include payments totaling $455,000 to South Jersey Democratic leader George Norcross’s firm and an associated broker that a New Jersey insurance company characterized as a “referral fee” for lining up the DRPA account.
Norcross told the Comptroller’s Office that the payments by Willis of New Jersey to Commerce Insurance Services (now Conner Strong & Buckelew) were for a marketing agreement unrelated to the DRPA, a bistate authority that has been a favorite target of Republican Governor Chris Christie for the wasteful practices that Boxer detailed in a 77-page report yesterday.
Christie and former Pennsylvania Gov. Ed Rendell jointly requested the probe of the DRPA, including its insurance-related payments, in 2010. “As soon as Gov. Christie took office, he zeroed in on the DRPA as among the worst offenders in terms of abusing tollpayer money for employee and commissioner perks and large-scale spending outside the agency’s core mission,” Michael Drewniak, Christie’s spokesman, noted.
Boxer’s findings yesterday confirmed Christie’s view. “In nearly every area we looked at, we found people who treated the DRPA like a personal ATM, from DRPA commissioners to private vendors to community organizations,” Boxer said. “People with connections at the DRPA were quick to put their hand out when dealing with the agency, and they generally were not disappointed when they did.”
The Comptroller’s report found that more than $100,000 in the DRPA’s Social and Civic Sponsorship Fund went to organizations linked to DRPA commissioners or executives or to groups that provided them with tickets to Tango Nights, NCAA lacrosse championships, or galas, and that EZ-Pass abuses cost the authority $1 million in revenue over the past 10 years.
But the issue examined in greatest detail in Boxer’s report was the insurance-sharing arrangements that were hidden from DRPA officials.
The Office of the State Comptroller concluded that “over the past 10 years more than $1.5 million in commissions derived from the placement of DRPA insurance policies was shared among disclosed and undisclosed insurance brokers in a series of ambiguous and non-transparent dealings. The commissions were shared regardless of whether the brokers actually performed any corresponding services for the DRPA.”
The Comptroller’s report noted that the State Commission on Investigation unsuccessfully urged the New Jersey Department of Insurance in 1980 to ban -- and criminalize -- commission-sharing on local government contracts. This was after it found that brokers were being required to split commissions with “politically influential or subservient sub-brokers who returned the favor in the form of political contributions” and that these brokers “generally provided no professional services for their commission shares.”
New York State did ban the practice in 1984 after the New York State Temporary Commission of Investigation found that commissions were being split with other brokers “at the specific direction of the political party in power to perpetuate its own interests.”
Both the New Jersey Department of Banking and Insurance and the vice-chairman of the DRPA said they would welcome public disclosure of all insurance commission sharing; the state agency noted that legislation would be required to ban the practice as New York did.
Norcross’s company, Conner Strong & Buckelew, issued a statement noting that “the investigation has found nothing illegal, unethical, improper or in violation of any laws, statutes or regulations regarding Commerce, Mr. Norcross, Mr. Buckelew or anyone associated with any of them or the agreement between Willis and Commerce.”
That, however, didn’t stop U.S. Senator Frank Lautenberg (D-NJ), who has been feuding with Norcross over his support for the Rowan University/Rutgers-Camden merger, from seizing upon the Boxer report to declare that "this is yet another example of how a corrupt political machine operates to enrich itself and local politicians at the expense of everyday people.”
Norcross, who was unavailable for interviews yesterday, shot back in a press release that Lautenberg “never expressed these sentiments when he literally begged for South Jersey’s support in all of his campaigns for reelection. It’s the height of hypocrisy.”
The Boxer report noted that the $455,000 in payments by Willis to Conner Strong and a broker named Michael Martucci, who is described as an acquaintance of Norcross’s wife, were matched by $684,254 in similar cost-sharing payments by the Pennsylvania-based Graham Co. to another Pennsylvania broker, the West Insurance Agency.
A frustrated Comptroller’s Office said it “has not been able to determine definitively the rationale for these payments because the involved parties either professed no knowledge of them, had a limited recollection of them, and/or provided conflicting explanations and rationales for the payments. Moreover, these arrangements were not documented in any written agreement, nor were they formally disclosed to DRPA,” which prevented the agency from seeing “whether it could have achieved a more financially beneficial arrangement with its brokers that reflected compensation only for work actually performed for or on behalf of DRPA.”
Conner Strong Buckelew, in its written statement, disputed that conclusion, asserting that “New Jersey law and regulations did not, and do not, permit the DRPA to negotiate lower commissions with its insurance brokers. As a result, any payment to Commerce by Willis -- regardless of the purpose -- had zero impact on the DRPA’s rates or amounts.”
Boxer’s assessment comes four weeks after his report concluding that local governments could save millions of dollars in plan costs and broker fees by joining the State Health Benefits Plan and it again reveals the inner workings of the local insurance business.
While the Pennsylvania-based firm, Graham, was selected by the DRPA in response to a 1996 Request for Proposals and formally approved by the DRPA board, the Comptroller’s Office could find no DRPA documents or correspondence related to the selection of Willis of New Jersey.
The earliest available documentation was a December 30, 2002, email from Norcross to Willis CEO Joseph Plumeri notifying him that his company -- which had not sought a DRPA contract -- had been selected as co-broker (with Graham) for the bistate agency, which oversees four bridges and the PATCO rail line linking South Jersey with the Philadelphia area.
“Neither Norcross nor Conner Strong formally work for DRPA, have the authority to appoint DRPA’s insurance broker or have any official role in DRPA’s decision-making process,” the Comptroller’s report pointed out.
Norcross told the Office of the State Comptroller that “someone from Gov. James McGreevey’s office had offered Norcross’s insurance company the opportunity to be DRPA’s New Jersey insurance broker.” Norcross “could not recall who that person was, but stated that it was not the governor himself.” He said he turned down the contract because he did not think his firm could handle DRPA’s work at the time and because the scandal-tarred DRPA, which had been under investigation by the U.S. Attorney’s Office, was too much of a “reputational risk” for him.
Norcross told the Comptroller’s Office he “probably would have recommended Willis, among other brokers … though he did not specifically recall.” He said he did not know what actions the DRPA took to appoint Willis, and that he never spoke to anyone at DRPA about appointing Willis. He “acknowledged sending Willis the email informing them of the appointment,” and said he “probably would have learned of Willis’ appointment from someone at the Governor’s office or DRPA,” although he said "he could not recall the identity of that person.”
DRPA Vice Chairman Jeffrey Nash had no better recollection of which person from the Governor’s Office directed him to appoint Willis, and added that DRPA not only had no input into the selection, but didn’t even meet with Willis officials before the firm’s appointment.
“While it may not be entirely clear how, why or by whom Willis ultimately was selected as DRPA’s insurance broker, it is clear, based on contemporaneous documents and OSC interviews of Willis officials, that Willis believed the Conner Strong took action to secure its appointment and compensated Conner Strong accordingly,” the Comptroller’s report concluded.
Plumeri, the Willis CEO, said the payments stemmed from a conversation he had with Norcross around 2002 in which the Conner Strong CEO offered to refer any business he couldn’t handle to Willis. Soon after this “unofficial, oral marketing agreement” was decided upon, Plumeri said, Norcross told him that Willis had been selected as DRPA’s New Jersey insurance broker, and Plumeri said Willis began paying a “co-brokering or referral fee” for the DRPA business.
Willis of New Jersey CEO Kevin Walsh told the comptroller’s office “that the payments to Conner Strong were based specifically upon the revenue Willis earned from the placement of DRPA insurance and that he negotiated the compensation for Conner Strong directly with Norcross and discussed with him the fee as it related to DRPA.” Willis provided the investigators with a statement accompanying the $85,000 check made out to Conner Strong in 2007 listing nine payments “emanating from various specific DRPA insurance policies.”
Norcross told investigators he and Plumeri did not conclude their “unwritten ‘handshake’ marketing referral agreement until 2004, and that it did not relate to the DRPA. Nor, he said, did he meet with any Willis staff -- again contradicting both Plumeri’s and Walsh’s accounts. Furthermore, Conner Strong argued that if the payments were related to the DRPA, they would have begun in 2003, and that Conner Strong did not receive direct payments until 2005.
Plumeri, however, told investigators that Willis began paying “the flat annual fee” to Martucci in 2003 “at the direction of Conner Strong.” The $45,000 in payments to Martucci were made in care of Edward Kiessling, the Chief Operating Officer of Commerce Insurance Services, at the Conner Strong address.
In a June 2004 internal email, Walsh explained the arrangement: “I spoke to George Norcross and Ed Kiessling today and agreed on $85K per year for Michael Martucci, the producer that referred DRPA to Willis. The gross annual revenue is about $500K so this represents 17 percent and I am fine with that.”
Norcross said he referred Martucci to Willis as someone who might meet DRPA’s “small business enterprise” participation requirements. But Kiessling left a different explanation for the mysterious Martucci’s participation in a voicemail for Walsh in 2003 that Walsh typed up for his files. “You want to know about Martucci and who this fellow was,” Kiessling said. “He has no connection to us. He’s a guy George knows but it’s actually the governor’s selection of the broker that he wants to co-broker this stuff with in New Jersey. I don’t know anything more beyond that and so I figured I would just leave that to you but he doesn’t get paid by us, he doesn’t work for us.”
When asked by the Comptroller’s Office what work he did for the $45,000 in payments, Martucci said, “I performed nothing,” then decided later that he must have “consulted” or “attended a meeting.” He did recall the checks had some connection to the DRPA.
According to Walsh, after several payments had been made to Martucci and Conner Strong, “Norcross made clear to Walsh that Norcross would prefer they refer to the payments in the context of what Norcross called the ‘North Jersey Marketing Agreement.’” Current Willis North America President Todd Jones said he thought “it was odd that Norcross called the arrangement by that name as there was only one item of business related to the agreement, which was DRPA.”
In its written statement yesterday, Conner Strong & Buckelew reiterated Norcross’ contention that “Commerce and Willis had a marketing agreement, not a commission agreement.”
“The relationship between Willis, the third-largest insurance broker in the world, and Commerce Insurance Services came about when Joseph Plumeri, Chairman and CEO of Willis, joined the Board of Directors of Commerce Bank on November 19, 2003,” Conner Strong said. “After Mr. Plumeri joined the Board, Willis and Commerce entered into a marketing agreement, almost two years after Willis had become the New Jersey broker to the DRPA. It was not until 2005, at least two years after having been appointed the DRPA’s insurance broker, that Willis first made a marketing agreement payment to Commerce. Even though Willis remains the New Jersey DRPA insurance broker today, Willis has not made a marketing payment to Commerce or its successor companies since 2009.”
Conner Strong, which is Commerce Insurance Service’s successor company, noted that it has “been in direct competition with Willis” since October 2009, including bidding against Willis for DRPA insurance brokerage work under the new public procurement process that the DRPA implemented under pressure from the Christie administration.