New Jersey politicians silent on watchdog report detailing covert takeover of public insurance funds

New Jersey’s top public corruption watchdog issued a scathing report last week detailing how for-profit companies and powerful political interests have co-opted an obscure but essential branch of local government.

Acting State Comptroller Kevin Walsh reported that the purchase of employee health insurance for many towns, cities, and school boards is more or less controlled by a single Camden firm linked to George Norcross, a Democratic leader who has long been one of New Jersey’s most influential party bosses.

It’s an “unauthorized covert takeover of a core public function by a private entity — and a serious risk to public trust and public dollars,” Walsh concluded in his 34-page report, which makes it clear that tens of millions of taxpayer dollars are at risk.

Yet in the days following Walsh’s bombshell, the response from New Jersey’s top elected officials — as well as the two main candidates running for governor — has been total silence.

Neither major party candidate seeking to succeed Gov. Phil Murphy issued a statement or made any public comment about Walsh’s eye-opening findings. Repeated calls and emails The Jersey Vindicator made last week to the campaigns of Democrat U.S. Rep. Mikie Sherrill and her Republican opponent, Jack Ciattarelli, were not acknowledged.

The candidates’ campaign websites don’t mention any plans to deal with longstanding ethics issues in the state’s part-time Legislature, which reformers say is undermined by conflict-of-interest problems and some of the nation’s weakest disclosure rules.

The word “corruption” does not appear in Ciattarelli’s 16-point “Plan to Fix New Jersey,” or in Sherrill’s “On the Issues” post that details her policy priorities.

Murphy, a two-term Democrat who ran for office as a champion of open government and appointed Walsh to the comptroller’s job five years ago, was less than effusive in commenting on the findings of his top watchdog.

Appearing on WNYC’s “Ask the Governor” call-in show three days after Walsh’s report came out, Murphy sought to beg off making any comment at all. “I haven’t read [the report], in fairness,” he said.

Pressed on findings in the report about how millions of taxpayer dollars allegedly have been improperly funneled to insiders, and whether the state should work to reform procurement practices, Murphy offered the following:

The question “is a little bit like, do you beat your dog. I mean, of course you want to fix anything that’s corrupt, and we’ve done a lot. That’s obviously a decision that has to be made in the legislative branch.”

Murphy also appeared hesitant to support Walsh’s conclusions that contractors who dominate the public health insurance funds broke state law in failing to make mandated disclosures about conflicts of interest. The governor said his administration is now trying to verify findings that laws were broken.

“I actually don’t know that,” Murphy said. “We’re in the process of … running that down. There’s been pretty strong pushback … on that assertion already.”

Reformers around the state say the reticence on the part of Jersey policymakers to focus on public corruption reflects the growing co-dependency of politicians and the moneyed interests that finance their campaigns, and the major political parties.

They praised Walsh for the political courage to take on a system dominated by Norcross, a storied figure from Camden County who is said to have controlled generations of South Jersey officials through his fundraising prowess and political skill.

His Camden-based insurance brokerage, Conner Strong & Buckelew, is the most important corporate player in the vast public-private apparatus that administers insurance coverage for towns, school boards, and county commissions across the state. For the last 18 years, Conner Strong has owned and operated affiliates that now manage about three dozen joint insurance pools, overseeing tens of millions in coverage for local government agencies and their employees.

One company owned by Conner Strong, Parsippany-based Perma, serves as “executive director” for most of these funds, earning millions every year. Another Conner Strong affiliate, J.A. Montgomery, provides risk management services regarding property and casualty coverage to some of the funds.

Conner Strong also gets paid millions in taxpayer money performing a variety of other roles for the insurance funds. The firm also receives brokerage fees to place reinsurance policies with insurance firms.

The arrangement, according to state investigators, is an unethical usurpation of local government.

“If it looks like a scam, walks like a scam, then it’s probably a scam,” Antoinette Miles, state director of the nonprofit New Jersey Working Families, said in a press release. “Comptroller Walsh’s scathing report lifts the veil on the web of conflicts of interest that George Norcross and his businesses have used to bilk New Jersey taxpayers of countless millions of dollars — in apparent violation of state laws and regulations.”

Working Families represents working-class people in Camden County and greater South Jersey who have chafed at the county’s party-boss rule that has, until recently, had near total control of public contracting and primary elections.

About a year ago, it was Miles’ group that sent a letter to Walsh’s office urging an investigation of Conner Strong’s public contracts and the firm’s dominance in joint insurance funds.

“It turns out we did the right thing by blowing the whistle when we did,” Miles said. “These health insurance funds were supposed to help local governments save money, not provide a public piggy bank for an indicted insurance broker.”

Collingswood resident Kate Delany, leader of the South Jersey Progressive Democrats, said she was stunned — and grateful — to see an independent state agency like the comptroller actually make what she said was a powerful stand for government openness and accountability.

Delany said that six years ago, she had never even heard of joint insurance funds, let alone the fact that powerful firms like Conner Strong were reaping millions in revenue through them. When she started asking questions and attending meetings of the Camden County Joint Insurance Fund, Delany said she quickly learned that local politicians allied with Norcross who served on the board did not welcome scrutiny.

“It was all like, well nobody asks a lot of questions about how taxpayer money is spent because we all know who is behind it,” Delany said. “When I saw Walsh’s report, I was thrilled to see that somebody finally got it. Somebody finally stood up for the taxpayers instead of the politicians.”

The Camden County fund, which lists a $20.5 million budget this year, provides property, casualty, and liability coverage to about 40 municipal governments and other local agencies.

Walsh reviewed the practices of just three of the 35 funds across New Jersey managed by Perma. While the Camden fund was not among them, its public financial reports show that Conner Strong and two related firms were working simultaneously on the funds, with one arm of the company essentially overseeing another — a practice Walsh claims is both improper and largely hidden from public view.

For the month of August alone, Conner Strong affiliate Perma was paid more than $47,000 by the fund for “executive director” services, according to financial reports. J.A. Montgomery, another Conner Strong affiliate, was paid $18,400 as fund “safety director.” Conner Strong also received $1,300 in “underwriting management” fees. At the same time, the firm was serving as local risk manager for a number of the member communities in the fund.

“What makes this worse is that the vendor concealed from the state and its public entity clients that it was operating on all sides of contracting processes that are supposed to protect taxpayer funds,” Walsh reported.

Conner Strong, through a spokesman and an attorney, has pushed back on Walsh’s findings, attacking the comptroller’s office as a politically motivated “rogue agency.” The company demanded an apology and a “full retraction” from Walsh, asked for the governor to appoint a special counsel to investigate him, and urged the Legislature to take immediate action to rein him in.

Matthew Boxer, a predecessor of Walsh’s who now does legal work for Conner Strong, claimed that state regulators maintain careful oversight of the public health insurance funds and are well aware that Conner Strong and Perma are related entities working together in many New Jersey insurance pools, such as those singled out by Walsh.

Boxer also said that each of the insurance funds is overseen by appointees named by member school boards or municipalities that belong to the funds. These board members, he said, make the decisions on hiring vendors and other professional advisers.

Dan Fee, a spokesman for Norcross, called Walsh “underqualified” and “politically ambitious,” claiming that his report is full of errors. State regulators, he said, exercise tight control over the Conner Strong insurance funds, and explicitly approved the hiring of company affiliates in key consulting roles.

The comptroller, Fee said, received numerous responses from Conner Strong in email exchanges detailing erroneous assumptions and errors Walsh made. “There are literally hundreds of pages of back and forth,” Fee said. “If they were released, the public would see the errors.”

Conner Strong and the board chairs of nine health insurance funds managed by the firm have called on the governor and Legislature to have hearings on what they say is Walsh’s “overreach.”

Such aggressive pushback mirrors Norcross’ strategy in combating criminal corruption charges brought last year by state Attorney General Matthew Platkin. The case, involving an alleged scheme where Norcross and his business partners were said to have illegally seized control of the Camden waterfront for personal gain, was thrown out of Superior Court but has been appealed.

Walsh’s aggressive push to seek out waste and abuse has impacted powerful politicians and entrenched interests across the state. Opposition from some, like Senate President Nicholas Scutari, has resulted in Walsh remaining an acting director only, with some legislators unwilling to confirm him formally.

“The loud opposition you hear from some quarters on Walsh tells me loud and clear he is doing his job as an independent watchdog,” said Ed Stier, a legendary state and federal prosecutor who once headed the New Jersey Division of Criminal Justice. “In my view, Walsh is clearly the best, most capable man we’ve ever had in his position.

“If politicians and other insiders are complaining about him, I’d say the public is being served.”