The Joint Underwriting Association a medical malpractice fund whose $110-million surplus Gov. John Lynch, D-N.H., had hoped to tap to help balance the state's budget is now facing an investigation prompted by state Insurance Commissioner Roger Sevigny, according to the Union Leader. Sevigny claims that since the JUA is a private fund, it may be subject to millions of dollars in unpaid taxes, although others contend the investigation is part of a larger attempt by the state to acquire funds from the JUA.
Last week, Sevigny and the assistant attorney general declared the JUA insolvent, or unable to pay the taxes the state believes the fund owes. This enabled the state to pursue its investigation "behind closed doors," Georgia Tuttle, who formerly served on the board of the JUA, told The Dartmouth. Tuttle was also the lead plaintiff in a case filed by the JUA against the state in January to prevent the state from usurping the JUA's surplus.
Tuttle denied the claim that the JUA was insolvent, saying that even if federal taxes were owed, they would not surpass the JUA's surplus.
"It's clear that this allows them to go into a non-public setting," she said. "Under the Right-To-Know Law, the public gets to see what's going on. This allows them to do whatever they want out of the public eye."
Tuttle said she was skeptical of the timing of the investigation, which coincides with a settlement that state Rep. Fran Wendelboe, R-New Hampton, is attempting to broker between the state and JUA officials. The plan would give New Hampshire $1 for every three that the state permitted the JUA to distribute to doctors and hospitals. The deal will not allow the state's share to exceed $25 million.
"We're offering to open our wallet, and I'm surprised that a small amount of something that doesn't belong to them isn't enough," Tuttle said. "They want it all."
The investigation, which state officials have said may take up to a year to conduct, is a stall tactic for "the governor to take another run at this money," Tuttle said.
By stalling, attorney Kevin Fitzgerald, who has been involved with JUA court cases, said government officials will be able to work on a "secret" regulation that will allow the insurance commissioner to appropriate JUA's surplus funds, he said.
"In my view, you have the attorney general and the insurance commissioner and the governor actually actively conspiring to subvert the law and find a way to take the money anyway," Fitzgerald said.
Fitzgerald said the state's claim that it needs more time to investigate is "ludicrous." Any issues can be "resolved within a time frame of 90 days" a span determined by the accounting consultant firm PricewaterhouseCoopers, which Fitzgerald hired for the investigation, he said.
Neither Lynch's staff nor the insurance commissioner's office responded to requests for comment by press time.
State officials at the Offices of the Attorney General and the Insurance Commissioner have stated that since the state Supreme Court ruled that the fund was not a state entity in January, JUA, which might have amassed millions of dollars in unpaid federal taxes, may be subject to an Internal Revenue Service audit, according to the Union Leader.
The JUA has had a letter of exemption of federal taxes in its possession "for years," Tuttle said.
"If indeed we owe federal taxes as a result of the decision, all we have to do is self-report to the IRS and the IRS will work with the organization and by all means we should pay them," she said. "But for the Governor's Office to claim that it will bankrupt the JUA is totally unbelievable."
To Tuttle's knowledge, the JUA has not yet contacted the IRS, she said.
Although the state conducted a full financial review of the JUA approximately one year ago, state officials now claim to be completely unaware of the financial situation of the JUA, according to Tuttle.
"They knew how much was there when they were going to take the money, and now they say they don't know how much was there," she said. "How can they say it's insolvent if they don't know how much is in there? They'd have to know how much was in there if they said it couldn't cover the taxes."
The state Attorney General's Office has also directly violated Belknap County Superior Court Justice Kathleen McGuire's ruling that it is disqualified from representing the JUA, according to Fitzgerald. While McGuire mandated that the attorney general's attempt to represent both the state and the JUA was a conflict of interest, Fitzgerald said he received a letter "about a week ago" from the Office of the Attorney General written on behalf of both the state and the JUA.
"Despite the fact that they were found to have a conflict of interest which violates the rules of interest, they're preventing the JUA board from acting," Fitzgerald said.
Wendelboe could not be reached by press time.
