Pinnacol Assurance, the state political subdivision that provides worker's compensation insurance, spent hundreds of thousands of dollars on employee bonuses, golf outings, expensive dinners, drinking occasions and ritzy hotels, a CALL7 investigation found.All of this spending was happening around the time Pinnacol officials were fighting the state legislators who wanted to take some of the organization's approximately $700 million surplus to fill the state's budget gap.The spending uncovered by 7News upset key legislative leaders."When you're a company who has more money than they know what to do with you spend (it) on things that you shouldn't spend it on, and I think that's what those numbers say," said House Majority Leader Paul Weissmann, D-Louisville.Senate President Brandon Shaffer, D-Longmont, agreed the spending was inappropriate."Is this kind of spending acceptable to you?" asked CALL7 Investigator Tony Kovaleski."No, it's not," Shaffer answered.But Pinnacol Chief Executive Officer Ken Ross said all the spending was appropriate and that legislators have no right to either Pinnacol's surplus or to question how Pinnacol is using the money."We are not a state agency," he said. "We are not owned by the state. We have nothing to do with the state. My employees are not state employees."It's true that Pinnacol's employees are not state employees, but lawmakers and Pinnacol executives differ on the official relationship between Pinnacol and the state.Pinnacol was set up by the state in the early 1900s to cover state employees and serve as the insurer of last resort for worker's compensation insurance. About a decade ago was allowed to operate as a mutual insurance company."What is Pinnacol?" Kovaleski asked. "Is it public? Is it private? Is it both?""That's part of the problem," Weissmann said. "It's both right now, and I think we need to make it one or the other."While Pinnacol receives no direct tax money, the state and local governments pay the organization either to provide worker's compensation insurance or administer self-insured plans. Pinnacol also pays no state or local property taxes -- amounting to about $4.5 million savings last year -- and its employees are members of the Public Employee Retirement Association -- the state's generous pension system. Pinnacol's board is also appointed by the governor.Those benefits, which no private companies receive, is what prompts legislators to argue the organization is an arm of the state, but Ross maintains he only answers to the board and Pinnacol's policy holders."Shouldn't you have to follow the same rules as other state agencies?" Kovaleski asked."We don't believe so," Ross said. "The state law that creates us creates a unique company to serve Colorado business."In the early part of the decade, Pinnacol had financial problems and was underfunded. Since then, Pinnacol has maintained the $1.3 billion reserve required by the state insurance commissioner and collected nearly $700 million in surplus.Ross said that money is necessary to cover any liabilities if there was a major incident in Colorado, but Weissmann and Shaffer said Pinnacol is either overcharging customers or underpaying claims or both.Ross also said that spending uncovered by 7News is necessary either to reward employees and agents or attract new business. The five- and six-figure bonuses are also necessary, Ross said."You believe every bonus is earned and is fair during this economic time?" Kovaleski asked."Oh, absolutely," Ross said. "I think my executive staff -- based on comparable numbers -- are underpaid for what they do."In 2003, the state auditor criticized Pinnacol's executive compensation as too high compared to other quasi-governmental agencies like PERA and the Colorado Housing and Finance Authority. While Pinnacol has reduced some salaries and bonuses since then, their executives still make considerable more than PERA and CHFA leaders.But Ross said it isn't enough compared to executives at other insurance companies."I am actually going to go to the board after what I went through the last two months," he said. "I think they ought to give me a raise.""More money?" Kovaleski asked."More money for what I do would certainly be in order," Ross said.Pinnacol's luxury spending uncovered by 7News bothered legislators.It includes:-- $143,000 for a luxury suite at Invesco Field -- $2,500 on dinner at Del Frisco's Double Eagle Steakhouse, including $144 a plate lobster and three $115 bottles of wine. -- $133,000 hosting clients at the exclusive Four Seasons resort in Scottsdale, Ariz. -- $109,000 at an island resort in South Carolina. -- And a night in on the town in New York City that started with eight people ordering 21 drinks in an hour for $400, then going to dinner with more alcohol and drinks afterwards."You look at some of these receipts and it looks like your employees and guests in the middle of some sort of booze fest?" Kovaleski asked."I was actually at that event," Ross said of the New York trip. "It wasn't a booze fest. It was a team-building event, and it was certainly appropriate under these circumstances."Weissmann disagreed, saying a bill passed this year will require Pinnacol to undergo a performance audit and set up a committee to recommend whether to bring Pinnacol back under full state control or spin it off as a private company."We set them up," he said. "They want all those benefits, but they don't want any restrictions that we give to any other state entity. They want to act like both and that's a real problem."Another expensive event was titled the "Ritzy Girls," a weekend for insurance agents held at the Ritz-Carlton at Bachelor Gulch. But that pricey party had one guest who was not an insurance agent."Who is Amy Gibson-Ross?" Kovaleski asked."That's my wife," Ross said."Is she an agent?" Kovaleski asked."No," Ross said."She was on that trip," Kovaleski said. "Pinnacol paid for it?""Yes," Ross said."Is that right?" Kovaleski asked."Oh, absolutely," Ross said.Ross even disputed that some of the spending 7News uncovered was lavish."How could you not feel you are living a life of luxury when you are dining at Colorado's best restaurants -- some of the country's best restaurants -- playing golf at some of the nicest golf courses in the country," Kovaleski asked."Maybe your interpretation of a life of luxury is a little different than mine," Ross said, laughing.