Audit Questions Pinnacol Compensation, Travel

Quasi-Public Agency Under Fire After CALL7 Investigation Into Board Travel

A legislative audit criticized large bonuses, travel and a golden parachute program at the state-started worker’s compensation company.

Pinnacol Assurance was the focus of a CALL7 investigation in May that showed board members traveling with executives to a luxury golf resort in Pebble Beach, Calif.

“I think there is some tightening down that needs to be done," said state Sen. David Schultheis, a Colorado Springs Republican who chairs the Legislative Audit Committee.

The audit found that Pinnacol paid $1.9 million in bonuses to top executives between 2007 and 2009 and that the board approved a $4.3 million compensation package in September for executives if they were removed from their jobs. The measure was seen a reaction by Pinnacol to the uncertainity of possible legislative action.

Legislators, looking to fill a budget gap and following a CALL7 investigation into spending, were looking to take as much as $600 million from Pinnacol during this legislative session. The attempt did not pass.

Last month, CALL7 Investigator Tony Kovaleski followed three of the board members, who approved the bonuses and golden parachute provisions, to Pebble Beach, watching them golf, wine and dine for a five-day trip with Pinnacol picking up the bill.

State Sen. Morgan Carroll, D-Aurora, who chaired a committee last year that reviewed Pinnacol’s business practices, called the trip “ridiculous” and “obscene.”

“When you realize that they are stewards of the public money,” Carroll said. “This is a quasi-public entity we are talking about here. I think it’s ridiculous.

“The board is supposed to be the oversight check and balance,” she added. “It is uncomfortable to me that there’s a large amount of wining and dining.”

On Monday, audit committee members on of both parties agreed.

“A lack of accountability and transparency,” said Rep. Dianne Primavera, D-Broomfield, about Pinnacol’s spending and compensation.

CALL7 Investigators asked for receipts from Pebble Beach trip and despite previously providing travel records under the state’s open records laws, Pinnacol refused to provide the records for the May trip. Pinnacol attorneys are asking a judge to sanctify their refusal to provide the records and 7News is fighting to obtain the documents.

The audit said Pinnacol’s travel violated its own policies in three-quarters of the documents auditors sampled and the company has not placed proper limits on lodging and meals.

Pinnacol Board Chairman Gary Johnson, who was seen golfing in Pebble Beach, declined to discuss the company’s travel policies.

“In the shadow of the Pebble Beach trip, the audit was clearly critical of the travel and entertainment." Kovaleski asked. "Will it change?”

“I have no comment on that,” Johnson said.

“Did you receive any gifts on the trip to Pebble Beach from Pinnacol?” Kovaleski asked.

“That is information I am not going to talk about at this stage,” Johnson said.

“Don't you owe that answer to the people of Colorado? You are appointed by the governor. I just asked you if you took any gifts from Pinnacol?” Kovaleski asked.

“That's part of that open records that has not been resolved,” Johnson said.

“But you are an appointee of the governor. You can answer it without waiting for a court decision. Did you take any gifts?” Kovaleski asked.

“I am not going to answer that question,” Johnson said.

Pinnacol Chief Operating Officer Ken Ross said Pinnacol agreed with almost all of the audit’s findings.

“We were here to answer the committee’s questions, and our responses are embedded in our audit,” he said.

Previous Pinnacol audits found similar problems with their compensation and travel policies. Auditors repeatedly found that Pinnacol executives make salary and bonuses that are larger than compensation for similar quasi-public agencies.

Ross said the separation compensation package passed in September was necessary to make sure the current executive leadership stays in place.

“Golden parachute?” Kovaleski asked.

“It’s not a term that I ever use,” Ross said.

Legislators and newspapers have called for Johnson and board members Debra Lovejoy and Ryan Hettich, who were on the Pebble Beach trip, to step down. Some lawmakers have also suggested Ross step down for his inappropriate behavior when Kovaleski questioned him about the trip.

In May, Ross threatened to break Kovaleski’s finger and pushed Kovaleski when the 7News reporter was questioning Ross at Pebble Beach, but Ross later apologized for that behavior.

Johnson said neither he nor Ross should leave their positions at Pinnacol.

“The board has done an extremely good job working with the executives of Pinnacol, so there is absolutely no reason to step down,” Johnson said.

"There has also been a call for CEO Ken Ross to resign," Kovaleski asked. "Will you support that call?”

“Absolutely not,” Johnson said. “Ken's records stand on its own. He has been the spearhead behind all the great results that have happened these last five years. There's no reason for Ken Ross to resign.”

Carroll said lawmakers are looking for a way to force out the board members.

“I don't think these folks have the independence to do it,” Carroll said. “I am disappointed they won't step down, but I don't think that's the end. We may be looking at more technical reasons to remove members of the board.”