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August 4, 2014 at 5:22 PM

How to investigate yourself and satisfy no one

Attorney Phil Talmadge and client Patricia Petersen testify at a June 16 hearing of the Senate Law and Justice Committee.

Attorney Phil Talmadge and client Patricia Petersen testify at a June 16 hearing of the Senate Law and Justice Committee. (Photo by Erik Smith/ Seattle Times)

Remember the Patricia Petersen case? The hearings officer who says her bosses at the state Office of Insurance Commissioner tried to pressure her into ruling in their favor? The office has finally released its report on the matter, and it looks like it ought to be filed with the Department of Told-You-So.

It is hard to imagine a vindication for a state agency as complete as this one. Not only does the report find the agency blameless, it also finds much to fault in Petersen’s behavior. So much fault, in fact, that the Office of Insurance Commissioner is using the findings as the basis for formal disciplinary proceedings, and termination seems one likely outcome. Not to mention a lawsuit from Petersen, and recriminations before the Legislature.

Commissioner Mike Kreidler and his crew should have known better. An investigation like this was bound to satisfy no one.

Link to OIC report: OIC Investigation of Allegations of Ex Parte Contact

Link to public response from Petersen’s attorneys: Concerned Citizens memorandum

Though the Office of Insurance Commissioner hired an independent attorney to write the report and notes that it had no control over his findings, even the most rigorous self-examination by a state agency would be suspect unless it reached damning conclusions about itself. Phil Talmadge, the former Supreme Court justice who is representing Petersen in the case, says he has filed a public-records request to find out exactly what the agency directed attorney Patrick Pearce to investigate. Was Petersen pressured by her superiors? Randi Becker, R-Eatonville, chairwoman of the Senate Health Care Committee, thinks so.

“It’s a question of trust at this point,” Becker says. “Trust is a hard thing to gain and an easy thing to lose, and a lot of people have lost trust because of what is going on in that office, including this investigation.”

For the last 19 years Petersen has presided over administrative hearings whenever insurance regulations or rulings are challenged, serving in a judicial role that is supposed to be every bit as fair and impartial as a judge in a courtroom. But starting late last year, when a spate of cases involving the Affordable Care Act began coming before her, she says a new deputy commissioner, James Odiorne, began pressuring her to rule in the agency’s favor. The Insurance Commissioner’s office maintains that it merely was trying to tighten up procedures and ensure that rulings reflected the latest thinking from the agency’s management. Matters came to a head when Odiorne dropped an unscheduled evaluation on Petersen in May, just as a critical case involving Seattle Children’s Hospital was coming before her.

Pearce’s report quickly dismisses the charge of pressure. He says Petersen had an “extremely strict” view that all matters concerning insurance regulatory policy needed to be aired during hearings, and he says it was proper for Odiorne to raise general issues outside of court, because he was not directly involved in prosecuting or defending cases. “The actions by Mr. Odiorne did not constitute improper ex parte communication,” he writes.

Instead, Pearce’s report finds grevious fault with Petersen, for, among other things, sending a copy of her whistleblower complaint to one of the attorneys in the Children’s Hospital case – something Talmadge calls inadvertent as she sought legal help — and for failing to disclose that her husband, a pediatrician had been a resident at the hospital more than 30 years ago, and occasionally supervises interns as a volunteer.

Talmadge says the report measures Petersen against a code of ethics for administrative law judges at the independent Office of Administrative Hearings, which doesn’t apply to a judge working for the OIC. Yet if the code did apply, he says it would be clear that Odiorne’s communications were improper. And Talmadge points to the strangest thing about the report: Though it says Odiorne did nothing wrong, it faults Petersen for not reporting him soon enough.

The Office of Insurance Commissioner says the report did the best job it could: “While it is understandable that some will disagree with the findings and conclusions of the independent investigator, the report represented the best option to get an unbiased and impartial accounting of the issues at hand,” says spokeswoman Stephanie Marquis in an email.

“The independent investigator, who has a background in law and who was selected through the contracting process that is available to state agencies, conducted several interviews and examined almost 2,000 pages of related documents to reach his conclusions.”

It is hard to imagine the report settling anything. Already Becker says she plans to launch an investigation of her own, using the powers of her committee. And one of the questions she will ask is why on earth the Office of Insurance Commissioner controls its own judges in the first place, rather than hearing cases at the Office of Administrative Hearings. More and more it is sounding like a case for true independence.

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