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August 18, 2014 at 6:19 AM

Auditor Kelley makes a right move in Insurance Commissioner’s case

Washington State Auditor Troy Kelley.

Washington State Auditor Troy Kelley.

State Auditor Troy Kelley made an unfortunate decision last May when he decided not to investigate a rather serious charge against a state agency — that the Office of Insurance Commissioner was pressuring a judge to rule in its favor. But since then he has come up with a pretty solid idea, a performance audit that will examine whether judges ought to work for state agencies in the first place.

It’s about time someone analyzed that question in a formal way. The charge from hearings officer Patricia Petersen calls attention to the fact that many state agencies conduct appeals hearings in their own offices, using judges who are subject to discipline and termination by agency managers. The arrangement raises doubt about the impartiality of hearings – as it certainly seems to in this case.

Petersen, who has been chief hearings officer in Insurance Commissioner Mike Kreidler’s office for 19 years, says a new supervisor attempted to influence decisions on high-profile cases by issuing unfavorable job evaluations hinting at disciplinary action. The office maintains it was within bounds, and Petersen’s important accusation has been muddled by counter-allegations from the office that Petersen dealt with her concerns improperly. Last month an investigation commissioned by Kreidler’s office appeared to exonerate the agency of impropriety and assigned fault to the judge. Disciplinary proceedings, which could include termination, are now under way.

In an op-ed piece that ran in the Spokane Spokesman-Review Aug. 9, Kelley defends his decision not to investigate Petersen’s charges. If he had, she might have obtained whistleblower protection and action against her would have been put on hold. But Kelley says he views her case as a personnel matter, and says his decision has been bolstered by subsequent “revelations about the employee’s own conduct” — namely the points raised by the Insurance Commissioner’s investigation.

Not everyone would have made that call. The Times urged him to rethink. Kelley’s predecessor Brian Sonntag said he would have investigated. And a truly independent investigation by the auditor’s office might have come to a different conclusion.

But Kelley’s announcement of a performance audit to look at the grander issue is a different matter, and the idea has merit of its own. Kelley writes,

“While a whistleblower investigation of this particular situation was clearly not warranted, I believe that what is warranted is a larger, systemic review to determine if the practice by some state agencies of using in-house administrative law judges is good public policy. The internal conflict at the Office of Insurance Commissioner notwithstanding, several obvious questions arise about the role of administrative law officers in state government. Can an administrative hearing process be considered independent if it is housed within an agency and reporting to the head of an agency? If these processes are truly meant to be independent, why house them within an agency, which could intuitively raise issues about independence and impartiality?”

Many are asking the same questions, among them former Attorney General Rob McKenna and state Sen. Randi Becker, R-Eatonville, chairwoman of the Senate Health Care Committee. Becker says she may introduce legislation next session to move hearings from the Office of Insurance Commissioner to another office within state government that has the capability to hold independent hearings, the Office of Administrative Hearings. Some 26 state agencies have the ability to stage hearings there, including Kreidler’s office, but nearly all reserve the right to overrule its decisions.

Phil Talmadge, the former Supreme Court justice who is representing Petersen as an attorney, suggests it might make more sense to create a statewide Superior Court to hear administrative appeals. In that case, the judicial canons would clearly apply and independence and impartiality would be assured. A constitutional amendment might be required. At this point it is unclear whether the audit will be done in time for lawmakers to consider the matter next year, but it sounds like Kelley has found a good way to dig in.

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