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The Insurance Industry: Can Leavitt Leave It?

An in-depth look into just how closely, and inextricably, Secretary of Health and Human Services nominee Mike Leavitt is linked to the insurance industry.

According to a 2003 financial disclosure report filed in 2003, Michael Leavitt has investment holdings in various pharmaceutical companies – including Johnson & Johnson and Merck & Co. – and medical equipment makers. Upon confirmation as Health and Human Services Secretary, his predecessor Tommy Thompson "was forced to sell his stock in drugmakers" in compliance with government ethics rules; it is naturally assumed that Leavitt will be able to do the same. However, Leavitt's potential conflicts of interests run far deeper than Thompson's, as his holdings in and relationships to the Leavitt Group, the "family insurance business," are essentially inescapable.

Sources: Thompson sells stocks to comply with ethics rules | Leavitt's pharmaceutical, medical equipment investments; Leavitt must answer questions on conflict of interests: The Salt Lake Tribune, 12/16/04

What is of more concern is not just Leavitt's investment worth $5 million to $25 million in Leavitt Group Enterprises – the 27th largest insurance broker in the U.S., where he used to serve as chief operating officer – but his continued personal relationship to "the family business." In addition to having several family members on the Board of Directors, Leavitt's brother, Dane Leavitt, continues to be the president and CEO of the family insurance firm, which underwrites personal and property liability lines of insurance including but not limited to Medicare supplements (Medigap policies) and medical malpractice insurance plans – two health areas that would be directly affected by priorities that Leavitt has mentioned are on his would-be agenda.

Sources: Medical liability reform, Medicare in Leavitt's proposed HHS agenda | Leavitt must answer questions on conflict of interests: The Salt Lake Tribune, 12/16/04 | Leavitt Group Enterprises | Breakdown of major investments held by Mike Leavitt: KUTV – Utah News, 12/14/04

State of Utah's Exclusive Deal with Met Life: In 1998, the state of Utah maintained an "exclusive contract with Metropolitan Life Insurance Co." through which over 20,000 public employees obtained group auto and home insurance policies. Judd Turner – vice president of the brokerage agency behind the deal – was both a "friend and former insurance-business partner" of then-governor Mike Leavitt, as well as formerly employed by the Leavitt Group. Though the Leavitt Group did not directly benefit from the contract, it was "one of the largest Utah brokers for Met Life." Additionally, both MetLife and the brokerage agency had contributed to Mike Leavitt's 1992 election. [The Salt Lake Tribune, 9/30/98]

State of Utah and the Utah Workers Compensation Fund: In 2002-2003, the status of the Utah Workers Compensation Fund (WCF) was a hotly debated issue in the state. To the consternation of legislators and those affiliated with WCF, a bill on the docket that would have "turned the fund into a mutual-stock company owned by policy holders" was scrapped by the governor. Influential in the last-minute move was Dane Leavitt, who "argued strongly" against the legislation in his communications to the assembly. The governor continued to drag his feet on what to do with WCF until Wasatch Property Management eventually "switched [its] injured-worker insurance policy from WCF to a company affiliated with the Leavitt Group." While several insurance companies were involved in the new deal, the reinsurance company of significance behind the final arrangement was PacWest, a Bermuda-based offshore insurance company and "wholly owned subsidiary of the Leavitt Group." Though Gov. Leavitt continued to deny knowledge of the transaction, his obvious tie to Dane Leavitt as well as his lesser recognized ties to Wasatch Property Management (the company's founder and CEO was one of Leavitt's top campaign contributors and a trustee of his think tank) caught the wary eye of "at least one industry watcher." [The Salt Lake Tribune, 6/12/03; 6/21/03]

In both of the above cases, Gov. Leavitt staunchly claimed there was no conflict of interest, but according to a 1998 article in the Deseret News, Mike Leavitt never fully broke away from the family business. Though he might not have continued making any managerial decisions or having a "formal role in the businesses," he did keep abreast of what was going on. In fact, several times a year, the Leavitt family holds "family business meetings," which Mike Leavitt "routinely" attended. During the meetings, the then-governor, his father and his brothers would "sit down and chew the fat – most often about their business dealings." In reference to Medigap policies, Dane Leavitt to this day claims that he and his brother do not discuss the topic: "I have never had a discussion with him on any of these topics, and I don't anticipate having one." However, according to Mike Leavitt, talking shop is second nature to his family: "Many families have traditions…My father loves to get his sons together and talk business."

Sources: Deseret News, 12/6/98

The precise wording of the Office of Government Ethics provisions regarding conflicts of interests prohibits "an officer or employee of the executive branch of the United States Government" from "personally and substantially" being involved in rulings or recommendations in which he has a financial interest. As is, Leavitt continues to own one-seventh of the family insurance company and profits annually from this holding. Even if he somehow finds a way to sell his investment (take another look at the Board of Directors, it is quite the family affair), clearly he cannot divest from his own family. Both his history and his own comments have made it more than apparent that Leavitt will never be able to face up to the legal and ethical conflicts surrounding service as secretary of health and human services.

Sources: Conflict of Interest Law