THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, January 27, 1996 TAG: 9601240006
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Editorial
LENGTH: Long : 102 lines
A simple two-question test determines if a public official has a conflict of interest.
1. Does he or she serve two masters - the public and someone else?
2. Is there, or might there be, a conflict between the two masters?
If the answer to both questions is yes, the public official has a conflict of interest - and not just a ``perceived'' conflict of interest.
In Richmond early last week, House Majority Leader C. Richard Cranwell argued that he had no conflict of interest when he represented Trigon Blue Cross Blue Shield in its attempt to convert into a for-profit company - and to sell roughly $1.2 billion in stock. Later in the week, under public pressure, Cranwell and Trigon parted company, but Cranwell never conceded any conflict of interest.
Was there one?
1. The Roanoke County Democrat served two masters: the public, whom he represents, and Trigon, which paid him and his law firm $225,000 over the past two years.
2. A potential conflict exists between the public and Trigon, because what's good for Trigon might be bad for the public.
The answer to both questions, then, is yes. No one should speak of Cranwell's ``perceived'' conflict of interest. The conflict wasn't illegal - not much is, under Virginia's lax conflict-of-interest law - but the conflict was as real as a tree.
This is where things stand in the Trigon matter. To become a for-profit insurer, Trigon must obtain State Corporation Commission approval. Trigon has agreed to pay $159 million into a charitable state foundation in exchange for that approval. Critics say that's not enough to repay the people of Virginia for the tax breaks and nonprofit status extended to Trigon since its founding in 1930.
Cranwell and other delegates will make a number of decisions this session that will have a profound effect on Trigon, which serves about a third of Virginians. Delegates will elect two of the three SCC members who will decide Trigon's fate. They probably will consider health insurance and HMO bills that will affect the amount of money Trigon can make. They will consider Gov. George F. Allen's budget, which calls for using $95 million of the $159 million in Trigon's foundation for education.
Trigon says it needs for-profit status to expand and fend off out-of-state competition, but Virginia would be the first state to permit a Blue to convert entirely from nonprofit to for-profit.
Trigon's image was tarnished last year when it was revealed the insurer had overbilled clients for a decade. Trigon had secretly negotiated lower rates from health-care providers but had used the higher public rates to compute policyholders' 20 percent charge. As a result, many policyholders, without knowing it, were paying far more than 20 percent of their medical bills. Trigon was fined $5 million and agreed to repay policyholders more than $22 million.
This is not the first time Cranwell has been accused of conflict of interest. It became known last year that he was one of four powerful legislators on the board of a mortgage-insurance company set up by a one-time lobbyist for Trigon. Questions were raised whether banks would take their business to the company to gain favor with the legislators. Amid charges of conflict of interest, all four legislators resigned.
Eyebrows also have been raised over the large sums Cranwell has made representing counties fending off annexation, since Cranwell played a major role in writing annexation laws.
Legislators argue that a conflict-of-interest law is difficult to write, but most other states have managed far better than Virginia. What's lacking in the General Assembly is the will to write a stricter conflict-of-interest law.
Sen. Joseph V. Gartlan Jr., D-Fairfax, told The Washington Post, ``The philosophy of the Virginia conflict-of-interest law is disclosure, not prohibition. With the needs of the (legislators) to make a living, disclosure is the better approach.''
In many cases, we'd argue, prohibition is the better approach. Some legislators favor prohibiting legislators from representing clients before state agencies, for which legislators set the rules and grant the funds. That would seem to be a minimum requirement. Perhaps one reason Virginia has a higher percentage of lawyer legislators than any other state is that a Virginia lawyer can legally use his position as a legislator to enrich himself.
Consider the 22 members of the House Corporations, Insurance and Banking Committee. The Washington Post reported eight are bank directors, 14 own bank stock, nine do legal or other work for banks or insurers and two own part or all of insurance companies. Only five have none of these entanglements. So who is best represented on that committee - the public or the regulated businesses?
Cranwell said he will ask the House Ethics Panel to rule on whether he should vote on matters affecting Trigon. We can answer that. In the absence of adequate legal restrictions, Cranwell should abstain from participation in all Trigon matters, including the picking of the two new SCC commissioners. He has broken no laws, but legislators should aspire to a higher standard than merely staying within the law.
Legislators should refrain from representing clients before state agencies like the Alcohol Beverage Control and Commonwealth Transportation boards or the SCC. In Virginia such representation is legal, but it's still wrong.
The deliberately lax state conflict-of-interest law reminds us of an old saying: ``What's legal in Virginia is a crime.'' by CNB