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By DAN REYNOLDS, senior editor of Risk & Insurance®

The Attorney General for the District of Columbia said this week that an antiquated record keeping system could be one factor in the district's failure to pay the appropriate life insurance premiums for employees under its disability compensation program.

Office of Risk Management Director Kelly Valentine (pictured) was placed on paid administrative leave from her $147,848-a-year position on July 1 pending the outcome of an investigation into her department by D.C.'s Inspector General Charles Willoughby and Auditor General Deborah Nichols.

Nichols said on July 30 that it could be three months before her office can issue a report. She said that one difficulty in putting together the necessary information is that Valentine has been difficult to reach while on administrative leave. Valentine could not immediately be reached for comment by Risk & Insurance®.

Nickels' office estimates the value of unpaid premiums to Standard Life Insurance Co. of New York and a federal insurer life insurer at about $2 million.

This isn't the first time that questions have been raised about the operation of D.C.'s Risk Management Office. Similar questions were raised in an audit of the office by the Inspector General in 2007.

"Our investigation has determined that life insurance premiums deducted from employee's disability compensation have not been paid to Standard, or the previous life insurer, Colonial Life, since 2003," Nickles wrote.

Some of these irregularities in the way the district has managed its program could be classified as fraudulent, Nickles said.

The district may also owe Memphis, Tenn.-based third-party administrator Sedgwick Claims Management Services for services rendered in connection with the district's disability compensation program (DCP), Nickles said.

Frank Huffman, senior vice president and director of corporate communications for Sedgwick, declined comment.

D.C.'s Mayor Adrian Fenty has put his General Counsel Andrew "Chip" Richardson in charge of the Office of Risk Management on an interim basis. Richardson said on July 29 that he is cooperating with the investigation.

"We are letting everybody know that we are cooperating fully so I was placed over here to do that, and I am certainly doing that," Richardson said.

Nickels said Valentine might have inherited a system that was outdated and cumbersome.

City employee health insurance premiums are calculated and dispersed by computer, Nickles said, but the district's DCP program, which reimbursed employees and their families for injury or death, was managed on hand-written cards.

"When the new administration came in as I understand it, the books and records were not in very great shape, but we are having to go back and piece those together, and we are going to provide them to the inspector general so that they have the best information we can put together," Nickles said.

July 30, 2010

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