Analysis by Don Knox, STATE BILL COLORADO

Picture this: A Colorado governor, fuming after reading a steady stream of negative headlines about the lavish spending of a well-heeled statewide organization, successfully leans on that organization’s board of directors. Coolly, it cans the offending CEO.

Industry officials howl. But the firing sticks.

The CEO in question? No, not Pinnacol’s Kenneth Ross. It was Thomas A. Levin, helmsman of nonprofit Blue Cross and Blue Shield in the early 1990s. And the governor? It was Roy Romer.

The boardroom showdown of governor vs. CEO drew headlines for months in Denver’s major dailies — yes, there were two then. More than anything, the showdown underscored Romer’s willingness to use the power of his elective pulpit to send management sinners packing.

Point made.

Fast forward to 2011. Ken Ross and his predecessors have enviably managed Pinnacol Assurance, the state’s quasi-governmental worker’s compensation authority. The organization, once nearly broke, enjoys coffers so flush that Democrats at Colorado’s Capitol last year attempted a raid in part to stem the state’s own budget crisis. The attempt fails, but Pinnacol does not survive unscathed.

Unfortunately for Pinnacol, the current CEO happens to possess the Tom Levin gene: When the going gets tough, the tough go shopping. Pebble Beach? Check. French-cooking school? Check.

Denver’s TV news has been awash this week in coverage of the Pinnacol overspending. Senate President Brandon Shaffer called Friday for Ross’ head. This morning, so did The Denver Post.

There is a difference, however, between 1993 and 2011.

Then, the board of Blue Cross was stacked with well-meaning corporate execs with big reputations and long resumes. One of them, prominent Denver banker LaRae Orullian, was confident in her judgment of Levin’s ability.

“I don’t think there’s ever been a time when Mr. Levin lost the support of the board,” she said then. “We still felt he was the best in the business.”

So why did she vote to fire him?

“We knew we couldn’t keep him.”

Unlike Blue Cross of the 1990s, Pinnacol’s board of 2011 is much less known. The most recognizable name is that of a local auto dealer whose back-of-the-vehicle nameplate graces many a vehicle.

A list of the board members, including the start of their board tenure as well as their day jobs, appears below.

This board appears to be much more insular, as well. As this morning’s Denver Post editorial noted, four happened to travel on the same Pebble Beach junket that drew all the negative coverage. Surely, The Post noted, these members won’t race to fire Ross.

But still, you have to wonder:

– Despite some of its members’ shared culpability, will this board nevertheless send the head sinner packing?

– Will the incoming governor, John Hickenlooper, as Roy Romer before him, use the power of his elective pulpit to force a decision?

– Or does this test of wills end in more political standoffs, as they did during the Bill Ritter years?

Stand by, Colorado.

Don Knox edits State Bill Colorado and Law Week Colorado. He is a former business editor of The Denver Post and the Rocky Mountain News.

PINNACOL’S BOARD

Gary O. Johnson, chair, joined the board in 2003. He is president of Strategic Insurance Consultants Inc., a company that helps independent agents merge with or purchase other insurance agencies.

Holman F. Carter, employee representative, joined Pinnacol’s board in 2010. He is president and business agent of the Amalgamated Transit Union Local 1001 and a member of the Colorado AFL-CIO executive council.

Ryan Hettich, employer representative, joined the board in 2006. Hettich is the owner of a Colorado Springs-based company in the business of retail dry-cleaning, textile restoration, and commercial real estate holdings.

Robert J. (R.J.) Jolly, employer farm and ranch representative, has been a member of Pinnacol’s board since 2003. Jolly is co-owner and manager of Barbara Jolly and Sons Ranch LLC, primarily a cattle ranching enterprise.

Debra E. Lovejoy, employee representative, joined the board in 2003. She is vice president of Employer’s Resources of Colorado Inc., which provides outsourced human resources services to Colorado businesses.

Robert C. McDaniel, finance/investment representative, joined Pinnacol’s board in 2010. He is the managing director of Metrix Advisors LLC, a management consulting focused on advising companies operating in heavily regulated business environments.

Paul Suss, employer representative, joined the board in 2004. He is president of Suss Buick Pontiac GMC, a family owned and operated automobile dealership.

Richard Rivera, employer representative, joined Pinnacol’s board in 2010. He is the president of Emergi-Medical Care Center in Pueblo and owner of HealthTrac Walk-In Clinic in Canon City

Nonie Rivale Willisch, employee representative, joined the board in 2010. Since 1998, she has sold workers’ compensation and commercial insurance for CRS Insurance Brokerage Inc. in Denver, focusing on the construction industry.

Source: Pinnacol website

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Source: 9News

Even while Pinnacol Assurance is being criticized for its lavish spending habits and lawmakers are calling for its leaders to resign, the insurance carrier continues to send its employees to an expensive French culinary school in Denver, 9Wants to Know has learned.

More than 100 of Pinnacol’s employees have learned to cook at Mise en Place, at a cost of more than $10,000, in the last year.

Separately, Senate President Brandon Shaffer is calling for the resignation of Pinnacol CEO Ken Ross and board members who traveled in 2010 on an expensive retreat to Pebble Beach, Calif.

Today, The Denver Post, in an editorial, made a similar call. The Post said:

We wrote last May that Ross’ “erratic behavior” — which included the infamous 7News video of Ross shoving the TV station’s reporter, Tony Kovaleski — left us to wonder whether he should keep his job. The evidence is now conclusive. It’s time for Ross to step down

.

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Travel records show Pinnacol Assurance board members, executives, employees and spouses spent $318,717 golfing, dining, getting massages, drinking, taking wine tours during a trip at a luxury resort last year on the firm’s dime, 9News reports.

According to 9News:

Costs included $15,000 in air fare, $39,659 in golf and spa services, $131,000 in room charges, recreation and room charges for the delegates, $46,259 for restaurants and lounges and $35,800 in retail, transportation and miscellaneous charges and 8,091 in tours and dine-around charges.

Pinnacol Assurance said it released the records Thursday to comply with a court order directing the documents be delivered to KMGH-TV and made public.

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A bill that would have placed limits on the ability of insurers to spy on workers’ compensation claimants died Wednesday in committee, The Pueblo Chieftain reports.

The Senate Committee on Judiciary killed HB1012, sponsored by Rep. Sal Pace, D-Pueblo, more than a month after hearing testimony on it. It failed on a 4-3 vote.

“We knew all along that we were missing a key vote. That’s why it sat on the calendar for a month,” Pace said.

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Pinnacol Assurance, under intense scrutiny in the Colorado Legislature for the past year, caught its first break in a while Tuesday when a state House committee rejected a bill that would have capped the workers’-compensation insurer’s reserves and required it to pay excess revenues back to policyholders as dividends, the Denver Business Journal reports. House Bill 1356, sponsored by Rep. Su Ryden, D-Aurora, would have capped the amount of Pinnacol’s risk-based capital that it could keep in reserve and mandate the rest go back annually to its roughly 55,000 business clients statewide.

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Editor’s Note: State Bill premium subscribers may listen to the entire Senate Judiciary Committee by clicking on the player below. For long hearings, a delay is normal as the audio loads for the first time.

A quintet of bills aimed at making Colorado workers’-compensation insurer Pinnacol Assurance more accountable to the state and the public rolled on in the Legislature late Wednesday, though a particularly divisive bill on surveillance of supposedly injured workers stalled temporarily while its sponsor cleans up some issues with its language, The Denver Business Journal reports. The Senate Judiciary Committee, at the end of a seven-hour hearing, approved five of the seven bills suggested this summer by an interim committee studying Pinnacol, sending them to the Senate floor.

In other coverage:

The Denver Post (editorial): In the end, Pinnacol Assurance never proved that the deal being brokered with the governor’s office was anything more than a cash for autonomy exchange. As tempting as the big-money offer from Pinnacol was in these tough economic times, Colorado lawmakers were right to take a pass on it this legislative session. Would the $330 million deal create a better environment for Pinnacol’s thousands of policyholders? Would it benefit future businesses that sought Pinnacol’s help? No one could say for sure.

Associated Press: Colorado lawmakers have begun debate on a package of tough reforms for Colorado’s workers compensation program after injured workers told lawmakers they were spied upon and had benefits denied. The Senate Judiciary Committee on Wednesday approved several bills, including a measure that would change the makeup of the board of directors of Pinnacol Assurance, the state-chartered insurance company. Lawmakers added a doctor and an injured worker to the nine-member board to prevent abuses.

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The proposal to give Pinnacol Assurance nearly full autonomy in exchange for potentially hundreds of millions of dollars to the state will not happen this year, The Denver Post reports.

That fact was confirmed by officials with the quasi-governmental worker’s compensation insurance fund today.

“Today we were advised that Pinnacol’s proposed plan to separate from the State of Colorado will not be considered by the Colorado General Assembly during the 2010 session,” Pinnacol President and chief executive Ken Ross said in a statement.

In other coverage:

The Denver Business Journal: The Colorado Legislature ended discussion of a $330 million deal in which Pinnacol Assurance would buy itself out from under state control Tuesday, leaving the quasi-governmental workers’ compensation agency full of reserve money, but fearful that a future Legislature will raid it. The end to roughly six months of negotiations between Pinnacol and Gov. Bill Ritter’s office came one day before six bills that would restrict some of the company’s activities are due to be heard in the Senate Judiciary Committee. Senate President Brandon Shaffer, D-Longmont, who sponsored a failed 2009 effort to take $500 million from Pinnacol’s reserves, said that any potential deal would be killed in his chamber, according to House Speaker Terrance Carroll, D-Denver.

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Pinnacol Assurance, the state-chartered workers’ compensation insurance fund that wants to be privatized, said Thursday it’s willing to offer the state more money — $130 million more — to do that, The Denver Post reports. Pinnacol’s increased offer comes a week after the release of an analysis from financial-services firm Morgan Stanley that said the quasi-governmental agency was worth as much as $374 million to the state, nearly twice the amount Pinnacol had originally offered the state in exchange for almost full privatization.

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With the legislative session halfway over, leaders from both parties are saying it’s less likely lawmakers will consider a proposal to spin off Pinnacol Assurance, the state-chartered workers’ compensation fund, The Denver Post reports. Analysts from Morgan Stanley said in a report released Monday that a deal to “separate” Pinnacol from the state could fetch up to $374 million for the state, including an upfront payment of up to $264 million.

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Pinnacol Assurance is worth as much as $374 million to the state, an analysis by financial services firm Morgan Stanley shows. That’s nearly twice the amount Pinnacol, the state-chartered workers’ compensation insurance fund, offered the state under a proposal that would grant the quasi-governmental agency nearly full autonomy, The Denver Post reports.

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