Tidewater retains role with state in insurance

Subsidiary of firm has no-bid contracts with IWIF agency

July 19, 2000|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

A quarter-century ago, the name Tidewater Insurance was synonymous with political influence in Maryland. The company, owned by the friends of then-Gov. Marvin Mandel, wrote millions of dollars worth of insurance contracts on state projects. One subsidiary alone had 28 state contracts during Mandel's tenure.

But Tidewater's fate changed when three of its owners were convicted along with Mandel on mail fraud and racketeering charges.

Though the convictions were overturned, Tidewater's political lifeline appeared to be severed and, with new owners, it dropped from view - or so it seemed.

Records show the insurance firm has quietly forged a relationship with one state agency - the Injured Workers Insurance Fund.

A Tidewater subsidiary, International Underwriters, has had for more than a decade an unusual series of no-bid contracts with IWIF.

Last year, another three-year contract was awarded retroactively to International Underwriters, an agreement that more than doubled the premiums paid to the company to nearly $1.4 million a year. That deal was never brought before the IWIF board for approval.

And, the state piggybacked on the IWIF contract to purchase insurance of its own through International Underwriters, boosting annual premiums paid to the company by another $500,000.

In each case, International Underwriters receives a commission - generally figured as a percentage of the premium - from an insurance carrier, which is the insurer.

IWIF officials and officers of International Underwriters defend the contracts as proper and beneficial to the state agency.

"If they didn't think we were doing a good job, they would fire us," said J. Timothy Reid, vice president of both insurance companies, which have offices near Baltimore-Washington International Airport.

IWIF, run by a board appointed by the governor, sells workers' compensation insurance coverage to Maryland businesses, competing directly with private insurance carriers.

IWIF in turn needs a type of coverage, known as reinsurance, to protect itself from potential catastrophic losses on the policies it sells. The state buys into the same reinsurance plan to cover major workers' compensation claims from its employees.

Under its contract with IWIF, International Underwriters places that coverage through agreements with insurance carriers. Acting as the insurance agent, International collects its commissions from those carriers.

Company officials declined to disclose the amount of its commission on the state deal, and IWIF officials said they have no knowledge of what International earns. Industry officials said commissions are negotiated privately between agents and carriers and vary widely, ranging up to 10 percent of the premium.

Though it is a state agency, IWIF is not subject to state laws requiring competitive bidding. IWIF's procurement guidelines do require competitive bids in some cases, but specifically exempt reinsurance contracts from those requirements.

Reid said the former owners of Tidewater who were central figures in the political scandals of the 1970s no longer have any ownership interest in the company.

Tidewater and its then-owners were at the center of a political scandal that landed Mandel in federal prison on corruption charges.

Mandel and the three Tidewater owners - Harry W. Rodgers III, his brother, William A. Rodgers, and W. Dale Hess - were convicted in 1977 on charges of mail fraud and racketeering in connection with a scheme to influence racetrack legislation. The conviction was overturned a decade later on appeal.

Though Tidewater's operations were not directly involved in the charges against Mandel, the original investigation leading to the indictments stemmed from allegations that Tidewater had received favored treatment from the Mandel administration.

In a recent interview, Reid said he and David A. Fisher, Thomas Lowe and Alan Etridge now own the firm. He said Harry Rodgers left Tidewater in 1982, William Rodgers in 1986 and Hess in the 1970s. None of the three former Tidewater owners responded to requests for comment.

Reid said International writes the specifications for IWIF's reinsurance coverage and distributes them to companies interested in seeking the business. Under its contract, it is also charged with recommending a "suitable" reinsurance plan after insurance carriers submit proposals.

Defending arrangement

Preston Williams, IWIF chief financial officer, defended the exclusive arrangement with International Underwriters, pointing to the company's extensive experience with the agency. Williams, who did not work for IWIF when the most recent contract was signed, said International also provided similar services for state workers' insurance funds in other states.

He said that while the International Underwriters' 1999 contract was not presented to the board, the panel had voted earlier on the overall reinsurance package. That vote came early last year, nearly a year before the contract was signed.

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