The Minnesota Department of Commerce is tangled up in politics — again.
This is not exactly new territory for the state agency. With a mission of regulating commerce, the department crosses paths with the banking industry, insurance firms, energy companies and telecommunications providers.
That means the department often has a target on its back, says former Commerce Commissioner Jim Bernstein, who ran the department under former Gov. Jesse Ventura. “Our oversight is of a number of industries that people interact with everyday,” he said. “If I made a decision that favored consumers or rate payers, I’d hear from the industry. If I leaned the other way, I’d hear from consumers.”
The latest controversy involves Community Action of Minneapolis, which was raided after investigators discovered the agency was misusing millions of dollars in federal funds aimed at helping low-income people pay their heating bills. The state Department of Commerce is the pass-through point for the federal money.
In the Minnesota Public Radio report that set off the latest round of scrutiny, Commerce Department staff members said the department had been aware of the misuse of funds for years, but that Commissioner Mike Rothman would not act on the warnings because of political sensitivity, a claim Rothman does not deny.
“I understand the politics, because the leadership of the Community Action agency and well-known and powerful,” Bernstein said.
Bernstein had his own brush with powerful interests. In 2002, toward the end of his tenure as commissioner, Bernstein had fined American Bankers Insurance $3.5 million for illegally selling credit-protection insurance.
But the company, based in Florida, settled for a much smaller fine a year later after the Pawlenty administration came into office. A legislative auditor’s report confirmed that American Bankers Insurance had made campaign contributions to both the Republican and DFL parties, although stopped short of saying that the contributions led to the smaller fine.
Bernstein said he’s “loathe” to criticize Rothman but added, “The agency [Community Action] was out of control. The board of directors was utterly incompetent. It appears based on media reports that the leadership was corrupt. Should the department have caught this? You can make a case that says, ‘yes.’”
Bernstein said during his tenure between March of 1999 and December, 2002, the Low Income Heating and Assistance Program was housed at the Department of Commerce. “I had full responsibility and full authority to make sure the moneys were being spent responsibly,” he said. “The question is how much authority the department now has with oversight.”
The authority would still seem to be substantial, given the reported comments from department staff and the fact that the LIHEAP national website cites the monitoring reports in Minnesota as an example of how states can determine whether the federal money is being used properly.
Republicans have seized upon the implication of political favoritism. Incoming speaker of the House Kurt Daudt says Rothman should step down if he “chose to put politics before protecting Minnesotans.”
This isn’t the first time Rothman or his department has been the focus of Republicans’ attention. Earlier this year, Republican candidate for governor Jeff Johnson charged that politics played a part in in the Commerce Department’s approval of low health insurance rates offered on MNSure by Preferred One health insurance company. Preferred One exited the exchange, saying the low rates were not sustainable.
Bernstein shrugs at calls for resignation. “It always happens with this position,” he said.
But Rothman should not expect that the scrutiny of the Department of Commerce to diminish, Bernstein said. “Everybody uses the phone, goes to the bank, uses electricity,” he said. “And, as a result, you are going to deal with the legislature all the time. They pay close attention to what the Commerce Department is doing. It is a political position.”
Bernstein is no political expert
Seeking out Jim Bernstein to comment on politics of the Commerce Department is certainly an interesting choice. Bernstein is best known for driving 1,000 State Farm employees with excellent jobs out of the state a decade ago after the insurer tried to set up an HMO-like network for auto glass repair to keep costs down. In a populist political move in 2002, Bernstein charged the insurer with unfair trade practices. He wound up settling for $75,000, or what amounted to pocket change for State Farm. Then the next year the insurer closed its huge Woodbury campus and moved 1,000-plus good jobs to Lincoln, Nebraska. Because of this action, Bernstein arguably may have been the most politically deficient Commerce Commissioner in Minnesota history.
Setting The Record Straight
Mr. Edwards can say whatever he pleases about me, it goes with the territory. However, his comments contain several incorrect statements and inferences.
Minnesota statutes then and now, give the policy holder – not the insurer – the right to choose which glass company will repair/replace their windshield. Insurers were allowed to set up networks but if a policyholder chose to use another glass company not in the network, the insurer was nevertheless required to pay the claim to the glass company that made the repair/replacement. Insurers were forbidden to steer policyholders to networks and were required to tell the policyholder that they could use any glass repair shop they chose. After 12 years have passed, I don’t recall the specific details of the consent order between State Farm and the Department, but it was not for “trying to set up an HMO-like network”, it was for actual violations of the statute prohibiting steering to network shops and not informing policyholders of their right to choose their own glass company.
State Farm’s decision to close its Woodbury campus had nothing whatsoever to do with paying a one-time $75,000 civil penalty in Minnesota. State Farm was and is the state’s largest auto insurance company (number of policies and premium dollars) and made the decision to consolidate some operations in Lincoln for their own strategic and business reasons. Insurers like State Farm – a well respected and honorable company – are regulated by state insurance laws. From time to time an insurer may engage in practices that are in violation of a states insurance laws. It is the responsibility of that states regulatory agency – the Dept. of Commerce in Minnesota – to enforce those laws.
Politicians and putting Minnesotans first
Does anyone else see the irony of a politician stating that anyone should resign if “they chose to put politics before protecting Minnesotans,” especially coming from a member of a certain political party who would rather shut down the government than compromise?