October 24, 2002
High Stakes on ‘Down Ballot’
They may be "down ballot,"or low profile, races for state offices, but the contests for insurance commissioner and controller in the Nov. 5 election could have important international effects on the Jewish community.
California's next insurance commissioner will have an important voice in the settlement and distribution of Holocaust-related funds. The responsibilities of the state controller include seats on public pension fund boards, where the battles over divestment of investments related to Israel may be fought.
Nearly a quarter of all U.S. claims made to the International Commission on Holocaust Era Insurance Claims (ICHEIC) have come from California. The California insurance commissioner, along with the commissioners of several other states, European insurance regulators and Israeli and Jewish organization officials form the ICHEIC board. The ICHEIC was established in 1998 and works with insurance companies, Holocaust survivors and their heirs to resolve unpaid insurance policy claims.
In addition to working with the ICHEIC, California's insurance commissioner has the leverage of state law to force reluctant insurance companies to pay survivors' claims. In 1999, California passed the Holocaust Victim Insurance Relief Act, which requires insurance companies that do business in the state to provide information regarding any policies sold by the companies or their affiliates in Europe between 1920-1945.
The insurance commissioner has the power to revoke the business license of any company that does not comply with the law.
The leading candidates facing each other on the Nov. 5 ballot for insurance commissioner are Democrat John Garamendi, a former California insurance commissioner, and Republican Gary Mendoza.
Garamendi was the state's first insurance commissioner (1991-1995). He lost a re-election bid to Republican Chuck Quackenbush, who resigned in the wake of a scandal. Retired state Appellate Court Judge Harry W. Low was appointed in September 2000 to fill the vacancy.
Garamendi, who went to work in the Clinton administration as a deputy secretary of the interior, wants his old job back. "I learned and now know how to use that power," Garamendi said, explaining that he plans to bring the full weight of the insurance commissioner's office to bear on companies that stall or refuse to release information about their European policies during the Holocaust.
"It's a contract. The length of time that's passed does not alter the fundamental nature of that contract," Garamendi said. "That's not their money. If there are no beneficiaries left, it's still not their money. If companies in California don't comply with this law, I will have no option but to pull the license."
Mendoza, a former state corporations commissioner and Los Angeles deputy mayor under Richard Riordan, was also state chairman of the Bush for President 2000 campaign. Mendoza admitted that Holocaust insurance payments were not a topic he paid close attention to before running for insurance commissioner, however, he said, "I have begun to pay more attention to it."
Noting that the constitutionality of the Holocaust Victim Insurance Relief Act was upheld in court after a strenuous insurance company challenge, Mendoza said, "The law does stand; it is important to enforce it," and California's vital market for insurance gives the state commissioner a "fairly decent amount of leverage." Still, Mendoza said, "the ICHEIC process is a failure; a lot of claims haven't been heard."
The GOP candidate sees the commissioner's international clout leveraging a different issue. "I've been an outspoken supporter of Israel for years," Mendoza said. "Israel is fighting our fight right now. Statewide officeholders have an opportunity to speak out and support our allies. I'd like to see a declaration of independence from Arab oil."
Also running for insurance commissioner are David I. Sheidlower, Green Party; Dale F. Ogden, Libertarian Party; and Raul Calderon Jr., Natural Law Party.
In the other down-ballot race, the state controller wields power over billions of dollars in investments, as California's chief financial officer. In the case of the controller, the power most relevant to the Jewish community is as a voting member on the California Public Employees Retirement System and the California State Teachers Retirement System pension funds. Together the two pension funds control approximately $250 billion in investments.
Although political decisions relating to Israel are not part of the controller's job, recent campaigns to divest government dollars from companies doing business with Israel could make the controller a key player in Israel's economy. Both the main candidates for the job have denounced divestment efforts but for different reasons.
Republican Tom McClintock, a state senator from Thousand Oaks who has developed a reputation for fiscal conservatism, said that making a political statement by divesting California pension funds from Israel is not appropriate for the job or the pension funds.
"Investing is not supposed to be a playground for political causes," McClintock said. "The controller has a fiduciary responsibility to look for rate of return and security, with the accent on security."
Noting that "Israel's been a very reliable and stable trading partner," McClintock said that divestment campaigns, or any other social or environmental issues, are a "direct breach of fiduciary responsibility."
Democrat Steve Westly sees investment in Israel as part of California's responsibility. Calling the controller's post a "much more important job than most people realize," the former senior vice president of eBay and business professor at Stanford University said of divestment campaigns, "I've been very outspoken that this is precisely the wrong time to do that."
"Technology is increasingly the future of both California and Israel," Westly said. "They're our No. 7 trading partner, and we're far and away their first. Cutting back would be horrendous."
Westly noted that "some of the best firms in the world" do major business in Israel. However, he went even further in his support, saying that if California is to encourage policy through its investments, "It is important to make sure we're not investing in companies that are destabilizing the area."
Like his opponent and the main candidates for insurance commissioner, Westly understands the political power inherent in California's massive economy. "We have an international economy," he said. "We have to have an international perspective."
Also running for controller are Laura Wells, Green Party; Ernest F. Vance, American Independent Party; and J. Carlos Aguirre, Natural Law Party.