State Auditor Finds Evidence of Possible Fraud at La. Citizens

Louisiana’s insurer of last resort may have illegally spent more than $1 million in public money on trips to Bermuda, fishing excursions, other travel, meals and entertainment, a state audit has found.

The insurer’s former head, Terry Lisotta, may have broken state theft, malfeasance and public records laws, and federal embezzlement and misappropriation laws, according to the report released Oct. 1 by Legislative Auditor Steve Theriot.

But whether Lisotta broke the law may depend on whether state courts decide that Louisiana Citizens Property Insurance Corp., Louisiana Auto Insurance Plan and Property Insurance Association of Louisiana, which administers the other two, are public or private.

Many of the payments would be legal for a private agency, PIAL Attorney A.J. Herbert said.

Lisotta could not be reached for comment. His phone rang unanswered and his cell phone was not accepting voicemail messages on Oct. 1, The Advocate reported. He also declined to make written comments on the report, Legislative Auditor Steve Theriot said.

Theriot quoted Lisotta as telling auditors the three agencies operated without regard to the state laws governing public agencies because lawyers told him the agencies were private.

At Louisiana Insurance Commissioner Jim Donelon’s urging, new management at Citizens and LAIP asked Attorney General Charles Foti for opinions about whether they are public, private or something in between.

Two weeks ago, Theriot issued a report saying that PIAL was public. That was challenged in court on Sept. 28.

Theriot said Lisotta bought 100 tickets to a New Orleans Zephyrs baseball game for his daughter’s cheerleading squad fundraiser, then gave them to PIAL employees. He also described golf outings, fishing excursions, quail hunts, football tickets, gifts, airline tickets, hotel rooms and trips to Bermuda, New York and the beach in Alabama.

He also described improper bonuses and severance packages, and hiring family members and lobbyists.

Theriot said property owners across the state will see special assessments for years to come because Citizens didn’t have enough money to pay claims when Katrina hit.

Until recently PIAL, a fire-rating agency, provided all the staff for Citizens and accounted for most of its expenditures. Louisiana Auto Insurance Plan, the car insurer of last resort, held Lisotta’s contract even though it accounted for only a tiny portion of his responsibilities. Citizens has not been able to balance its books since Hurricane Katrina because of a massive computer crash. An effort to reconstruct the records is supposed to be completed later this year.

Theriot, who was out of the office and unavailable for comment Oct. 1, said he has sent copies of his work to Jim Letten, U.S. attorney for the Eastern District of Louisiana, and to Paul Connick, district attorney for Jefferson Parish, where the offices of Citizens and its related entities are located.

Letten said he hasn’t seen the report and could not comment. Connick’s office confirmed that it had received the report, but said it was unable to comment.

Donelon called the payments “egregious” and said he has taken steps to correct them by installing new management at Citizens and encouraging the groups to operate in a more transparent way.

The insurance department does not directly control Citizens and the other agencies, but has appointees on each board.

“I’m totally confident that we have the checks and balances in place, and the people in place, to prevent that type of activity in the future,” said Donelon, who is running for re-election.