Huffpost Denver

Pinnacol Audit Nails Insurance Provider For High Compensation, Waste

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DENVER — Colorado lawmakers on Monday grilled executives from the state-chartered workers' compensation insurer after state auditors learned employees spent $500 a night to stay in expensive hotels and were paid huge bonuses after the company lowered performance goals.

The state audit released Monday found that Pinnacol Assurance paid more than $1.9 million in bonuses to employees from 2007 to 2009.

Lawmakers also were stunned to learn that executives set up golden parachutes that require the quasi-governmental agency to pay them up to $4.3 million if lawmakers change the way the company is run, including guaranteed salaries, bonuses and benefits.

Board Chairman Gary Johnson and CEO Ken Ross defended the bonuses and salaries, saying the company had to be competitive with industry practices.

The company also agreed with the audit recommendations that the company set up spending guidelines and enforce them, but Johnson later said he made no promises.

"I think we agreed we'd take another look at it," Johnson said.

The company came under fire last month after KMGH-TV in Denver reported that Ross and three board members, including Johnson, attended a golf trip to Pebble Beach, Calif., that cost thousands of dollars. Ross said the trip was intended to reward top-producing agents.

Johnson defended the trip, but he refused to say what it cost. The company also refused a Colorado Open Records Act request from media, including The Associated Press, for the expense accounts.

Sen. Morgan Carroll, D-Aurora, said the executives are being hypocritical by telling lawmakers they agreed with the audit's findings but balking when they had a chance to implement changes.

Carroll said the company refused to turn over records to auditors, making it difficult for lawmakers to determine if the bonuses and expenses were justified.

"It makes me wonder what they're hiding," she said.

The state established what eventually became known as Pinnacol Assurance to provide workers' compensation insurance to any company that needs it. It doesn't pay any state or federal taxes.