Donaho admits he rode free in insurer's limo STATE HOUSE REPORT

The state insurance commissioner admitted yesterday that he accepted a free limousine ride to Washington and back from a company his department regulates, an action that would appear to conflict with his own policy on gratuities.

The admission by Commissioner John A. Donaho comes only days after he generated controversy by threatening to drive Blue Cross and Blue Shield of Maryland into insolvency if the General Assembly did not give him the power he believes he needs to regulate the insurer.


Individuals in the administration of Gov. William Donald Schaefer, who already is miffed about Mr. Donaho's strong-arm tactics with Blue Cross, say the commissioner's job could be in trouble in the wake of the news about his accepting the limousine ride.

These individuals said the limousine ride -- first reported yesterday in the Washington Post -- may be the final straw for Mr. Schaefer, who has been angry at Mr. Donaho for months. The governor has not made any decision about Mr. Donaho's future, the sources stressed.


Accepting gifts of any sort is barred by the Insurance Division's own code. And Mr. Donaho put out a memo last October barring any staff member from accepting "any gift, meal, or other emoluments" after he himself admitted accepting box seats at baseball games and other events from Blue Cross and Blue Shield.

But Mr. Donaho insisted yesterday that he had not violated the policy.

He said he wanted to attend a preinauguration party Jan. 20 at the Four Seasons Hotel in Washington because it presented a rare opportunity to meet with two people he needed to conduct business with.

Those two were John Garamendi, top insurance regulator in California, and Eli Broad, chief executive of Sun America Inc., the company that provided the limousine. Mr. Donaho wanted to talk to them about an audit Maryland and California are conducting of Sun Life Insurance Co., a subsidiary.

He said he took the ride largely because his back was sore and he was unable to drive himself to Washington. "I was not going to go at all," he said. "Secondly, there was a car sitting there that was available.

"Where else were Garamendi and I going to meet [with the Sun Life executive]?" he asked, adding that the only other option was to fly out to California at much greater taxpayer expense. But he said he would "probably say no" to the limousine ride if asked again.

"These people don't have enough money to bribe me," Mr. Donaho said. "If my decisions can be influenced by a ride to Washington and back, I shouldn't be here."

Reports of the limo ride appeared near the end of a tough legislative session for Mr. Donaho, in which the commissioner has been under fire by the industry, legislative leaders and the governor.


Mr. Donaho has been pushing aggressively for powerful oversight regulation of the Maryland Blues in the wake of the insurer's financial and management problems, which he first disclosed to Congress last summer.

He threatened last week to force the company into insolvency if the state Senate did not remove amendments that he opposed to the oversight legislation. The Senate did so earlier this week, but Mr. Donaho was criticized for using bullying tactics.

"I'm not entirely pleased with John," Mr. Schaefer said in the days after the threat was issued. "His threat to put them in bankruptcy, I don't think serves any purpose."

The commissioner's threat was part of a running feud with Sen. Thomas P. O'Reilly, chairman of the Finance Committee. That committee had adopted amendments weakening the Blue Cross bill but was rebuked when the full Senate restored powers Mr. Donaho deemed critical.

Earlier in the session, while the regulatory bill was still in the Senate committee, Mr. Donaho complained that Mr. O'Reilly, a Prince George's Democrat, had been pressuring him to approve a proposal that would benefit a company represented by Mr. O'Reilly's personal and political friend, Gerald E. Evans.

The limousine incident occurs as the insurance commissioner's department is in the midst of an audit of Sun Life Insurance. In recent months, Mr. Donaho has twice rejected introduction of a new insurance product sought by the Sun America subsidiary that would have generated more than $500 million in business.


Mr. Donaho declined to discuss the audit.

Mr. Schaefer has been unhappy with Mr. Donaho ever since the commissioner unexpectedly announced his concerns about the financial health of Blue Cross before a U.S. Senate subcommittee last summer.

If Mr. Donaho accepted gratuities from an insurance company he regulates, several legislators said, that might be construed as a serious enough breach to place his job in jeopardy.

"The governor's not happy with him," said Sen. Thomas L. Bromwell, a Baltimore County Democrat on the Finance Committee. "If he puts himself in a position where he's doing something that is grounds for dismissal, I don't think the governor would hesitate."

Mr. Donaho has said that the governor cannot fire him because of his status as a protected witness before Congress, said Mr. O'Reilly, the Finance Committee chairman.

"He said Senator Nunn would protect him," Mr. O'Reilly said. "As far as that status is concerned, the law probably should protect him against reprisals flowing out of his testimony, but that does not extend to the level of protecting him against everybody for any reason whatsoever."