Watch CBSN Live

Quack Quits

California's insurance commissioner stepped down on Wednesday amid allegations he spent insurance settlements meant for earthquake victims on his personal political aspirations.

Chuck Quackenbush, one of only two statewide-elected Republican officials in California, contended that the charges against him were a Democratic witch hunt.

"I think this has become such an emotional trauma for him that he could no longer serve effectively as insurance commissioner," said Donald Heller, Quackenbush's lawyer. "I am satisfied he has done nothing illegal or criminal or improper in any way. He made mistakes, which he readily admitted."

The resignation, effective July 10, shields Quackenbush from potential impeachment by the state legislature.

Quackenbush's problems stem from his handling of settlements from six major insurance companies after the Northridge earthquake that struck the Los Angeles area in 1994. The state insurance department allowed insurers to avoid $3.7 billion in potential penalties, in exchange for $12.45 million in donations to the new California Research and Assistance Fund (CRAF), which was created by Quackenbush's office.

None of the money, which was supposed to finance consumer assistance and earthquake research, has yet to reach any of the Northridge victims. Instead, it has paid for TV ads featuring Quackenbush and to community groups with no connection to earthquake issues. A football training camp attended by Quackenbush's children received $263,000. The Sacramento Urban League, on whose board the commissioner sits, received $500,000.

Several newspapers reported Wednesday morning that the commissioner offered to resign if the California State Assembly's insurance committee would not issue its planned report and if he could avoid testifying further before the committee. Quackenbush was issued a subpoena to appear before the committee on Thursday.

Sources also told the Associated Press that the commissioner spent two days in private negotiations with lawmakers, seeking to limit his possible civil and criminal liability. The insurance committee was expected to decide after Quackenbush's scheduled testimony whether it should seek criminal charges.

The committee "made no deal," a source told the AP, but it will cancel the Thursday hearing and will publish a report on its findings.

Gov. Gray Davis, a Democrat, will appoint a successor to Quackenbush, who must then be confirmed by the state legislature. That replacement will serve until the commissioner's term expires in 2002.

The 46-year-old Quackenbush, a former Army helicopter pilot, was re-elected to a second four-year term in 1998. Described as "handsome and muscular" by one recent press account, he was viewed by some political observers as a potential candidate for governor.

Quackenbush's wife, Chris, said on Wednesday morning that she hoped her husband would not resign. She said he was being targeted by "powerful enemies he made by doin the right thing for consumers."

"When you are elected by 5.5 million people, you don't get unelected by the newspapers. He's been convicted in the court of public opinion and that's a mistake in democracy," she said.

The commissioner first came under scrutiny when he transferred thousands of dollars from his political accounts to pay off campaign debts from his wife's failed 1998 bid for state senate.