Possible conflict of interest in insurance investigation

• State’s attorney defends decision to not ask deputy to recuse himself despite county board members’ opinions

Winnebago County State’s Attorney Paul Logli said he will not ask Deputy State’s Attorney Chuck Prorok to recuse himself from an investigation of the county’s former insurance broker, Bruce Hagshenas, despite Hagshenas’ $1,000 contribution to Prorok’s campaign for 17th Judicial Circuit Judge four years ago.

Logli and Prorok said they do not view Hagshenas’ contribution and Prorok’s investigation as a conflict of interest. Prorok also said he will not recuse himself from the investigation.

However, Winnebago County Board members Polly Berg (D-7) and Randy Olson (R-1) said Prorok should step down to avoid even an appearance of a conflict of interest.

“I think there’s definitely a conflict of interest,” Olson said March 26. Hagshenas was fired March 11 by the county board from his job as the county’s insurance broker after the county’s Executive Committee asked Logli’s office to examine the contract the county had with one of Hagshenas’ businesses, Benefit Planning Services, Inc.

During an interview April 6, Hagshenas alleged he was fired as a result of county politics and Thayer’s affiliation with Rockford Consulting and Brokerage, Inc.—a finalist in the county’s new search for a health care insurance broker.

Thayer said the reason she pushed for a new insurance broker was that she was concerned about rising health care costs, and was repeatedly informed there were no commissions associated with the insurance policies, not that she allegedly has an interest or special affiliation with Rockford Consulting.

Hagshenas said he would support efforts to bring an independent investigator from the Illinois Attorney General’s office to examine the process that eliminated his company as the county’s insurance broker, search for a new broker, and his company’s old contract with the county.

Thayer said she also would support an independent investigator to examine the matter.

Asked the same question about an independent investigator, Logli said: “I think it’s premature to make such a statement. I’ll let Chuck [Prorok] gather more documents and information, and complete his work, but I’m not making any commitment one way or the other at this time.”

Examination or investigation?

Prorok said he began a formal investigation Feb. 9 of the contract and commissions Hagshenas was paid for negotiating several county insurance policies. The formal investigation came two weeks after Prorok wrote a letter Jan. 26 to Hagshenas that said:

“I [Prorok] have reviewed the Benefits Consulting Agreement between the County of Winnebago and Benefit Planning Services, and it is my opinion that by accepting commissions, Benefit Planning Services did not breach the terms of that agreement.

“The agreement provides that the County of Winnebago would make direct payments to Benefit Planning Services in the amount of $75 per hour not to exceed $10,000 for services as outlined therein. It is my understanding that Benefit Planning Services never received compensation directly from the County of Winnebago exceeding $10,000. The agreement is silent on the issue of commissions. Had it been the County of Winnebago’s intention to limit the compensation earned by Benefit Planning Services to $10,000 from all sources, the agreement should have stated such,” Prorok wrote.

Prorok said the letter was the result of an examination of documents, not an investigation, which is more thorough in scope. Prorok said he was given the assignment to examine the Hagshenas contract by Logli last October, and added that Logli assigned him to the investigation Feb. 9. Prorok said he informed Logli of Hagshenas’ $1,000 contribution in 2000, but the contribution has not been discussed since that time.

Even though a formal investigation commenced Feb. 9, Prorok said during a Jan. 22 interview about the contract: “The issue’s dead. …The issue is no longer business before the county.”

Defamation lawsuit

Prorok’s Jan. 26 letter clearing Hagshenas of a breach of contract is an exhibit in a lawsuit that was filed March 17 by Hagshenas against Winnebago County Board Executive Committee member Patti Thayer (R-9). The lawsuit alleges Thayer defamed Hagshenas, and reads: “On or about October 20, 2003, Defendant Patti Thayer, attended a County of Winnebago Executive Committee of the County Board and advised that the Plaintiff, Bruce Hagshenas, was a ‘crook.’”

Hagshenas named Rockford Consulting as a respondent in discovery in the case.

The lawsuit also alleges Thayer “published false statements” that indicate Hagshenas “offered to make $100,000 payment to a charity such as the Boys’ and Girls’ Club of Rockford if the investigation could be concluded.”

Thayer said she was advised by a private lawyer to not comment on the pending litigation. Hagshenas denied making such a statement.

Olson said since Thayer was conducting county business during the time Hagshenas alleges Thayer spoke to the committee about Hagshenas, Logli’s office is obligated to represent Thayer against Hagshenas’ lawsuit. Olson added that Thayer has requested Prorok not defend her, and that someone else in the state’s attorney’s office represent Thayer.

As a result of Thayer’s concern about Prorok, Logli said the county hired local attorney Thomas Luchetti to represent her in the defamation lawsuit. According to Logli, Luchetti is a defamation law expert, who has represented the local daily newspaper in several lawsuits.

Commission payments

Olson estimated Hagshenas was paid more than $100,000 last year in commissions, from Winnebago County, by insurance companies from which the county purchased about $9 million worth of insurance products.

Hagshenas said the commissions, which were legal, were closer to $70,000 for 2003.

Prorok said the commission costs may have then been passed on to the county in the form of higher insurance premiums.

An Oct. 15, 2003, letter from Patricia Luedke, director of sales at Rockford Health Plans, to Thayer supports Prorok’s speculation that reads: “Does the commission affect the rate? The answer is, yes…. The premium rate would be adjusted to reflect a commission change,” Luedke wrote.

Luedke’s letter is not part of Hagshenas’ exhibits in the lawsuit. The lawsuit indicates that Hagshenas has been the county’s insurance broker since Jan. 1, 1998. The lawsuit also uses Luedke’s letter to indicate that no commissions were received between 1999-2002. However, between Jan. 1, 2003, through Oct. 7, 2003, Hagshenas was paid $53,898.22 in commissions from Rockford Health Plans, according to the correspondence from Luedke.

Prorok said the basis of his current investigation is to thoroughly explore whether the commissions were prohibited by the contract, which has already been terminated. Prorok added that the investigation may or may not support his conclusions that were stated in Prorok’s Jan. 26 letter.


Before the March 11 vote by the county board to terminate its contract with Hagshenas, Thayer said to the board: “Some of us have been threatened with lawsuit regarding this investigation. …We’ve [the Executive Committee] been given outright false and misleading statements from the broker, as well as [Winnebago County Chairman Kris Cohn’s] administration. …The broker has admitted to hiring a private investigator. And photographs of several county board members have been taken, and I ask, ‘For what reason?’”

Hagshenas denied giving false information to the county, and countered that Thayer misled county officials and made false statements, which is the basis for his lawsuit.

Cohn said she supports the work Hagshenas’ Benefit Planning has performed for the county, and that the county has received “the most complete health care at the lowest cost.”

As to whether Cohn’s staff gave “false and misleading statements” to the Executive Committee examining the contract with Benefit Planning Services, Cohn said her staff “never knowingly gave false informat

ion” to the committee, and that Thayer’s allegations at the county board meeting were “absolutely irresponsible.”

Mary Ann Aiello (R-9) was the lone vote against terminating the contract with Hagshenas. Aiello said before the vote she would not support the action because the move wouldn’t save the county money for past services. However, Luedke’s 2003 letter suggests the county could save on future services—a move Aiello said during a March 30 interview, she would support.

New broker

Berg said after the county fired Hagshenas, more than 10 requests for proposals were received for a new broker. Executive sub-committee members that will select the new broker are Thayer, Olson, Winnebago County Board Member Jim Hughes (D-11), Purchasing and Risk Management Director Sally Claassen, Human Resources Director James Kelly, and County Administrator Steve Chapman, who interviewed the three finalists April 6.

Berg said she felt Claassen, Chapman and Kelly should not be allowed to vote to choose the new broker because they work under Cohn, and are not elected officials who can be held directly accountable by voters.

The finalists that the sub-committee will choose are Midwest Life and Health Group, Miller and Buettner Inc., and Rockford Consulting.

Enjoy The Rock River Times? Help spread the word!