Jones Insurance withdraws as questions raised over partner’s VP

kjahner@newsobserver.comJanuary 17, 2014 

— Jones Insurance has withdrawn from serving as the town’s insurance broker as the town prepared to re-visit the company’s already controversial selection over a partner company’s executive’s spotted past.

Last fall, town council overruled staff in a split vote and directed it to work with Jones. Jones relies on partner EbenConcepts for employee health benefits expertise. According to town emails, two insurance companies competing for the contract informed the town in December that Eben vice president David C. Smith had been disbarred in 2009 for misappropriating more than $227,000 from a client trust fund and using it for his personal benefit.

Eben would not have directly received town money and Smith wouldn’t have been involved with the town contract. Town attorney Bill Anderson said before the withdrawl there were no direct legal problems with the proposed arrangement. Smith does oversee compliance issues for Eben, according to a town memo, and Anderson expressed concerns regarding Smith’s past and implications for his character.

“It’s saddens me to have this happen but I think it’s best for everybody concerned,” Jones Insurance owner and chair Jerry Jones said.

Jones said he had spoken with council members before deciding. The issue had been put on Tuesday’s agenda by Mayor Ronnie Williams. Town staff had pushed to re-visit the matter since learning of Smith’s past in December, according to emails acquired through a public records recquest. Williams said it was time, as “the public will have a lot of questions, and hopefully Tuesday night (council) will reconsider their decision.”

Smith said he’s beyond his past mistakes, and characterized the move as a competitor’s character attack.

“It’s regrettable that Jones is being targeted for something so irrelevant since I’m not even working on this case,” Smith said. “This is not about me, it’s about a competitor not being happy.”

The brokerage contract totals around $25,000-$35,000 per year. The broker negotiates a $1 million annual health insurance contract to cover town employees. Town staff evaluated proposals and initially chose Hill, Chesson & Woody for the contract. It publicly outlined and defended its reasons, and staff’s integrity and objectivity have not been questioned by council members or Jones Insurance. The rationale for the switch was to support local business.

But on Nov. 19, about a month after initial objections were raised, Buck Kennedy, Gra Singleton and Jackie Johns voted to direct staff to work with Jones, a well-known local company. Ken Marshburn and Kathy Behringer opposed the change.

Jones promoted its new partnership with Eben as access to top-notch expertise in public employee benefits. That was key for the all-in-one insurance provider to win council support. Benefits specialists Independent Benefits Advisors had won the contract in 2010 after Jones had it for a decade.

Debt paid or character flaw?

According to court records, Smith misappropriated $227,082.45 from a client trust account in the years leading up to his disbarment. During his time as an attorney he also applied for attorney malpractice insurance and failed to disclose a potential malpractice suit arising from the dismissal of another case in federal court. He was sued by former clients; the judge awarded a $75,000 punitive award for “willful and wanton” malpractice in that case.

“Smith’s actions certainly illustrate a pattern and practice of disregard of rules, laws and ethics,” Anderson advised the town in a memo that laid out Smith’s transgressions.

But Smith called the move nothing more than an irrelevant insult from a competitor “doing anything they can” to get business.

“I’m way beyond that. That was more than five years ago,” Smith said. “It would be relevant to the Town of Garner if I was going to be involved in any way, shape, form or fashion in this case.”

Emails indicate the town first heard about Smith’s past in the second week of December, after the contract was awarded. Eben president Chris Harrison said he knew about the transgressions when he hired him and noted that he does not deal with funds or give legal advise, working in a consultative role.

Jones, who also knew of Smith’s backround before the town, backed Smith’s character.

“A guy that’s gone through this, it’s got to be hurtful and embarrassing. All he can do is live out his days doing the best he can,” Jones said. “He’s a good person. We stand by him. It’s old news, and it’s being brought up by a small-minded competitor trying to discredit him again.”

A memo dated Jan 10 – from assistant town manager Rodney Dickerson, human resources director Mary Beth Manville, and finance director Emily Lucas – detailed Smith’s prospective role, as discussed during a Dec. 23 meeting with Jones and Eben leaders.

Follow-up reference checks were conducted on Harrison, according to the memo. The references were positive. One reference and Eben client referred to David Smith as the company’s lawyer, but it was unclear if Smith presented himself as such or if the client independently inferred or assumed it.

“It is important to note that Council has options (Hill, Chesson, & Woody) that carry no ‘baggage’ and therefore pose no risk. As such, staff strongly feels that we should take no chances and move forward with the broker that was identified through the RFP process as the best candidate,” the memo concludes. Town manager Hardin Watkins backed that staff conclusion.

Marshburn, who voted along with Behringer, said he’s always supported the work of the staff. He expressed a nuanced view balancing the notion that one should be able to get beyond past mistakes by working with companies with a clean past.

“I would say in general that any time you’re dealing with a compliance issue, it’s preferable you’re going to be dealing with someone who has a clean past,” Marshburn said Thursday.

Jahner: 919-829-4822; Twitter: @garnercleveland

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