I have to say from the start that I haven’t seen anything in my initial pass at the recent controversy surrounding the Hawaii Employer-Union Health Benefits Trust Fund that can’t be explained simply by a dysfunctional board, some tough competition, soaring health care costs, and an overlay of politics.

But I’ve also learned enough through my prior reporting to appreciate that commissions flow in the insurance business and often those commissions are paid to land or keep contracts.

And where money, profits, power, politics, and secrecy mix, there are good reasons to suspect that more good stories remain to be reported. Sometimes following those stories can unexpectedly lead to uncovering more serious issues.

I first looked at the insurance business after returning from an annual conference of Investigative Reporters & Editors in the mid-1990s. Based on a suggestion made at the conference, I sat down and brainstormed a list of “sacred cows” that deserved more reporting. I don’t remember the whole list, but UH athletics and HMSA were both on it.

HMSA, certainly the 800-pound gorilla in Hawaii’s health insurance world, eventually prompted me to also look at several other small “mutual benefit societies” offering health insurance, and it was the collapse of one of those, Pacific Group Medical Association, that led me deeper into the tangled world of insurance and unions.

Payments made by PGMA in order to get the insurance business of the United Public Workers, which represents blue collor state and county workers, eventually contributed to the conviction of the union’s executive director, Gary Rodrigues, and one of his daughter’s in federal court on multiple charges involving theft and fraud.

As alleged in the federal indictment and later shown at trial, Rodrigues directed the company selected to provide health coverage for UPW members to pay a consulting fee to a tiny Kauai company headed by his own daughter.

Other insurers made kicked back cash to Rodrigues.

PGMA’s payments would likely never have been disclosed if the company had not run into financial trouble and been taken over by the State Insurance Commissioner. It was the subsequent investigation of the company that turned up the link back to Rodrigues, and my browsing through the tedious court files then led to the first published account of the Rodrigues’ connection and allegations that fraud was involved in the company’s collapse.

During the subsequent federal trial, testimony showed that soon after my first story appeared in print, Rodrigues arranged to have payments continued through a different channel, this time via an affiliate of Royal State Insurance, another company with union ties.

Here’s what I wrote about that testimony at the time (October 24, 2002):

Yesterday’s main witness was Lilia Yu-Lum, who heads VEBAH, the Voluntary Employees Benefit Association of Hawaii, one of these Royal State companies. A number of the charges in this case relate to a contract awarded to Rodrigues’ daughter, Robin Sabatini, for consulting as part of Vebah’s servicing of the union’s insurance plans. How Robin was selected to do the work, as well as what work she actually performed, are central issues.

Yu-Lum testified that Sabatini was chosen because she was qualified. However, she also testified that no one else was considered. Yu-Lum said she knew at the time that Sabatini was Rodrigues daughter because she was told by her boss, Mel Higa, the central figure in the Royal State companies.

Prosecutors painfully elicited testimony on the makeup of the tight little network of companies, all located at 819 S. Beretania. For years, Rodrigues served as a director of several Royal State companies alongside Higa and Yu-Lum. Both testified that their relation with Rodrigues was not a factor in hiring his daughter, but failed to provide any other rationale to explain why she was the only candidate considered for the UPW-related work.

According to testimony yesterday, Sabatini initially received a percentage of the UPW business which amounted to around $11,000 a month, which was later reduced to a flat monthly fee of $6,000.

Garrett Ing, who heads Management Applied Programming, the Vebah/Royal State affiliate that actually contracted with Sabatini, testified that he had little contact with Sabatini, was not part of her hiring, never received reports from her, and only met her during public meetings held annually to sign up new members for the UPW insurance plans.

Witnesses today will include former Royal State exec Mark Fukuhara, recently named to head up the newly created Hawaii Employer-Union Health Benefits Trust Fund. Also expected to appear today is UPW staffer and former State Labor Department administrator Dayton Nakanelua.

More details about the internal workings of PGMA were described in a financial autopsy of the company by forensic accountant Thomas E. Hayes.

All this simply to explain why I’ve been taking the time to dig deeper into the recent series of EUTF decisions. You never know what you’ll find.

It’s a lesson that must be constantly relearned. Earlier this year, an insurance-related company affiliated with the Hawaii State Teachers Association filed for bankruptcy after consultants found it had been “grossly mismanaged”.

Last week I checked the bankruptcy file and noticed the lengthy schedule of assets and liabilities.

This little table of “potential” claims followed a listing of accounts receivable:

The potential embezzlement claim caught my eye, along with other potential claims listed against CPAs for failing to do their jobs properly, and claims against other company officials for “breach of fiduciary duty”.

All these just “potential” claims, unproven and not accompanied by justifications.

But for reporters looking to stay ahead of the press releases, this is fruitful territory, as is the whole EUTF situation.