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Gov. Gavin Newsom signs law inspired by $2 million bounty to influence insurance commissioner

San Francisco Chronicle 9/23/2022 By Sophia Bollag
The California State Capitol is seen in Sacramento, Calif. on May 11, 2021. © Stephen Lam/The Chronicle

The California State Capitol is seen in Sacramento, Calif. on May 11, 2021.

SACRAMENTO — Consultants face new restrictions on charging bounties for influencing some decisions by state officials under a bill Gov. Gavin Newsom signed Thursday that expands California’s lobbying laws.

Companies and interest groups spend hundreds of millions of dollars each year to lobby lawmakers and the governor on issues related to proposed laws and regulations. Most of the money is subject to strict lobbying disclosure rules, including that the people paid to lobby register with the state and that the companies that pay them file regular public disclosures.

An investigation by the Sacramento Bee, however, revealed earlier this year that loopholes allowed some companies to pay bounties called “success fees” to influence some decisions by state officials without having to report them.

A lawsuit by former California lawmakers Fabian Núñez and Rusty Areias revealed one such payment. They sued a workers’ compensation company, arguing it had agreed to pay them $2 million if they persuaded Insurance Commissioner Ricardo Lara’s department to allow an acquisition deal to proceed.

Their lawsuit is still pending. The workers’ compensation company, Applied Underwriters, has argued in court filings it does not owe Núñez and Areias money because they did not meet the terms in their contract.

Lobbyists are prohibited from charging success fees for achieving a desired outcome for their clients. But because Núñez and Areias’ work wasn’t technically lobbying, they were able to negotiate a bounty fee and wouldn’t have to disclose it to the public.

The law Newsom signed changes that. Under the new law, paid efforts to influence decisions or approvals by the insurance commissioner and the director of the Department of Managed Health Care are considered lobbying. Lobbyists engaging in this type of influence work would not be allowed to charge success fees and would need to file lobbying disclosures with the state.

Assemblyman Marc Levine, D-San Rafael, introduced the legislation after the Sacramento Bee reported on the practice. Levine was running for insurance commissioner against Lara when he introduced the measure, but did not advance to the general election.

The new law doesn’t ban all success fees, just those to influence decisions by the insurance commissioner and director of the Department of Managed Health Care. An expert on lobbying law told the Bee that most success fees are for helping clients win contracts, which the new law won’t affect.

Rachel Arrezola, a spokesperson for the Department of Managed Health Care, said the department did not take a position on the bill, AB1783. Michael Soller, a spokesperson for Lara, said his office had no comment.

Núñez and Areias did not respond to messages seeking comment.

San Francisco Chronicle reporter Bob Egelko contributed to this story.

Sophia Bollag is a San Francisco Chronicle staff writer. Email:

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