Adviser on Executive Life Said to Lack Experience : Securities: Regulators are paying one consultant $110,000 a month to evaluate a junk bond portfolio pivotal to the sale.

As California Department of Insurance experts pore over eight complex bids for Executive Life Insurance Co., questions have surfaced about the qualifications and hiring of one of the regulators’ key advisers.

George Bull, a partner in Mill Valley-based GB Capital, was retained by Insurance Commissioner John Garamendi to evaluate Executive Life’s investment portfolio, made up largely of junk bonds that are a pivotal element in the company’s sale.

Bull, who is being paid $110,000 a month out of Executive Life’s coffers, will also help determine who finally wins the bidding for Executive Life, which failed last April under the weight of a huge portfolio of souring junk bonds and a flood of policy surrenders.

However, some industry experts maintain that Bull is not qualified for the job, having little experience evaluating junk bonds or bonds in default.

“When people in the (junk bond) community heard about this (Bull’s hiring), they thought it was the biggest joke in the world,” said one industry expert who asked not to be named. “How could he analyze this portfolio? He has virtually no experience.”

Bull acknowledges that he has had little experience dealing with defaulted bonds and only limited experience managing junk bond portfolios. However, Bull says he has extensive experience handling high-grade bonds, which are similar to junk bonds although less risky.

“The issues are no different, the risks are just larger,” he said.

Although regulators defend both Bull’s performance and his fees, they acknowledge that they have hired at least two other consulting firms to handle parts of Executive Life’s investment portfolio that Bull had too little experience with to handle himself. Altogether the state is paying financial advisers about $500,000 a month.

Critics have also raised questions about possible cronyism in Bull’s hiring. They note that he was awarded the contract on a no-bid basis in April, and that Bull is a friend and neighbor of Rick Baum, who is chief deputy insurance commissioner for the state of California.

Regulators deny there was favoritism involved in Bull’s selection. State contracts normally must be put out for competitive bids, but regulators say those rules did not apply in this case. They said Executive Life remains a private company during its court-sanctioned conservatorship, and is therefore immune to state bidding rules.

Garamendi interviewed a variety of bond experts with an eye to finding one with experience, low fees and no ties to the controversial investment house of Drexel Burnham Lambert, which had sold many of the junk bonds to Executive Life, Deputy Insurance Commissioner Tom Epstein said. Bull was simply the best candidate with the lowest fees, he said.

He also has been hired to handle the bond portfolio at First Capital Insurance Co, another Los Angeles-based firm that fell under the weight of a souring junk bond portfolio and the insurance equivalent of a run on the bank.

Nevertheless, some industry experts remain critical of Bull’s hiring and ability to adequately evaluate Executive Life’s investment portfolio.

Executive Life owns one of the nation’s largest portfolios--and some say most troubled--of high-risk, high-yield junk bonds. Issuers of about 15% of the company’s $6 billion in bonds have stopped paying on their debts. And some estimate that at least half of Executive Life’s portfolio is likely to default.

Others have described Executive Life’s portfolio as “toxic waste.” Eli Broad, whose Los Angeles-based insurance company is bidding for Executive’s insurance assets, maintains that Executive’s holdings “represent one of the lowest-grade junk bond portfolios held by any financial institution in the United States.”

Bull admits to some lack of experience. The last time he handled a portfolio of defaulted securities was between 1972 and 1974, when--fresh out of college--Bull was hired as a credit analyst and portfolio manager at the California Public Employees Retirement System.

Since then he’s worked for two other investment houses and started his own consulting firm. His firm manages only $1.3 million in assets, but advises others on how to manage significantly bigger portfolios, he said. Bull also recently became affiliated with a second company that has $625 million under management.

While Bull says he has extensive experience with investment-grade bonds, he recommended that Garamendi hire Wertheim Schroder, an investment banking firm, to evaluate the defaulted bonds in Executive Life’s portfolio. Wertheim is being paid $125,000 a month, regulators said.

Bull also suggested a third expert be hired to handle the insurer’s real estate portfolio. Consultant Paul Kane of Kane & Co. is paid $89 an hour to do that job.

Additionally, the Blackstone Group, a New York-based investment house, is on retainer--$250,000 monthly--to make sure regulators are able to complete Executive Life’s sale.

Altogether, these advisers are being paid about $500,000 a month. Notably, Salomon Bros. had previously been retained, at a cost of $1 million, to study Executive Life’s junk bond portfolio as well.

Some critics say a single firm could have been hired at much less expense to do the whole job.

“It is standard for financial advisers to make between $100,000 and $150,000 a month,” said a source close to the proceedings. “But normally, they would analyze the portfolio, manage it and help negotiate the deal with potential acquirers. But to be paid $100,000 a month to just look at the portfolio every day is rather odd.”

However, regulators say they are very satisfied with Bull’s services and believe that his fees are far more reasonable than those charged by other companies handling similar situations.

Bull added that regulators probably would have had to hire several different sets of advisers regardless of who was hired to manage the junk bond portfolio.

“The one-manager-fits-all theory is a nice concept,” he said. “But very few companies could have filled all those roles quickly.”