Ex-Quackenbush Aide Grays Ready to Talk

SACRAMENTO —  George Grays, an elusive central figure in the scandal engulfing state Insurance Commissioner Chuck Quackenbush, plans to break his silence and “tell his story” publicly.

A source close to the Assembly Insurance Committee said Friday that Grays, a former deputy commissioner, insists witnesses lied when they identified him as the man behind expenditures of millions in insurance company settlement funds for projects to enhance Quackenbush’s political image.

“He was beside himself with these people telling the story their way,” said the legislative source. The disclosure that Grays wants to come forward came after three days of damaging testimony against the embattled Republican commissioner.

“He came to us,” said the source, who spoke on condition of anonymity. “He said he wanted to tell his story. He didn’t want to take the 5th Amendment.”

Lawmakers have said testimony from Grays, who has refused to speak up since resigning under pressure in April, could be decisive in determining whether Quackenbush was directly involved in decisions to funnel funds from a private foundation to political consultants and a variety of nonprofit groups with connections to Grays and Quackenbush.

Grays’ testimony is expected to be a pivotal factor in whether the Assembly drafts articles of impeachment against Quackenbush. At the same time, pressure from fellow Republicans is mounting on the commissioner to resign.

In testimony to the Senate and Assembly insurance committees this week, witness after witness identified Grays as the man in Quackenbush’s executive office suite who ran the California Research and Assistance Fund. Under state law, such funds and the insurance commissioner must have an arm’s-length relationship.

Created by Quackenbush, the fund was envisioned as a foundation that would underwrite earthquake research. Evidence amassed by the committees and state Atty. Gen. Bill Lockyer, however, shows that it was used to pay for television ads featuring the commissioner, finance political polling and provide grants to community organizations, including $500,000 to the Sacramento Urban League.

Since Grays quit his $93,500-a-year job as a top-level deputy to Quackenbush, he has virtually disappeared from the Capitol scene. But he voluntarily contacted the Assembly committee on Wednesday and said he was ready to tell all he knew, the legislative source said.

“He really needed to unburden himself of all the stories,” the source said.

But lawmakers, both stunned and delighted by the offer, noted that Grays was not accompanied by an attorney. They urged him to get legal representation and go to Lockyer to try to reach an agreement for immunity from prosecution.

Sources said Grays, who was under subpoena to testify before the Assembly committee Thursday, met for several hours with Lockyer’s staff but did not reach a final agreement. Grays asked for more time to negotiate with Lockyer, and the committee agreed to the delay.

“Once I can work that out, I want to come before your committee and tell the whole story and not invoke the 5th,” Gray was quoted as saying.

The Assembly committee plans to meet June 19 to take several hours of public testimony from Grays in the morning and call Quackenbush to the stand in the afternoon.

Quackenbush, who has been seen as a potential contender for governor or U.S. Senate, has repeatedly said he had no involvement in the operation of the fund. He has branded the legislative investigation a political “witch hunt.”

Initially, Quackenbush’s department had threatened insurers with more than $3 billion in penalties for mishandling claims resulting from the 1994 Northridge earthquake.

Instead, he settled with six insurance companies that agreed to contribute $12.8 million to two foundations he set up. He has defended the unusual arrangement as legal, but critics in the Legislature say it was a device to avoid their scrutiny.

*

imes Sacramento Bureau Chief Rone Tempest contributed to this story.