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WSI board does favors for friends, auditor says

BISMARCK -- The internal audit manager of the state workers' compensation agency said she found "reasonable suspicion of inappropriate favors" by agency board members or agency executives who intervened to reduce business friends' premium rates a...

BISMARCK -- The internal audit manager of the state workers' compensation agency said she found "reasonable suspicion of inappropriate favors" by agency board members or agency executives who intervened to reduce business friends' premium rates and award safety grants to select employers.

Kay Grinsteinner, of Workforce Safety and Insurance, wrote her concerns in notes compiled from July 19 to Oct. 10. A few weeks later, she reported some of her findings to the state auditor and asked the attorney general for whistle-blower protection.

All of the state's approximately 20,0000 businesses with employees must buy WSI coverage for wage replacement, medical care and rehabilitation for workers hurt on the job. Employers' premiums are set according to type and size of business. They are regularly audited to see if their business is in the correct rate category. About 304,000 North Dakota employees are covered.

WSI released Grinsteinner's memo Thursday in response to open-records requests. Names of most employers mentioned have been blacked out, or "redacted."

Tim Wahlin, a WSI attorney, told the agency's board at a Nov. 13 meeting that none of Grinsteinner's allegations are credible. He also accuses her of illegally distributing confidential employer information.

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The only board member named in the nine-page memo is a former member, Dennis Schneider of Grafton, a grocery store owner who resigned shortly after the board discussed Grinsteinner's memo on Nov. 13. His letter said he was leaving the board because he had sold his business and thus was no longer eligible to serve.

Grinsteinner interviewed several WSI employees about whether they ever experience "outside pressure" to revise findings after a business's premium rate is audited.

Employees and former employees described several instances in which Schneider or WSI executives apparently acting on his behalf argued for a lower rate for a grocery business colleague of Schneider's. The business' name is blacked out.

According to Grinsteinner's memo, acting WSI CEO John Halvorson told two WSI employees on Sept. 9 that "Denny called to get to the bottom of this" more than a month after Schneider's colleague had complained to WSI about his premium.

Grinsteinner reports another, unnamed, board member may have engaged in similar of premium rate interference several years ago and that employees' suspicions about it were never investigated.

Schneider said Friday that he would not comment until he had seen the memo, but then did not respond to two phone calls and two e-mail messages after being sent the memo.

Grinsteinner also questions whether some employers are allowed to under-report their payroll to WSI, which could lower their premiums. And she suspects the North Dakota Association of Counties, through personal connections with WSI executives, continued to get WSI safety grant money after other groups, such as the North Dakota AFL-CIO, were told the grant program had ended.

Grinsteinner speculated that the Association of Counties may have gotten an extension on the grant when other did not because Mike Wolf, who works at the counties' office, formerly worked at WSI and is friends with former WSI CEO Pat Traynor and with acting CEO John Halvorson.

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Wolf, a former WSI premium auditor, told Forum Communications he's never made improper contacts or sought favors at WSI. The association received two safety grants, totaling $160,000, covering 2005 to 2007, he said, and were awarded by a review committee. He made no contacts with any WSI executives or board members, he said.

"We've never asked for anything above or beyond what the statutes would allow," Wolf said. He added that he is not friends with Halvorson or Traynor. "I was surprised to see my name pop up in the middle of all of this (memo)," he said. "We have nothing to hide. We've followed all the requirements."

Traynor, who now heads Dakota Medical Foundation in Fargo, denied having a friendship with Wolf, but said he was proud of the improved workplace safety results that have come from WSI and the association's collaborative efforts. He's unaware of any improper board contacts with WSI employees in trying to exert pressure to lower premiums.

Wahlin dismissed all of Grinsteinner's allegations during the Nov. 13 board meeting.

"The information in here is somewhat surprising," Wahlin told the board as he went through the memo. "The tone is accusatory. It pre-supposes corruption."

He said that Grinsteinner's accusations about board members going "over the line" in attempting to lower certain businesses' premiums are unsubstantiated.

"She's got nothing to support it," he said.

Where Grinsteinner questions the way "gross payroll" is reported by certain companies, Wahlin explained a law allows employers certain discretion in how they report their payroll.

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"I have difficulty coming up with any sound basis why (the differences) would matter," Wahlin said.

The meeting Nov. 13 was when the WSI Board met in a closed session and decided to assent to Gov. John Hoeven's urging that an outside consultant review the agency's mounting personnel problems and Grinsteinner's allegations that injured workers claims are being unfairly denied.

WSI also released a recording of the closed meeting on Thursday, deeming it an open record.

Hoeven had suggested an independent WSI investigation after Grinsteinner became the fifth agency employee this fall to seek whistle-blower protection from the attorney general. All five made their requests after former CEO Sandy Blunt returned to work in late October when criminal charges against him were dropped. Blunt was terminated Dec. 6 in what was called a mutual decision.

After reading the Grinsteinner memo Friday, Hoeven's attorney, Ryan Bernstein, said, "This is one of the reasons we called for an independent review. It underscores the need for transparency and a thorough examination of WSI management."

WSI management's only comment Friday was a prepared statement sent through spokesman Mark Armstrong.

"While we would like to talk about what is in the document, we are waiting for the full internal review to be completed," it said, adding that the review will probably be done the middle of next week.

"That review, once completed, will be presented to a special meeting of the WSI Audit Committee next week," the statement continued. "We will also have present at that Audit Committee meeting staff members and others to address any questions. To the extent the allegations can be supported in the Kay Grinsteinner memo ... the organization will address them at the Audit Committee meeting."

The Dickinson Press is owned by Forum Communications Co.

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