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Tuesday, November 4, 1997 - Page updated at 12:00 AM

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Corrected version

Michelle Malkin

A Tale Of Corporate Welfare And The Hypocrisy Behind It

Times Editorial Columnist

I want to believe political consultant Brett Bader when he says beleaguered Republican donor Tom Stewart is "one of the few financial contributors who isn't giving money for access but because he believes in Republican values."

I want to believe House Speaker Clyde Ballard, who told the Seattle Post-Intelligencer that "There have been no strings even suggested" when Stewart gives money to the GOP. "He just believes in the free-enterprise system," Ballard said.

And I want to believe Tom Stewart himself, who explained publicly at his annual Vashon Island picnic for the state's GOP faithful this summer that although he values his privacy, he participates in the political process simply because he loves his country.

If a man's patriotism is to be measured in campaign contributions, Stewart is as star-spangled as they get. But those who argue that Stewart contributes hundreds of thousands of dollars each year to the Republican party without reaping private rewards for his business are naive, blind, or just plain mendacious.

Consider the Longshoremen and Harbor Workers' Compensation Insurance Plan, an obscure state law whose benefits accrue mostly to Eagle Pacific Insurance - a key subsidiary of Stewart's privately held worldwide conglomerate, Services Group of America.

What Eagle Pacific gets from the state government constitutes a textbook case of corporate welfare. These Robin Hood-in-reverse schemes are typically bipartisan in nature. They are inevitably exacted after much great alarum. They are almost always everlasting. And, large or small, they undermine basic principles of free enterprise and fiscal responsibility.

Eagle Pacific sells longshoremen's and harbor workers' compensation insurance in Washington state. It's a lucrative business; insurance for longshoremen and harbor workers is rather pricey. And risky. Like many insurance companies, Eagle Pacific purchased what's known in the industry as "reinsurance" to protect itself against catastrophic losses in the event of extraordinary claims.

In 1992, Eagle Pacific's private reinsurer decided to stop selling reinsurance in Washington state. Arguing that the state's maritime industry would suffer if reinsurance weren't available, Eagle Pacific ran squealing to the government feed box. The company leaned on the Legislature to pass a law forcing the state's industrial insurance fund to protect against half of catastrophic losses stemming from workers' comp claims in the maritime industry.

This enterprising scheme gives new meaning to the "free" in "free enterprise." Eagle Pacific does not pay premiums to the public fund for this potential liability. "It's a real sweet deal," said Theresa Whitmarsh, then-spokeswoman for the Department of Labor and Industries, which opposed the legislation.

Public Disclosure Commission records show that Services Group of America lobbyist Lincoln Ferris was paid tens of thousands of dollars to shepherd the bill through the Legislature.

Like virtually every other ill-conceived government program, the plan was originally designed to be temporary, but it was extended for two years in 1993, then again in 1995 - each time under an "emergency" declaration. Earlier this year, the GOP-led Legislature quietly passed, and Democrat Gov. Gary Locke signed, House Bill 2098. The law enshrined Eagle Pacific's corporate welfare scheme permanently.

Defenders of the law will crow about all kinds of alleged civic and economic benefits to Washington taxpayers that arise from this little-known "partnership." But State Sen. Irv Newhouse, a Republican from Benton County, will tell you otherwise. "It's basically a scheme for the rest of the workers in the state to subsidize a special industry," Newhouse said in an interview. "This really bothered me."

Newhouse - one of only four legislators to vote against the bill in April - noted that "Lots of businesses have high costs. Sometimes they close. That's the market. They should pay their own way." State Sen. Mike Heavey, a King County Democrat, opposed the bill for similar reasons. "I just don't think it's right for the state to back up any private insurance company like that."

State Sen. Val Stevens, a Republican from Snohomish County who also opposed the bill, notes that the proposal "just slipped through at the end of the session. It deserved more attention than it got - and it should be revisited."

This government giveaway isn't the most egregious example of corporate welfare. In its scope and obscurity, in fact, it's rather ordinary. But the fact that it sailed through the Legislature with virtually no opposition is, as Sen. Newhouse puts it, "disturbing." Doubly disturbing is the fact that its ultimate beneficiary is an admitted campaign money-launderer who continues to be lauded by state Republican leaders as a selfless donor championing "Republican values."

A message to Tom Stewart's apologists: Wipe the stars and stripes from your eyes and get a clue. This tiny tale of corporate welfare is probably the tip of the iceberg. There is no something-for-nothing when it comes to high-stakes campaign finance. Yes, the state GOP party coffers may be filled to the rim with Stewart's money. But it is time to ask whether all that wealth is bringing the party of fiscal conservatism, self-reliance, and limited government closer to ideological victory - or nearer to the edge of moral bankruptcy.

Michelle Malkin's column appears Tuesday on editorial pages of The Times. Her e-mail address is: malkin1@ix.netcom.com.

Published Correction Date: 11/12/97 - This Column By Staff Writer Michelle Malkin Contained A Factual Error Regarding Eagle Pacific Insurance. Prior To Passage In 1992 Of The Washington State United States Longshore And Harborworkers Assigned Risk Plan, The Function Of The Assigned Risk Plan Was Carried Out By The National Council On Compensation Insurance (Ncci). It Was Ncci, Not Eagle Pacific's Private Reinsurer, That Decided It Would No Longer Underwrite The Risks Of The Longshore And Harborworkers Market.

Copyright (c) 1997 Seattle Times Company, All Rights Reserved.

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