97 



Mr. Campbell. Well, as you are aware, that crisis was caused by 

 the insurance commissioner in California, Mr. Garimendi when he 

 took over 



Mr. POMEROY. I take issue with you, sir. I was an insurance com- 

 missioner previously. It seems to me that one of the primary mar- 

 kets for the junk bonds floated by Maxxam for the purchase of Pa- 

 cific Lumber was Executive Life Insurance Company. They pur- 

 chased junk bonds. And then it seems like Maxxam when they had 

 control of the company took your pension fund and the pension 

 funds of every other employee and cashed them out, cashed out a 

 fully funded retirement fund for an annuity that cost much less 

 than that, taking a profit, an annuity conveniently with Executive 

 Life, the company that was on the other hand buying the junk 

 bonds. 



Now, there was nothing that Mr. Garimendi or his predecessor 

 did that caused this very unseemly relationship to exist or forced 

 a company to cash out your pension fund placing it instead in a rel- 

 atively risky life insurance situation. I am frankly very surprised 

 you would suggest that that was a regulator's fault. 



Now, has the company been forced to put up additional funds for 

 purposes of meeting obligations to pensioners in light of the compa- 

 ny's insolvency? 



Mr. Campbell. Yes, we have. 



Mr. Pomeroy. How much money has been posted in that regard? 



Mr. Campbell. I think about $900,000. Not one pensioner has 

 lost one nickel. 



Mr. Pomeroy. It cost you $1 million. 



Mr. Campbell. No, we are getting reimbursed for most or all of 

 it. 



Mr. Pomeroy. You will get reimbursed from Guaranty Fund? 



Mr. Campbell. That is correct. 



[Editor's note. — ^Mr. Campbell's additional information follows:] 



To put this in context, I should explain that Pacific Lumber voluntarily advanced 

 supplemental payments to its former employees who were Executive Life annuitants 

 and who were not being fully paid by Executive Life and the State guaranty funds. 

 Ultimately, it was acknowledged that these payments should have been made by 

 Executive Life and/or the guaranty funds. Therefore, Pacific Lumber was reim- 

 bursed for the funds it advanced. I beUeve the reimbursement check came from Ex- 

 ecutive Life, but may have been funded, in whole or in part, by or through 

 NOHLGA. 



Mr. Pomeroy. Who picks up the tab from Guaranty Fund? 



Mr. Campbell. I have no idea, but I will submit something for 

 the record. 



Mr. Pomeroy. I will tell you who: Ultimately the ratepayers in 

 the State of California as well as across the country, so ultimately 

 everyone else picks it up. 



The $25 million and the $900,000 are presently part of the liabil- 

 ity situation of the company? 



Mr. Campbell. I am not sure whether or not we have received 

 full payment of the $900,000. We did get an advance on that. I am 

 not completely sure of the total amount. The $25 million dividend 

 has been passed on to the parent, but is unrelated to the $900,000. 



[Editor's note. — ^Mr. Campbell's additional information follows:] 



With respect to each State, I believe that each fund is funded by the insurance 

 industry — or the carriers that operate in that State. 



