Four months after attorneys settled a sexual harassment lawsuit against Franklin County and its former top building official, the payout amount remains secret.

No records of the amount were filed in court. No records of the amount are in the possession of Franklin County, according to its contracted lawyer. The county’s private risk pool insurer, which is tasked with writing the check for Franklin in such cases, isn’t subject to state open records laws.

So, while taxpayer money covers almost $570,000 in annual insurance premiums for Franklin County, and taxpayer money that’s fed into the insurance pool by local governments covers the cost of settlements in cases like this one, officials may withhold the answer to a central question: How much is the payout?

One of Virginia’s leading open government advocates is researching the possibility of legislation aimed at closing the loopholes that allow Franklin County and any others who choose the same stance to conceal payout records. Megan Rhyne, executive director of the Virginia Coalition for Open Government, said county officials were being “intentionally opaque.”

That approach “violates the spirit of transparency,” she said. “I believe that there is a decision being made that doesn’t necessarily have to be made.”

Settlement agreements like the one signed in the lawsuit filed against Franklin County by former employee Jennifer Owen can be and frequently are private. But the payout amounts in cases involving local governments are another matter.

A landmark 1990 Virginia Supreme Court ruling found that accounting records related to case settlements must be disclosed. A separate determination by the Virginia Freedom of Information Advisory Council, a state agency, stated the principle that the public has the right to know how taxpayer money is spent.

What opened the avenue to allow public officials in Franklin and elsewhere to keep settlements secret was technological progress: the freedom for officials to look up insurance activity online rather than depend on a mailed statement. While governments that use these risk pools can access and print records of payments, the latter action isn’t required by the Virginia Freedom of Information Act, and the database from which those documents can be downloaded belongs to a private insurer rather than a public entity subject to open records law. Two Southwest Virginia local government agencies contacted for this story shared their insurance database content with The Roanoke Times. Franklin County declined.

Chris Carey of Risk Management Programs, the third-party administrator for the county’s risk pool insurer, said he was unable to discuss claims involving any member. He said he has no role in deciding whether localities declare settlement terms confidential.

“I get paid to cut the checks,” he said.

Until the law changes, local agencies in Virginia with the same pool insurance as Franklin similarly can avoid disclosing settlement amounts.

Franklin County uses one of the largest pools in the state. It’s known as VACORP, the acronym for the Roanoke County-based Virginia Association of Counties Group Self-Insurance Risk Pool. About 460 counties, authorities and school systems paid VACORP $77 million in 2017-18 for the settlement and resolution of insured losses and legal matters, according to the pool’s latest available financial statement. That total was an increase of 14% from two years earlier as a result of the pool adding members during that time.

With those funds, VACORP covered administrative costs, purchased reinsurance and paid losses, the statement said. The insurer paid $33.6 million for losses in 2017-18.

Slightly more than 2%, or $813,793, of the payout over those 12 months covered public official liability matters. The pool has paid $5.6 million under its public official liability protection program since VACORP opened in 1993, the statement said.

A settlement was paid in Franklin County’s case, according to elected county board of supervisors member Mike Carter, but he said in June he didn’t know the amount. Other county supervisors signaled acceptance of the confidential treatment of the settlement, referred a reporter to county attorney Jim Guynn or did not respond to a request for comment.

Guynn said both the county and Robert “Andy” Morris, the former building official named in the suit, deny Owen’s allegations, including one that Morris reached under Owen’s clothes and groped her.

A decision to settle involves multiple considerations, Guynn said, especially in what he described as a “he said/she said” case that could cost “hundreds of thousands of dollars in attorney fees.”

Plus, “all of this occurs in a rather charged environment resulting from publicity from famous cases that have received inordinate news coverage as part of the ‘me too’ movement,” Guynn said. “We believe that publicizing settlements under these circumstances contributes to future lawsuits by encouraging others to bring claims in the hope of receiving a settlement.”

The county’s only expense directly related to the settlement was a $5,000 deductible, officials said. No premium increase occurred as a result of the settlement, supervisor Ronnie Thompson said.

“This money that we paid is like paying an insurance premium and then a settlement is made,” he said. “So as far as it coming out of the county’s pocket, the amount, whatever that amount is, that didn’t come right out of the county’s pocket. It came out like paying your premiums for insurance.”

Vital to function

Government risk pools rose to prominence after rising asbestos and medical malpractice litigation jolted insurance markets in the 1980s.

Faced with higher claims and losses, commercial insurers increased premiums and reduced the availability of coverage. In one response to ease pressure, the federal government and states authorized local public entities to form member-owned insurance pools in about 1986. Today, hundreds of those pools operate nationwide with an estimated 80% of local public entities participating, according to the Association of Governmental Risk Pools.

Over roughly the last 35 years, these pools have become vital to the function of local government in Virginia, although they are largely unknown to the public. VACORP was briefly in the limelight after the Feb. 13, 2010, collapse of the gym roof at the former Blacksburg High School. As the school system’s insurer, it pledged several days later to send money within weeks. It ultimately paid $5.6 million, school spokeswoman Brenda Drake said.

Jonathan Sweet, Pulaski County’s administrator, said he values what VACORP does. “We’ve had good success with them addressing our claims,” he said. “They specialize in local governments. They understand local governments.”

VACORP offers multiple insurance products, including automotive liability and property damage coverage, as well as worker’s compensation and line-of-duty coverage for police and firefighters. Roughly half its loss-related expenditures went to compensate injured workers, according to its statement. A similar organization, the Virginia Risk Sharing Association in Glen Allen, is the state’s largest government risk pool based on net assets. It has a prior affiliation with the Virginia Municipal League.

Neither a government agency nor a business, VACORP is exempt from federal and state income taxes because it performs an essential government function and is controlled by a board of member representatives. Whatever isn’t spent on expenses must stay inside VACORP or be rebated to members through dividends. The Virginia State Corporation Commission, which released VACORP’s financial statement, regulates risk pools through the Bureau of Insurance.

VACORP has no employees but contracts for third-party administrative services with Risk Management Programs, a for-profit company that employs about 125 people at VACORP’s office on Electric Road, Carey said.

No one contacted for this story doubted the value of the service VACORP provides. But the lack of transparency over settlements stirs concern.

“There is no reason, really, that I can see why that kind of information would need to be protected,” Rhyne said.

Public or private?

Payout amounts in cases involving governments are public, regardless of whether lawyers agreed to a confidential settlement agreement, Rhyne said.

She cited the case of a former Alexandria sheriff sued over the erroneous detention of a local resident at the city courthouse. Another resident sought the lawsuit’s settlement agreement and terms when the sheriff ran for reelection four years later in 1990, but the state refused, saying all such documents were compiled for use in litigation and were therefore exempt from release. However, the Virginia Supreme Court later ruled that accounting records generated to pay the settlement, as well as those showing the amount, must be released.

Taken together, the Supreme Court decision, the public’s statutory right to know the compensation of public employees and the state’s policy of promoting public knowledge of governmental activities mean “the public gets to see how its tax dollars are spent,” the Virginia Freedom of Information Council wrote in 2013.

In that same vein, accounting records for hiring attorneys for litigation defense are also public records, the council found.

State law still imposes limits. The public’s access applies only to paper or electronic records prepared, owned by or in the possession of a government agency to transact public business. The literal meaning of “possession” applies. In 2008, a Richmond resident sought a stormwater pollution-prevention plan for a project on adjacent land. The builder created the plan and kept it at the job site for its use and the government’s. But only if a state agency took possession of its own copy was the plan a public record subject to release, the council found.

Years ago, VACORP member agencies routinely possessed reports from the insurer on loss and claims activity. VACORP mailed out those records. In recent years, the insurer arranged for members such as Franklin County to access the same information through a password-protected VACORP website.

Spencer Suter, Rockbridge County’s administrator, said he wasn’t required to create a record to fulfill a citizen information request when the record didn’t already exist. But in the case of the online information, the record exists, he said.

“I have the record here,” Suter said by phone while viewing his county’s information on the VACORP site. “There’s certain things I’d need to redact, but it is what it is.”

Suter released figures on 29 matters VACORP handled for his county last fiscal year. Those included 14 worker’s compensation cases in which claimants received a total of $12,348.71 in benefits. Employee names and the basis for the injury claims were redacted.

Sweet, of Pulaski County, released information on 14 claims involving his county during the first six months of this year. It’s public information and, if the public wants to see it, it can, Sweet said.

“That’s how we build faith, confidence and trust in local government, in our leadership, in our county, is through transparency, is through communication,” Sweet said. “And if you don’t have trust, you don’t have the collateral you need with the citizens to do things, whether it be invest in something or construct something or fund something.”

When asked for accounting records related to payments in the Morris sexual harassment case, Franklin County officials said they had none.

Asked to call up the county’s recent loss history online through the VACORP database, county officials did not respond.

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Jeff Sturgeon covers business, banking, transportation and federal court. Phone: (540) 981-3251. Email: Mail: 201 W. Campbell Ave., Roanoke, VA 24011.

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