Medical Mutual agrees to $75,000 fine

The state's largest medical malpractice insurer has agreed to pay a $75,000 penalty to settle allegations that the company violated state law by investing in real estate partnerships created to compensate its top executives.

Although Medical Mutual Insurance Co. of North Carolina and its officers -- including CEO A. Dale Jenkins -- agreed to the settlement, they deny any wrongdoing.

The company's investments in nine real estate partnerships ranged from $550,000 to $2.6 million, according to the settlement released today by the state Insurance Department. The company's total investment wasn't included in the settlement.

The executives' combined investments in the partnerships ranged from $240 to $6,860, and their combined ownership stakes ranged from 24 percent to 94.8 percent. The company's ownership stake was much smaller, ranging from 2.34 percent to 60 percent, despite its larger investment.

The four executives who invested in the real estate partnerships, and who agreed to the settlement, are: Jenkins; Brian Kent Tucker, senior vice president; David Paul Sousa, senior vice president and general counsel; and Paul Mark Davidson, treasurer.

In addition to the monetary penalty, Medical Mutual and the officers have agreed that the executives' ownership stakes in the real estate partnerships will be terminated and transferred to the company. Any financial benefits they received to date also are to be turned over to the company.

The company must submit "a plan of divestment or unwinding" within 30 days to the Insurance Department, which must approve the plan.

The state uncovered the disputed compensation plan in an audit conducted in the spring. The company told state auditors that its real estate investments "were created specifically in order to provide additional compensation" to top executives, according to the audit.

State law, according to the insurance department, forbids an insurance company from directly or indirectly investing in its directors or officers.