The cash-strapped District government will have to come up with as much as $6 million to cover the life insurance premiums the city collected from hundreds of disabled employees over seven years but didn't pass along to the insurance companies, officials said Tuesday.
Mayor Adrian Fenty and Attorney General Peter Nickles said at a news conference that they had asked the city's independent inspector general to investigate what happened to the money that had been collected by the city's Office of Risk Management.
The Washington Examiner first reported in May that members of the Fenty administration were scrambling to fix problems within Risk Management, which is charged with operating the city's workers' compensation claims, and that the FBI was asking questions about the agency's contracting practices.
Nickles said at the news conference that he did not believe the missing insurance money was used for "untoward purposes." But in his letter to the inspector general, he said the problems with the unpaid insurance might include "misappropriation, employee conduct, and fraud."
Ward 3 Councilwoman Mary Cheh said the city should have acted much sooner, as word of problems at Risk Management have been around for "some time." Cheh asked for the city's auditor to investigate the department last month.
"My question is, where have they been?" Cheh said. "They had early warning that something was amiss."
The city has sent a letter to 1,400 current or past city employees regarding the missing payments, Nickles said. But he added that no workers had been harmed by the "irregularity" because the insurance companies paid out life insurance benefits through "happenstance or luck" even though they hadn't received payments.
Nickles pegged the estimated number of claims made at about a dozen.
"My judgment is that the insurance carriers probably do not appreciate that these premiums for seven years did not reach them," Nickles said, adding that the city will meet with the companies to determine how much the city owes.
The two insurance companies are Standard Insurance and Colonial Life.
Nickles added that the life insurance premiums had not changed in the past seven years, and that the city may owe additional money to Sedgewick CMS, a third-party administrator.
Staff Writer Bill Myers contributed to this report.