Oxendine donors deny link to favorable directive: AJC exclusive: Insurance ruling affects Atlantan’s case [The Atlanta Journal-Constitution]

July 16--When an Atlanta businessman became embroiled in a multimillion-dollar dispute last year with his insurance company, he and associates started giving tens of thousands of dollars to state Insurance Commissioner John Oxendine's campaign for governor.

This spring, they asked for his help. In days, Oxendine delivered.

He issued a directive to all Georgia insurers telling them how to calculate payouts when commercial property is damaged. It required the companies to pay more in most cases and appears to bolster the legal position of David Davoudpour, a restaurant-chain owner and investor, seeking $5 million for damages to his Buckhead building.

As his dispute with the insurance company intensified, Davoudpour and associates contributed more than $46,000 to Oxendine's campaign, court records and State Ethics Commission records show. Donors include Michael Fusco, a claims expert hired by Davoudpour to handle the case of his damaged building.

The money was given in multiple payments over a seven-month period. The bulk was given in November and December.

On April 15, Davoudpour's company, Royal Capital Development, filed its lawsuit. Six days later, Oxendine issued his directive because he said he had been asked "recently." He did not say by whom, but Fusco told The Atlanta Journal-Constitution he was the one who asked on behalf of Davoudpour.

Glenn Allen, spokesman for Oxendine's office, said several people had asked for the commissioner's opinion on the technical issue in recent years. He could not name anyone else who asked besides Fusco.

Allen said, "as far as we're concerned," the directive doesn't apply to Davoudpour's multimillion-dollar claim because the damages occurred before Oxendine issued the directive. Nothing in the one-page directive states it does not apply to cases before the date it was issued.

When the AJC asked Fusco if Oxendine's directive helped Royal Capitol's lawsuit, he said, "Sure it does."

Allen said Oxendine "was not influenced at all by any campaign contributions."

News of the donations and the directive comes days before the July 20 primaries. Polls show Oxendine to be among the top contenders. Oxendine campaign manager Stephen Puetz referred questions to the Insurance Commissioner's Office.

Asked if the donations were related to the directive, Davoudpour told the AJC: "Hell no, absolutely not."

He said the group sought the directive from Oxendine because he's the insurance commissioner.

"Who else can we go to?" Davoudpour said. "His opinion is important. That's what he's there for."

Fusco, CEO of WorldClaim Global Claims Management, agreed.

"John Oxendine has always helped Georgians when we have a problem that we can't get resolved," he said. "I am a businessman trying to navigate the waters ... but if there is a question of linkage, there's not."

The sequence of events, however, show Davoudpour, Fusco and associates giving multiple donations to Oxendine in the last half of 2009, as their dispute with their insurance company, Maryland Casualty, developed.

The lawsuit, filed in federal court, stems from construction of The Streets of Buckhead development, which began in 2007. Royal Capital claims the work next to its property, The Capital Building on East Paces Ferry Road, caused severe structural damage, cracking the foundation and causing other problems.

It filed a claim with Maryland Casualty seeking money for the physical damages as well as for losses due to "diminution of value."

Diminution of value is an insurance concept arguing that if something is damaged physically, it also suffers a damaged reputation. The concept has been applied for years to automobiles. A damaged car may be repaired, but owners still faces potential loss because they have to explain what happened to future buyers..

The concept has not generally been used for commercial property, but it has not been ruled out either. Davoudpour's company sought to apply the diminution standard for the simple reason that it sought more money in its claim. Maryland Casualty opposed the standard for an equally simple reason: It didn't want to pay out more money. Hence the lawsuit.

Then Oxendine issued his directive.

The directive does not mention Royal Capital by name, but it clearly takes its side in the issue, declaring, "In some cases, even with repair to property, it is possible that the property may be worth less after the loss ..."

Oxendine warned insurers to consider diminution or face disciplinary action. "Govern yourself accordingly," he wrote.

Representatives of Maryland Casualty, based in Illinois, did not return calls. The company's attorney, Randy Evans, declined comment. Evans is also former general counsel of the state Republican Party.

Businesses and people linked to Royal Capital's case increased support for Oxendine beginning in the summer of 2009, when the dispute with Maryland Casualty escalated.

Donors include:

--Michael Fusco and his wife, who gave $6,850. Fusco said he has been a longtime Oxendine supporter. However, the State Ethics Commission and the Secretary of State's office do not show any Fusco contributions to Oxendine prior to last June.

--Royal Capital, which gave $9,400.

--David Davoudpour and his wife, who gave $15,300. The couple gave to Oxendine in November and December. In 2005, Davoudpour gave $10,000 to Oxendine's re-election campaign for insurance commissioner.

--McKerrow Enterprises, which gave $15,000, all of it on Dec. 31. George Mc-Kerrow is Davoudpour's business partner. McKerrow Enterprises is based, like Royal Capitol, in the East Paces Ferry building.

Donations to candidates are currently limited to $12,200 per election cycle, plus another $3,600 for a primary runoff.

Fusco said that with or without the directive, Davoudpour planned to pursue the issue in the courts, and the case is ongoing.

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