This Agreement is entered into between the State Ethics
Commission ("Commission") and Richard B. Simches ("Mr. Simches"),
pursuant to Section 11 of the Commission's Procedures Covering the
Initiation and Conduct of Preliminary Inquiries and Investigations.
The parties agree that upon its execution this Agreement shall
constitute a final order of the Commission enforceable in the
Superior Court of the Commonwealth.

Page 26

On April go, 1980, the Commission, pursuant to Section 4(a)
of General Laws Chapter 2688, initiated a Preliminary Inquiry into
Possible violations of General Laws Chapter 268A, (hereinafter
referred to as either "Chapter 268A" or the "Conflict of Interest
Law") involving Mr. Simches, a member of the Board of Governors
("The Board") of the Motor Vehicle Reinsurance Facility ("The

The Commission has concluded its investigation into Mr.
Simches' involvement in the matters set forth herein and make the
following findings of fact to which the parties hereto agree.

Findings of Fact

1. At all times in 1979, Mr. Simches was the Regional
Executive Director of Motor Club of America Insurance Company
("MCA"); and the owner of twelve (12) insurance agencies. In
addition, Mr. Simches has been the controlling stockholder of the
Safety Insurance Company ("Safety") since its formation in the
Summer of 1979.

2. In November of 1977, Mr. Simches was appointed by the
Commissioner of Insurance to be one of the members of the
Facility's Governing Board, and he has served in that capacity at
all times relevant herein.

3. The Facility was established pursuant to M.G.L. Chapter
175, Section 113H, to ensure that all Massachusetts drivers, and
specifically high risk drivers, would be able to obtain automobile
insurance. It is governed by a thirteen member Board, all of whom
are required to be associated with the insurance industry. Board
members are unpaid and are appointed by and serve at the pleasure
of the Commissioner of Insurance who also exercises other
supervisory powers over the Facility. All automobile insurers in
Massachusetts are members of the Facility and all operating costs
of the Facility are paid for by the member insurance companies.

4. Automobile insurance companies reinsure their high risk
policies through the Facility which allocates the losses from those
policies among all the member insurance companies. Two types of
policies are reinsured through the Facility:

a. Policies written by insurance brokers with a high
percentage of risk business ("designated brokers"), who are
assigned to an insurance company (a "servicing carrier")
because no company will voluntarily underwrite their policies;

b. Policies written by agents with a low percentage of
risk policies ("voluntary agents") which are voluntarily
underwritten by insurance companies.

5. In 1979 the Motor Club of America Insurance Company (MCA),
which had developed particular expertise with high risk business,
was one of the Facility's largest servicing carriers, having been
assigned many designated brokers including the twelve insurance
agencies owned by Mr. Simches.

6. Automobile insurance companies report monthly to the
Facility the amount of money taken in as premiums and the amount
of losses suffered from policies under the jurisdiction of the
Facility. On a quarterly basis, the Facility staff squares accounts
with the companies; if premiums exceed losses, a company must pay
the difference to the Facility and if losses exceed premiums, the
Facility pays the difference to the company. If, in any one month,
the amount of loss exceeds the amount of premiums by one and a half
times, the company can request an interim reimbursement rather than
wait for the close of the quarter. Interim reimbursements can only
be granted by vote of the Board. MCA requested interim
reimbursements, sometimes in excess of one million dollars, on
seven occasions in 1979. Mr. Simches, in his capacity as MCA's
Regional Executive Director, often personally made these
reimbursement requests in writing to the President of the Facility,
who then put them on the agenda of the Board.

7. In the Spring of 1979 it became apparent that MCA had
severe financial difficulties and its status as a servicing carrier
became compromised. In order to protect his business interests, Mr.
Simches, in the Summer of 1979, began to form a new insurer,
Safety, and proposed to the Board that Safety assume MCA's business
once MCA was eliminated as a Facility member. In July, 1979, Safety
applied for a license at the Division of Insurance, which took no
final action on this application until December 12,1979.

8. On November 30, 1979, several Facility Board members met
with Division of Insurance officials who expressed their serious
concerns regarding the continued viability of MCA. The Board called
a special meeting for December 4,

Page 27

1979, to determine what action, if any, should be taken.

9. Mr. Simches was present at the December 4, 1979, meeting,
and in his capacity as Regional Executive Director of MCA answered
questions from Board members concerning MCA's viability. After
discussion, the Board voted, with Mr. Simches abstaining, to
terminate MCA as a servicing carrier as of January 1, 1980, and to
have its staff develop a plan to reassign MCA's business to already
licensed carriers. The Board also voted not to consider reassigning
MCA's business to Safety until it was licensed. On December 6,1979,
one of Simches' insurance agencies filed suit to enjoin the
termination of MCA by the Facility.

10. Mr. Simches and his attorney then called upon Neil Lynch,
Counsel to the Governor, and requested his assistance in breaking
the apparent bureaucratic logjam delaying action on Safety's
license application. Mr. Lynch then called the Commissioner of
Insurance and told him that a decision one way or another should
be made quickly on Safety's application to avoid a substantial
dislocation of the consumer market caused by bureaucratic red

11. The Facility Board met in public session on December 10,
11 and 12, 1979, to consider further a number of matters concerning
the termination of MCA as a servicing carrier, the reassignment of
MCA's designated brokers, and the resolution of the law suit
brought by one of Mr. Simches' insurance agencies. At each of these
meetings, Mr. Simches appeared personally before the Board as the
corporate agent of his insurance agency and urged the Board to
consider designating Safety as a servicing carrier and assigning
to it MCA's designated brokers, or, in the alternative,
re-appointing MCA as a servicing carrier.

12. At the meetings on December 10th and 11th, the Board voted
not to change the reassignment plan it adopted at the December 4,
1979, meeting. Although present at these meetings as a corporate
agent, Mr. Simches absented himself from the executive sessions in
which the Board discussed and finally voted not to change its

13. On December 12, 1979, Safety was licensed by the Division
of Insurance. The Board met later that day and after questioning
Mr. Simches who now appeared as Safety's corporate agent, voted to
award 80% of MCA's business to Safety. This decision was made only
after Mr. Simches agreed that all his insurance agencies would
change from being designated brokers to voluntary agents. This
would result in 25% of Safety's business being written as
"voluntary," and thereby substantially increase its financial
contribution to the Facility's operating funds as compared to the
contributions made by MCA. Mr. Simches again absented himself from
the Board's vote on this matter.

14. By absenting himself from votes by the Board on December
4,10,11 and 12th, concerning matters affecting the financial
interests of MCA and Safety, Mr. Simches was attempting to avoid
a conflict between his obligations as a Board member and his
personal interest in MCA and Safety.

15. There is no evidence that by acting as agent for his
insurance agency, Safety or MCA before the Board, Mr. Simches
unduly or improperly influenced its decisions regarding either the
approval of MCA's interim reimbursement requests, or the transfer
of 80% of MCA's business to Safety, as set out in paragraphs 6, 9
and 11-13 above. Nor is there evidence that the Board's decisions
on these matters were contrary to the best interests of the
insurance industry or the Commonwealth.

16. At the time that he attended the Board meetings on
December 4,10, 11 and 12 as agent for MCA, Safety and his insurance
agency, and abstained from the votes noted in paragraph 14, Mr.
Simches did not know that he might be subject to the provisions of
the Conflict-of-Interest Law. In part, this belief was the result
of a legal opinion given to the Facility by its legal counsel in
July 1978, and repeated thereafter, which opined that the Facility
was not a "governmental body" for purposes of the State
Administrative Procedure law, General Laws Chapter 30A.

Conclusions of Law

The Commission concludes that the Facility is a "state agency"
within the meaning of and consistent with the purposes of the
Conflict-of-Interest Law, which purposes are broader and more
preventative in nature than those of the State Administrative
Procedure Law. The Commission also concludes that members of the
Facility's Board are "special state employees"

Page 28

within the meaning of Section 1(o) of Chapter 268A, and therefore
subject to the provisions of the Conflict-of-Interest Law. In light
of these conclusions, which are made by the Commission and not
contested by Mr. Simches, the parties agree that Mr. Simches
violated Section 4(c) of Chapter 268A, which prohibits special
state employees from acting as agents for private entities in
relation to matters which are pending in the state agency for which
they serve, by: (1) personally appearing before the Board as the
corporate agent for his insurance agency, for MCA and for Safety
at its meetings on December 4, 10, 11 and 12, 1979; and (2) acting
as MCA's agent in requesting the Board to grant MCA several interim
reimbursements in 1979.


THEREFORE, in view of the facts and circumstances set out in
paragraphs 1-16 of this Agreement, the Commission has determined
that the public interest would be served by the disposition of this
matter without further enforcement proceedings on the basis of the
following representations, terms and conditions hereby made and
agreed to by Richard B. Simches:

1. That he is represented by Frederick Pritzker, Esq., One
Federal Street, Boston, and has been fully advised as to all
matters relating to these proceedings and this Agreement;

2. That he cease and desist from acting as the agent for
Safety, MCA, or any other entity in connection with any matter
which is pending before the Board while he remains a member of the

3. That he pay the sum of $500 to the State Ethics Commission
within three (3) days of the execution of this Agreement; and

4. That he waive all rights to contest the findings of fact,
conclusions of law, and the terms and conditions contained in this
Agreement, in this or in any related proceeding.

DATE ISSUED:  October 7, 1980