If Thomas Schumpert is confirmed by the state Senate to take over as head of the Department of Business Regulations, he will be responsible for regulating everything from banks to boxing matches.
Rhode Island is unusual among state agencies in its approach to business regulation with a central agency regulating insurance, banking and securities; licensing nearly two dozen professions and businesses; and serving as the racing and athletics commission. Lumped in there is licensing authority for auto body shops, real estate agents, boxing and wrestling matches, upholsterers, liquor wholesalers, and mobile home parks.
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The agency has a $7.9 million budget, about 110 employees, issues approximately 80,000 licenses annually, and holds administrative hearings on license applications, revocations and suspensions, according to the state’s fiscal year 2000 budget.
Some states, including California and Connecticut, have opted for individual banking and insurance regulatory agencies. In California, Florida and Louisiana voters even elect their insurance commissioners. Other states, such as Massachusetts and Vermont, take a similar centralized approach, but give the regulatory body a different mix of responsibilities.
Gov. Lincoln Almond nominated Schumpert, a Cumberland resident with more than 20 years banking experience, to replace Barry Hittner as the DBR director on May 4. Hittner announced last November he would return to private law practice with Edwards & Angell. When Hittner left the job in January, Deputy Director Anthony V. Arico Jr. stepped in as acting director.
Both Hittner and Sheldon Whitehouse, who served as DBR director from 1992 to 1994 and is now the state’s Attorney General, agreed the job is one of the most interesting and diverse in state government.
“Those boxing commissioner responsibilities were particularly arduous, but I tried to live up to the task,” Whitehouse joked. “I thought it was a wonderful job. I was lucky at the time in that I had a very good team in place.”
Hittner said he also enjoyed the distinction of being boxing commissioner, but that a key staff member actually performed most of the required duties.
Though the DBR has a wide scope of authority, Hittner said it makes sense to combine responsibilities. “If you fractionated it into three smaller agencies … you would run a risk of (those agencies) being so de-emphasized it would jeopardize the mission of the agency,” he said.
And it frequently is an important mission.
It was the DBR that in 1996 threw regulatory roadblocks in the way of producers planning to stage a controversial “ultimate fighting match” at the Providence Civic Center. It was DBR that first suspended the license of a Warwick financial adviser last January, after clients claimed he made $6 million in unauthorized transactions with their money. And it was DBR that revoked former Gov. Edward DiPrete’s insurance license this winter, after he pled guilty to corruption charges.
Regulation of the insurance industry (health, accident, property and life insurance) dominates many of DBR’s resources, since there is little federal regulation of that industry. On the other hand, the banking and securities industries are subject to heavy federal oversight and require less DBR attention.
“The banking issues aren’t all that significant in that there aren’t any state insured banks, because the banks are federally insured,” Whitehouse said. During his tenure, however, he was still dealing with the “aftershock” of the Rhode Island Share and Deposit Indemnity Corp. (RISDIC) crisis.
“There’s relatively little regulation of the insurance industry on the federal level. It’s done almost entirely on state level,” Hittner added.
Whitehouse said it is important for the new director to “be proactive” and to avoid “a just sit back and regulate” demeanor.
“Don’t forget that you can go up to the legislature, and if you make your case right you can change the rules for the better,” he said.
Among the changes Whitehouse successfully lobbied for was anti-fraud legislation that helped state police set up an auto theft fraud investigation task force. That helped improve insurance rates here, as well as Rhode Island’s auto theft statistics.
Even so, Whitehouse added, with the wide variety of duties he didn’t accomplish everything he wanted to do. For instance, he wanted to automate more of the licensing functions to free up some staff from clerical work, which would have allowed them to do more consumer-oriented work.
The scope of the DBR director’s duties actually surprised Hittner when he took over in 1995, he said. Among his biggest surprises were the director’s responsibility to serve as receiver when insurance companies become insolvent, and the various board positions the DBR director is expected to fill. For instance, under state law the DBR director or a designee must serve on the Rhode Island Housing and Mortgage Finance Corp.’s board.
Whitehouse was familiar with DBR before taking the job because he helped investigate the state banking crisis and worked on workers’ compensation insurance reform.
“You have to get on a fairly fast learning curve,” Hittner said, explaining the director must quickly learn about state budgeting, the legislative process, the DBR’s five divisions and their procedures, as well as the state personnel system.
Hittner said he “was somewhat of a dark horse candidate” when he was nominated for the job, because his background was mostly in the area of estate planning and probate, with some small business and insurance law thrown in. The West Point graduate also served in the military.
Since he expects to meet with Schumpert in the near future, Hittner limited his suggestions for the DBR nominee saying, “I’ll reserve my advice for him.
“Essentially what you do is rely on two things: You rely on what the good people working there know and tell you, and you rely on your own good judgment,” Hittner said.
Both Hittner and Whitehouse agreed having a legal background helped them.
“I think you either have to have a legal background or have a lawyer you trust implicitly,” Whitehouse said.
Schumpert, who grew up in Mississippi and has lived in Rhode Island for 22 years, said he isn’t sure what to expect if his nomination is approved.
“It appears to be a job requiring a variety of managerial and leadership skills. Everyone tells me there appears to be a pretty doggone good staff,” he said. “My goal is to be a coach generally a coach makes people play better than he or she would without the coach.”
Last year he spent time working with U.S. AID in Bosnia teaching local bankers ways to help develop that country’s ailing economy. “One of the pieces (of a U.S. attempt) to stabilize the country militarily was to get the business and financial community back up,” he explained.
Schumpert served with the U.S. Air Force in Vietnam and later earned a management degree from Rutgers University. His banking experience includes jobs as a senior vice president at Bank of New England in Boston and an assistant vice president with Fleet National Bank in Rhode Island. In addition, he served as president of the Massachusetts Minority Enterprise Investment Corp. and founded his own Boston-based management consulting firm.
He has begun telling clients about the nomination, because he will “suspend” the business if his nomination is approved. But Schumpert said he won’t really miss being his own boss if that happens.
“As an entrepreneur everybody is your boss. To me the opportunity to be selected by the governor is an impressive opportunity,” he said. “Assuming I’m confirmed, it’s a real honor. How many people get the opportunity to do something like that?”
The Senate Judiciary Committee is scheduled to hold a confirmation hearing on Tuesday, May 18. The committee will hear testimony about and from Schumpert at that time, then will pass its recommendation on to the full Senate, according to a spokesman from Senate Majority Leader Paul Kelly’s office.
