A long-simmering investigation into alleged misuse of public funds at a major California workers' compensation insurer has reportedly escalated to search warrants, issued Friday, on property of several of its former executives.

State Compensation Insurance Fund spokeswoman Jennifer Vargen confirmed Saturday that "multiple" search warrants were served on former employees. She did not know the names of the former employees involved, nor how many warrants were served.

Citing an unnamed state official, the Los Angeles Times reported Saturday that warrants were served at the home and office of Redding construction executive and former insurance fund board member Kent Dagg. Search warrants were likely also given to former board member Frank DelRe of Long Beach, and former fund President James Tudor and Vice President Renee Koren, the paper reported.

The San Francisco-based State Compensation Insurance Fund is a $3.5 billion-a-year operation with 8,000 employees across California. It writes workers' compensation policies for nearly a fourth of state employers.

Problems at the fund came to light two years ago when a report by State Insurance Commissioner Steve Poizner detailed conflict-of-interest allegations.

From 1997 to January 2007, the State Compensation Insurance Fund paid $524 million in fees to safety groups. Of that total, DelRe's Western Insurance received more than $140 million in fees, while a workplace safety group run by Dagg was paid more than $125 million, the report said.

"Although board minutes indicated that there was no conflict of interest, the fact that the board members might have gained monetarily from the fund's decisions creates a potential conflict," the report said.

"Some group associations were paid millions of dollars for merely sending members quarterly newsletters and providing few or no other safety services," the report continued. "In many instances (State Fund) employees actually wrote most of the content of the newsletters."

Shortcomings at the fund resulted in delays felt by injured workers, who couldn't get medical bills processed. By the time Poizner released his report, the insurer had been hit with more than $19 million in late payment penalties.

Dagg and DelRe resigned in November 2006 after questions about their conduct arose. Tudor and Koren were fired a few months later.

Spearheaded by the San Francisco District Attorney's Office, law enforcement officials have since conducted their own criminal investigation, trying to determine whether charges are warranted. On Saturday, that DA's office declined to comment on – or even confirm the existence of – any new search warrants.

"An investigation is under way into alleged misconduct by former employees" of the fund, Erica Derryck, a spokeswoman for the San Francisco DA, told The Bee. "Beyond that, we are not commenting."

The state Franchise Tax Board, the state Department of Insurance and the California Highway Patrol are taking part in the investigation, but officials at those agencies on Saturday referred questions to Derryck.

State Fund officials turned over findings from their internal investigation to the California Highway Patrol in May 2007, and have since made changes to the way the agency is governed.

"We've cooperated fully and we've moved forward," Vargen said. "We look forward to a resolution in this matter."

Call The Bee's Phillip Reese, (916) 321-1137.