Today Mercury filed its quarterly report with the US Securities and Exchange Commission. Here’s what the company has to say about its sponsorship of Proposition 17:

The Company is supporting the Continuous Coverage Auto Insurance Discount Act (“Proposition 17”), a California ballot initiative which will be on the June 2010 ballot. If passed, Proposition 17 will provide for a portable persistency discount, allowing insurance companies to offer new customers discounts based on having continuous insurance coverage from any insurance company. Currently, the California DOI allows insurance companies to provide persistency discounts based on continuous coverage only with existing customers. While the company strongly believes this will be beneficial for the insurance consumer, there are consumer activist groups both supporting and opposing the initiative. The Company made financial contributions of $3.75 million, $0, and $3.5 million during April 2010, the first quarter of 2010, and 2009, respectively, related to this initiative. The Company expects to continue supporting the initiative with financial contributions.

A quick reading of this disclosure reveals three misleading statements:

1. Mercury is not simply “supporting” Proposition 17. Mercury wrote the initiative and has put in 99% of the more than $7.25 million that Mercury’s campaign committee has reported receiving (the rest comes from insurance agents). Perhaps because virtually all newspapers have editorialized against Proposition 17, Mercury’s management seems to be trying to put a little distance between itself and its creation. But in my mind, there is a major difference between “support” and “sponsorship.” I wonder how many shareholders would have preferred to be consulted by management before the company went ahead with this cynical multimillion-dollar boondoggle? The management plans to spend an additional amount – likely in the millions – between now and Election Day. Don’t they owe Mercury’s shareholders an estimate of how much more they plan to spend? Or perhaps the shareholders think that the surcharges Mercury will be allowed to collect under 17 will be good for the bottom line.

2. Mercury suggests that the California DOI is responsible for preventing the company from offering “discounts” that Proposition 17 would authorize. Wrong: it’s California law, which, since the passage of Proposition 103 in 1988, bars insurance companies from considering a person’s history of prior coverage when setting premiums. The voters prohibited the practice because it led to massive surcharges and more uninsured motorists on the road. Mercury got caught violating that law and was forced to stop doing so by the Insurance Commissioner and the courts.

3. Here’s a favorite: Mercury says, “there are consumer activist groups both supporting and opposing the initiative.” But legitimate consumer organizations like Consumer Watchdog and Consumers Union, the non-profit publisher of Consumer Reports magazine are all opposed to 17. Mercury has listed “Consumers First” and several other supposed “consumer groups” as supporting 17, but when researched and investigated by journalists, it turns out these organizations are either phony groups created by public relations firms or are run by spokespeople paid by Mercury.

Three more reasons why you can’t trust Mercury Insurance or Proposition 17.

Anyone who’s been following the sordid story of Mercury Insurance, the sponsor of Proposition 17, will not be surprised that the company’s first salvo of thirty second TV ads is an attempted fraud on the voters. The spectacle of Mercury referring voters to deceptive statements made by its own paid spokespeople – as if they were taken from the factual analysis prepared by the Attorney General for the official voter guide – caught the attention of the Los Angeles Times, which posted this condemnation of the ads tonight. And we hear from our sources that Mercury is about to dump a load of Prop 17 disinformation on its own policyholders any day now.

This is the company that just a few weeks ago was accused by state regulators of overcharging its own customers and dozens of other violations of state insurance laws. That came on top of reports of previous investigations which concluded that the company routinely penalized people for such risky activities as working out of their own homes.

Mercury’s ad buy – now over $7 million – is timed to coincide with the beginning of absentee balloting. With virtually every newspaper in the state urging people to vote NO on 17, with no one but insurance agents appearing to defend Prop 17 against universal criticism by consumer and taxpayer advocates, Mercury apparently decided that deceit was the only alternative.  I don’t think it’s gonna work. Californians are instinctively suspicious when they start seeing slick thirty second ads promising lower insurance rates. Soon Mercury’s sponsorship will be discussed at office water coolers  and at dinner tables across the state. Then people will ask, “Since when does an insurance company spend millions to save me money?” The answer is obvious.