TALLAHASSEE — Citizens Property Insurance Corp. has disbanded its Office of Corporate Integrity, a curious move for a state-run company that has seen a 52-percent increase in internal complaints and is being investigated for lavish executive spending and other corporate improprieties.

On Friday, four members of the Office of Corporate Integrity — which is responsible for handling complaints such as internal corruption, sexual harassment or misuse of funds — received termination letters. Citizens has asked them to sign confidentiality agreements.

Citizens claims that it fired the four corporate watchdogs in order to reduce redundancy and ramp up its forensic fraud detection efforts.

"In order to better understand and focus attention on the management of the risk of fraud and how this risk needs to be addressed within the organization, Citizens has determined a need to enlist well-skilled and qualified forensic accountants that have specific experience in the management of fraud in organizations such as Citizens," said Christine Ashburn, spokeswoman for Citizens.

But no forensic accountants have been hired, and no additional staff has been brought on in the wake of the dismantling of the corporate integrity unit.

The cuts come at a time when the state-run insurer is embroiled in a series of corporate controversies. Recent inter-office allegations at Citizens range from illegal use of funds to workplace violence to gambling with company resources. Allegations of employees misusing company funds have increased from two in 2009 to 15 last year. Citizens employs about 1,100 employees.

One of the first staffing decisions made by president Barry Gilway after he was hired in June was to stop taking direct reports from the former law enforcement official who ran the Office of Corporate Integrity. Instead, he began taking reports from the recently hired Chief Internal Auditor, a former employee at Gilway's former company, Zurich North America.

T.W. Smart, a former senior official with the Florida Department of Law Enforcement who ran the Office of Corporate Integrity, was among the group of employees terminated by Citizens. Selisa Daniel, a former economic crimes investigator with the attorney general's office, was also let go. Citizens claims that Smart, Daniel and two others did not have the necessary expertise to handle the type of high-level fraud taking place at the company.

Citizens' problems with internal controls and allegations of corruption, sexual harassment and improper spending have ballooned in recent years.

Between 2009 and 2011, the number of internal corporate complaints jumped 52 percent.

An anonymous letter sent to the board of directors in March alleged that Citizens employees had spent more than $500,000 on beverages, and spent millions of dollars on expensive furniture and illegal no-bid contracts.

Citizens' board called for an investigation by the Office of the Internal Audit, which eventually found that some of the allegations could not immediately be proven and other improprieties did, in fact, happen.

The OIA did not conduct any interviews with staff members in its investigation, and ultimately ruled that it could neither confirm nor deny several of the allegations. The case, which was not reviewed by the Office of Corporate Integrity, has been closed. Moving forward, OIA will handle many of the cases previously handled by the Office of Corporate Integrity.

In August, a story in the Tampa Bay Times and Miami Herald documented a pattern of lavish executive spending by Citizens' executives, who regularly roomed at luxury hotels and dined on gourmet meals while pushing for painful insurance rate increases.

The story chronicled $600-per-night hotel stays, first-class flights to Bermuda and improper use of the company credit card for alcohol and haircuts.

After the story ran, Gov. Rick Scott said he was "concerned," and asked his chief inspector general to investigate. Citizens has since overhauled its executive travel policy, but it also approved large raises for some of the same executives involved in the opulence.

The skyrocketing complaints of corruption and misuse of funds come as Citizens' cash-on-hand has reached record highs. The company has more than $6.2 billion in the bank, part of a $15 billion portfolio built up during a lengthy hurricane-free streak.

Good governance groups say that large amount of money, absent the necessary safeguards, is ripe ground for fraud and abuse.

"Gov. Scott was right to have his chief inspector general scrutinize Citizens' travel expenses for waste and abuse," said Dan Krassner, director of Integrity Florida, a good governance group. "Floridians should be concerned about these firings in the middle of an inspector general's investigation. … Were these ethics and fraud investigators let go because they were doing their jobs too well?"

Citizens is currently planning to lend out as much as $350 million of its surplus to private insurance companies that agree to take over some of its 1.4 million policies.

The hastily approved loan program was advocated for by an insurance lobbyist and did not undergo the traditional vetting process in the Florida Legislature.

The incoming speaker of the Florida House, Rep. Will Weatherford, R-Wesley Chapel, and incoming president of the Senate, Sen. Don Gaetz, R-Niceville, both said Citizens should halt the program and submit it to lawmakers for further vetting.

"My concerns involve serious questions regarding the process by which the proposed program was approved, the sufficiency of the information and analysis on which the approval was based, and uncertainties regarding the Board's legal authority to adopt and implement the program," Weatherford wrote in a letter to Citizens' board chairman.

Other legislators have been even harsher in their language, calling the $350 million program a fraudulent and illegal "sweetheart deal" for the insurance industry. Citizens has defended the program amidst growing pressure, but also agreed to have a third-party financial institution review the $350 million loan.

Former Chief Administration Officer Susanne Murphy — who questioned Citizens' authority to enact the loan program in July — resigned abruptly in August.

She was the senior executive responsible for overseeing Citizens' human resources and corporate integrity initiatives. She has not been replaced.

Toluse Olorunnipa can be reached at tolorunnipa@MiamiHerald.com or on Twitter at @ToluseO.