What do Oklahoma, New York, Washington, Kentucky and Florida have in common?
If it's workers' compensation, then the connection is a far reaching scheme involving millions of dollars, failed insurance companies and professional employer organizations.
A federal grand jury in New York back in October 2012 indicted Wilbur Anthony Huff, principal behind a couple of professional employer organizations, Matthew Morris, Park Avenue Bank's former senior vice president, and Allen Reichman, the former director of investments at New York investment house Oppenheimer & Co.
The indictment alleges that Huff and Morris engaged with former bank president and Chief Executive Officer Charles Antonucci in an elaborate conspiracy to plunder Park Avenue Property and Casualty, formerly known as Providence Property and Casualty Insurance Co., and its subsidiary, Imperial Casualty and Indemnity, and artificially inflate the bank's assets to secure funding from the federal Troubled Asset Relief Program.
U.S. Attorney Preet Bharara said in a press release that Huff, who secretly controlled South Florida PEOs O2HR and Certified HR Services, was at the "vortex of fraud" in a series of schemes involving more than $100 million and designed, in part, to keep O2HR from paying tens of millions of workers' compensation premiums owed to the Oklahoma insurers by the PEOs, and drain the assets of the insurers and help Antonucci's bank secure funding from TARP.
Antonucci pleaded guilty to charges of securities fraud, bribery, embezzlement and participating in the $37.5 million scheme to defraud Providence Property and Casualty on Oct. 8., 2010. He is expected to serve as a government witness at the trial of Huff, Morris and Reichman.
The federal judge handling the Huff/Morris/Reichman case postponed a pre-trial conference to May to allow discovery issues to be resolved.
Starting in 2009 WorkCompCentral started following the case of the failure of Park Avenue.
It's a complex case, as many big money fraud cases tend to be, so I won't try to unravel the whole story in this blog - for that I suggest you read up on the history of the matter in WorkCompCentral.
Some highlights are in order.
Huff was previously banned from the insurance industry as an insurance agent in Kentucky in 2004 after being convicted of wire fraud.
In addition, Huff and his ex-wife, Sheri Huff were ordered to pay $17.4 million by a federal judge in South Florida in October 2010 based on allegations by the SEC that the Huffs used $47 million in bogus letters of credit to inflate the value of Certified HR Services.
Danny Pixler, Certified's chief executive, pleaded guilty to a criminal charge of conspiracy in connection with allegations he bilked Certified's employer/clients out $4.56 million in workers' compensation premiums for policies written on companies not licensed as insurers.
In January 2010, a U.S. District judge in Washington state upheld a $19.3 million verdict against Pixler and the Huffs in the collapse of Cascade National Insurance Co. The jury in that case ruled that Pixler and the Huffs pretended to buy the ailing insurance company in an effort to divert millions of dollars in insurance company assets to Midwest Merger Management, a Kentucky company they controlled.
The latest news reported in WorkCompCentral this morning, however, shows how such a scam in workers' compensation can escalate to a significant amount of capital being sucked out of the system to the detriment of nearly everyone else.
The losses in Oklahoma stemming from the scheme now amount to about $92 million and are expected to grow, according to the National Conference of Insurance Guaranty Funds.
Oklahoma isn't a big market in the first place. According to the National Association of Insurance Commissioners, the state's total work comp premium in 2012 was $947,021,065, so $92 million (almost 10% of the total) is a lot to absorb in that state.
And who knows how much of the failure of Park Avenue and Imperial Casualty and Indemnity Co. contributed to that state's abysmal rate work comp insurance cost ranking leading up to last year's historic opt-out legislation.
"I know this has been a real mess," Kelly Collins, spokeswoman for Oklahoma Insurance Commissioner John Doak, told WorkCompCentral Friday.
That's an understatement.