Wednesday, December 17, 2014

Can't Stay Away

WorkCompCentral correspondent, Michael Whitely, has been following and writing about New York-based Oriska Insurance Company for nearly a decade. 

His story this morning about the principal owner's travails with regulators and the judicial system, and his new attempt to reenter the workers' compensation insurance market, show how enticing the work comp market, particularly California's "troubled" system, still is.

James Kernan was banned from conducting insurance business when he was sentenced in January 2010 in connection with a scheme by which Oriska was used as the principal underwriting agency to collect millions of dollars of premiums through bogus workers' compensation policies issued to professional employer organizations in states where it wasn't licensed to conduct business.

Whiteley describes in detail the allegations, the convictions, the statements and the positions of the government, Kernan, his colleagues and accomplices, prosecutors and a lot of other people touched by this story.

In a classic public relations move, the convicted blames others for duping him into illegal acts.

"Some of these unfortunate claimants waited nearly a decade," Kernan said in a recent press release. "Even though Oriska Insurance was victimized by con-men, we worked with the Department of Insurance to ensure duped employers or taxpayers didn't suffer. We took unprecedented action to see this process through and also to protect the Oriska insurance name."

The California Department of Insurance doesn't see it that way.

"The California Department of Insurance does not believe that Oriska Insurance Co.'s press release accurately portrays the events in the matter," Nancy Kincaid, press secretary to California Insurance Commissioner Dave Jones, said in a statement to WorkCompCentral. "Oriska issued insurance policies in violation of the California Insurance Code."

Kernan is contesting a New York State Insurance Department order that he divest his controlling interest in Oriska and hopes to re-enter the insurance business, according to officials.

And he is still embroiled in California claims, though Kernan's California attorney says those matters will be fully resolved and paid in short order.
Bowzer smells malarky...

The scheme was hatched nearly a decade ago, and continued on in several states - where Oriska was not authorized to write work comp insurance - despite several warnings, penalties and fines from state insurance departments.

A 2008 federal grand jury indictment says that Kernan, California PEO executive Robert "Skip" Anderson Sr., and several others conspired to engage in mail fraud for selling work comp policies in Arizona, California, New York and Pennsylvania through Oriska, even though the insurer was not authorized to write business in those states.

As of 2007, Oriska was authorized to write business in the District of Columbia, North Carolina, Pennsylvania, Tennessee and West Virginia only.

In the press release, Kernan contends Oriska was not aware of what he calls an "insurance-related Ponzi scheme that targeted Oriska" and stranded more than 350 medical and wage-loss claims based on "counterfeit coverages."

Kernan said California regulators and Oriska discovered the scheme when PEOs told employers with claims to contact Oriska.

"Oriska was victim of this Ponzi scheme and nearly crippled this company, but we wanted to be part of the solution," Kernan said.

Kernan is fighting regulators in New York to regain authorization to write insurance and is seeking to reverse an order that he divest his interests in the insurance company.

Whitely's examination of documents calls into question whether the ordered divestiture in fact has ever occurred.

The outcome of all this is, I'm sure, far from decided. But the story is a reminder that workers' compensation insurance is, at its heart, part of the financial services industry and all too often the numbers are just too hard to resist.

But from what I've read, frankly, this is an open and shut case. There weren't just appearances of impropriety - there was outright malfeasance. We don't need this in work comp.

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