A federal grand jury in New York has accused three men of participating in a “vortex of fraud” that included the plundering of an Oklahoma-licensed insurance company that went belly-up.
The grand jury accuses Wilbur Anthony Huff, a Kentucky businessman, Matthew L. Morris, a former New York City bank executive, and Allen Reichman, the former executive director of investments at Oppenheimer & Co., of insurance fraud and wire fraud in a scheme that left the insurance company insolvent. All three defendants are contesting the 13-count indictment, which was unsealed this week.
Oklahoma officials two years ago filed a lawsuit seeking more than $100 million in damages from the buyer and sellers of now-insolvent Park Avenue Property and Casualty Insurance Co., claiming they “looted” the firm with the help of the New York bank. That case still is in the discovery phase, and won't be tried in the near future, attorneys from both sides said.
John O'Connor, outside counsel for the state Insurance Department, said losses from Park Avenue's insolvency are expected to be between $105 million and $112 million. A pool of 28 states' guarantee funds, which pay policyholders' claims when insurance companies fail, have paid off on Park Avenue policies, O'Connor said.
The defendants in the Oklahoma case include the seller, Providence Holdings Inc., and seven of its owners or executives; and Oppenheimer & Co., its investments director and nine of the firm's board members.
Oklahoma Insurance Commissioner John Doak, the receiver of the insolvent company, “is aggressively pursuing those people,” O'Connor said.
According to the federal indictment, the buyers in 2008 told the Oklahoma Insurance Department that New York-based Park Avenue Bank was funding the insurance company's purchase. However, the indictment states that $30 million of the purchase price came from a loan from Oppenheimer & Co. that used the insurance company's own capital as collateral, which is illegal under Oklahoma law. The remaining $7.5 million of the purchase price was taken directly from the insurance company's assets, prosecutors allege.
Charles Antonucci, former owner of Park Avenue Bank, admitted that he participated in the illegal scheme to buy Park Avenue Property and Casualty. Antonucci's admission came in 2010 as part of a guilty plea in which he also confessed that he tried to grab more than $11 million in federal TARP bailout funds through his New York City bank. He also admitted giving false information to the Oklahoma Insurance Department and lying about his net worth while trying to win the agency's approval of the sale.
In January 2009, Park Avenue Property and Casualty's $55 million bond portfolio was transferred from Wells Fargo & Co. to Oppenheimer & Co. Prosecutors said Reichman, who issued the loan after being warned by Oppenheimer executives that it was illegal, earned hundreds of thousands of dollars in commissions from the deal.
The insurance company was insolvent within months of the sale, as Antonucci, Huff and Morris “pilfered the remaining company assets,” the federal indictment states. Federal prosecutors are seeking at least $5 million in forfeitures related to the alleged insurance fraud. The federal indictment includes 12 other counts unrelated to the Oklahoma insurance company.
O'Connor said Oklahoma officials will “do what we can to make sure that Oklahomans get a part of any restitution that's ordered.” The state's civil case does not conflict with the federal criminal case, O'Connor said.
“The indictment is entirely appropriate and it does not have a negative effect on the lawsuits that are pending in any regard, as far as we're concerned,” O'Connor said. “It just reflects that the prosecutors' investigation revealed the same thing ours did.”
Attorney Stephen Jones, who represents Jerry Lancaster, the original owner of the insurance company, said the federal indictment supports his claim that Lancaster was a victim of Antonucci and the people charged in the indictment. Lancaster is not named in the federal indictment.
“They managed to dupe not only the IRS, but the FDIC, the New York banking superintendent, us, and the Oklahoma Insurance Department,” Jones said.
Nolan Clay, Staff Writer