Insurance Executive Pleads Guilty in $100 Million Scam
June 16, 2015 by Frank Klimko
A Maryland insurance company president pleaded guilty to federal fraud charges in connection with a long-running insurance scam that involved sending false financial documents to state regulators, independent auditors and A.M. Best Co.
Jeffrey Brian Cohen, 39, of Reisterstown, Maryland, pleaded guilty to wire fraud, aggravated identity theft, making false statements to an insurance regulator and obstruction of justice. During the investigation, he threatened one of the whistleblowers for turning him in, according to a statement from the office of the U.S. Attorney for the District of Maryland.
Cohen was president of Indemnity Insurance Corp. RRG and a previous company called Indemnity Insurance-DC. Indemnity specialized in general liability insurance, liquor liability insurance and excess liability insurance coverage focusing on the entertainment industry, such as nightclubs, concert tours and special events. Both companies operated in several states, including Maryland, from 2008 through 2012.
Indemnity Insurance was ordered into liquidation by Delaware Insurance Commissioner Karen Weldin Stewart. Investigators allege Cohen made a false claim that Indemnity held $5.1 million in cash. Cohen resigned from the company and allegedly continued efforts to prevent its seizure (Best’s News Service, July 8, 2014).
According to his plea agreement, Indemnity insured more than 3,000 policyholders and collected over $100 million in premiums.
In his plea, Cohen admitted from about the start, his operation was based on financial ratings, financial audits and insurance regulatory approvals that he fraudulently obtained.
Prosecutors explained Cohen created false financial documents, including bank statements, letters of credit and confirmations of bank account balances. Those were used to obtain ratings that did not reflect the companies’ true financial condition. Once he obtained the ill-gotten ratings, Cohen touted them to policyholders and regulators.
Cohen faces a maximum sentence of 20 years for each wire fraud and obstruction of justice counts, 15 years for making false statements and a mandatory two years, consecutive to any other sentence, for aggravated identity theft. Cohen, who remains in jail, will be sentenced on Aug. 6.
Last year, A.M. Best changed the Indemnity financial strength rating to F (In Liquidation) from E (Under Regulatory Supervision). The rating action followed the issuance of a Liquidation and Injunction Order by the Court of Chancery of the state of Delaware (Best’s News Service, June 25, 2014).
