The charges follow the arrest in January of Mr. Segal, who is the company's founder and former head. He is accused of misappropriating millions of dollars from the firm's premium trust fund account over a 12-year period for his own and company use.

According to the indictment released by prosecutors, the amounts ranged from $5 million in 1990 to $24 million by 2001.

Mr. Segal is currently free on $750,000 bail.

Near North was indicted on seven counts of mail fraud and seven counts of insurance fraud.

Mr. Watkins, according to the grand jury, helped Mr. Segal in his scheme, providing Mr. Segal the money from the fund and covering over the losses. He, along with Mr. Segal, is charged with seven counts each of insurance fraud and mail fraud. He is also charged with one count of misappropriating funds from the firm.

Mr. Segal and Near North are charged with making false statements to the Illinois Department of Insurance to hide the alleged fraud. The indictment also charges that they gave discounts and rebates on insurance premiums financed "in part by withdrawals from the PFTA while it had a deficit balance," the U.S. Attorney's office said in a statement.

Near North, in a statement on its Web site, said it identified the problems with the trust account and voluntarily brought them to the attention of the state's insurance department in August 2001.

The firm said it has fully cooperated with prosecutors during the past 18 months, adding, "As a significant employer, the company is disappointed that the government has taken this extreme action."

Near North said no individual or company has lost any money as a result of the problems with the fund.

"The company will fight vigorously against these charges and do everything in its power to preserve the future of Near North," the firm said.

Natalie Rofalikos, a spokesperson for Near North, told National Underwriter that no action has been taken by any states to revoke the firm's license. She also said that Near North is continuing to negotiate a deal for the sale of the insurance firm to Frontenac Company, LLC., which was announced in February.

A spokesman for the Illinois insurance department said it is not taking any action against the firm at this time.

The Chicago Sun-Times said Friday that Mr. Watkins is cooperating with investigators and may have developed evidence to help prosecutors, including taping conversations with Mr. Segal.

If convicted, Near North could face five years probation and fines of $500,000 for each count. Mr. Segal and Mr. Watkins could face jail time ranging from 5 to 20 years for each count and a maximum of $250,000 in fines for each count.