Oriska Insurance Company, a small workers' compensation carrier being investigated for fraud by the FBI, remained under the control of the New York Insurance Department after a court proceeding yesterday.
The Oriskany, N.Y.-based company, which the department has called insolvent, was due to challenge the temporary receivership that was granted last week, but the case was put on hold until Aug. 16 yesterday when Oneida County Supreme Court Justice Samuel D. Hester announced he was removing himself from the case, according to Andrew Mais, an insurance department spokesperson.
Judge Hester last Thursday allowed the state to take over after Insurance Superintendent Howard Mills, in a court filing, said if the company kept doing business it would be "hazardous to its policyholders, creditors and the public."
A department investigation found the company had a $2.4 million reserve deficiency and, instead of its required surplus to policyholders of $2.2 million, it has a deficit of $393,694, according to Mr. Mills's petition.
The superintendent told the court that the U.S. Attorney for the Northern District in Albany had informed him the FBI had seized "a significant portion of the books and records of the company" on July 25 and the "confusion and disorder that will result" underscored the need to appoint him temporary receiver.
According to a search warrant filed by the FBI's Utica, N.Y. office, investigators, in part, were seeking evidence of "violations of insurance fraud, wire fraud and mail fraud."
Mr. Mills said the holding company for Oriska--Oriska Corp.--was purchased in 2002 by its then chief operating officer, James M. Kernan; the holding unit also includes Reinsurance Company of America and Financial Benefits Insurance Company in Illinois and Insurance Company of Americas in Florida.
Mr. Kernan, an attorney and now Oriska insurance president, was described by Mr. Mills as "the ultimate controlling person" of Oriska Corp.
Among other wanted items listed in the FBI warrant were bank records of six persons including Mr. Kernan and Robert Anderson Sr., who reportedly owns the searched premises and has a record of questionable insurance-related activity.
Others listed in the warrant include Marlene Kernan, Robert J. Anderson Jr., Allen Lill and Teresa Heinrich. Mr. Kernan did not immediately respond to a request for comment left with his office.
From the Oriska companies and listed individuals the FBI sought financial statements, insurance records, work orders, rental receipts, travel records, credit card records, telephone records, pager bills, safe deposit keys, and computer documents, records, software, diskettes and printouts.
According to Highline Data, the company listed Robert J. Kernan as a vice president and Mary Agnes Kernan as a director. The exact relationship of the Kernans to the company president was not immediately known. Oriska Insurance Company, listed as the Kernan Group, reported net admitted assets of $18.2 million for 2005.
Mr. Mais said the company is now under control of the department's liquidation unit.
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