NU Online News Service, March 2, 1:09 p.m. EST
Four former insurance executives of now-defunct Vanguard Fire and Casualty Company have been indicted on charges of fraudulently obtaining $20 million in reimbursement from the Florida Hurricane Catastrophe Fund (FHCF) after the 2004 hurricane season.
Maitland, Fla.-based Vanguard was ordered into liquidation in March 2007, according to the state Department of Financial Services, but the U.S. Department of Justice said the company would have been insolvent sooner without defrauding the state cat fund.
Pamela C. Marsh, U.S. Attorney for the Northern District of Florida, said the 12-count indictment charges William Sanders, former president; Thomas Stinson, former CEO; Richard Magsam; and John Henry Axley III with making false statements to the FHCF, state regulators and the state Board of Administration. The foursome also conspired to misrepresent Vanguard's financial condition and solvency, Ms. Marsh said.
Vanguard had "severe cash-flow problems" due to the number of claims filed after the 2004 hurricane season, when four storms hit Florida. One of these storms, Hurricane Jeanne, did not meet the company's threshold to claim reimbursement from the FHCF, but another storm did, so the group allegedly used another storm's loss data for Hurricane Jeanne in order to fraudulently obtain compensation, Ms. Marsh said.
Vanguard would have been insolvent by the end of 2004 had the former executives not misrepresented storm loss for Hurricane Jeanne, Ms. Marsh added.
Each man faces a maximum prison sentence of five years on each conspiracy charge and 10 years on each count of insurance fraud if convicted.
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