fraudnet meeting, miami beach, florida3 march 2006 1 international casualty & surety company...

Fraudnet Meeting, Miami Beach, Florida 3 March 20061

International Casualty & Surety Company Limitedand

Chris Browne


The makings of an international insurer

• In 1977, Mr and Mrs Miller of Titirangi, Auckland, New Zealand incorporated Valley Road Service Station (1977) Limited, renamed Abbotsway Energy Centre Limited in 1981.

• In July 1992, the company was sold to Mr Peter Harris, with 1 of 85,000 shares owned by the nominee company of a solicitor, Anthony Thomas. Both Mr Thomas and Harris became directors.

• In August 1992, Abbotsway Energy Centre Limited was transferred to Mssrs Vik Jain and Jesse Maynard, who also became directors. The company’s share capital was increased to $10 million, provided by assets of First Assurance & Casualty Co. Limited, a company registered in Oklahoma. One share remained with Mr Thomas’s nominee company.

• Abbotsway Energy Centre Limited changed its name to International Casualty & Surety Company Limited.


The makings of an international insurer

• In 1992 International Casualty & Surety Limited lodged NZ $500,000 with the Public Trustee (at the time equivalent to around US$260,000).

• In November 1992, Mr Vik Jain of ICS , met with Ministry of Economic Development officials, and advised that IC&S intended to carry on business in New Zealand as an insurer, and for that reason had paid the deposit. The New Zealand directors, Mssrs Thomas and Harris, resigned.

• Within 5 months, IC&S had advised the New Zealand media that it would not be carrying on business in New Zealand.


New Zealand’s regulatory framework

Insurance Companies Deposits Act 1953:

– Payment of deposits to the Public Trustee by insurers who carry on insurance business in NZ.

– On liquidation, payment to New Zealand policy holders out of the deposit.

– Provision of annual statements in relation to business in New Zealand.

– Reference to deposit on cover notes

Insurance Companies (Ratings and Inspections) Act 1994:

– The requirement of all New Zealand insurance companies carrying on business in New Zealand to be rated.

– The powers of the Registrar of Companies to investigate insurance companies.

• New Zealand Insurance Companies do not require a “licence” as such.

• Insurance companies are primarily governed by 2 statutes.


IC&S compliance with NZ regulation

• IC&S did not file any financial statements in the prescribed form. The Department of Commerce accepted that if IC&S transacted no New Zealand insurance business, it was not required to file a financial statement.

• IC&S paid a deposit of $500,000, held by the Public Trustee.

The Public Trust Office

1 October 1992

INSURANCE COMPANIES DEPOSITS ACT 1954

INTERNATIONAL CAUSUALTY & SURETY CO LTD

I confirm that the Public Trustee has deposited into his name the following Government stock to meet the requirements of the above Act:

Amount - $530,000Rate 8%Maturing 15 Nov 1995


From NZ to USA

Oklahoma

Arizona

Kansas

North Carolina

Florida

California

Nevada

Georgia

Colorado

Hawaii

Connecticut

Texas

Michigan

Ohio

Wisconsin

New Jersey

VirginiaWashington


Mexico

Canada

Belgium

GuatemalaIndonesia

Columbia

Brazil

Ecuador

Venezuela

Australia

Panama

Greece

And the world


Appearances can be deceiving

• New Zealand company, apparently incorporated in 1977.

• Complied with New Zealand insurance regulations.

– Lodged the bond required to trade as an insurer in New Zealand.

– Did not trade in New Zealand, so not required to file financial statements

• Held no assets in New Zealand, other than the $500,000 bond.

• Management of the company finances completed by Frontier Administrators Inc, or Premier Administrators Inc, both of Arizona.


Appearances can be deceiving Bank accounts

British Virgin IslandsLondon

Arizona

Caribbean

Mexico

Michigan

New Zealand


Appearances can be deceiving InvestmentsGovernment bondsDominion of Melchizedek

Letter of credit Union De Credito Metropolitana, Mexico

Capital NotesBlue Horizon IncColonial Financial Holdings, Inc

Shares Phoenix Resources Technologies, Wasatch Pharmaceutical Inc.Lifeguard Financial Systems Limited

$NZ10.9 million

$NZ9.8 million


Appearances can be deceivingGhost shareholder

Vik Jain Frontier Administrators

Inc, Arizona

Catus Energy Limited,

Nevada Jesse Maynard

Samuel B Love

Director

International Casualty &

Surety Company Limited

April, 1993

June, 1993

June, 1993 August, 1993

October, 1997

Vik Jain

Director Jesse Maynard

Director

Donald Havenar

Mexico

shareholders


Insuring the world

Samuel B Love, President of IC&S, from a letter dated 16 March 1995:

We have developed some very good relationships, both in Europe and in Latin America; relationships that should double our production over the previous year. The increase will not come from carrying larger limits, but from additional markets. We see no reason to depart from our conservative management philosophy by taking larger risks in order to increase our premium. Rather, it makes more sense to us to expand the market, thereby spreading the risk even further.

I am happy to report that our reinsurer did not have a single claim from our business in 1994, and this is as it should be. [emphasis added]


Insuring the world

In the Scotsdale office, the president of the company Mr. Sam Love, had an attorney who handled all claims, his name is Mr. Marvin Lewis, he handled claims until he got sick, and Mr. Jim Bower started handling the claims. But we started having problems with the claims because Mr. Bowers tought [sic] that if he hid the claims in a drawer they would go away gradually, but they didn’t and our insureds as well as the claimants started complaining about the bad service…[emphasis added]

Enrique Alvarez-Malo, American Mexican Insurance Services Inc,

in an email dated 15 June 2001:


Stripping the assets

The sale of ICS by Love to Axis/Boncamper in February 2000 would appear to have been actioned solely to remove and dissipate the assets of ICS to the prejudice and disadvantage of its creditors. Our piecemeal information indicates the assets dissipated include monies due from brokers of in excess of US$1 million, cash of US$200,000-US$300,000 and proceeds of approximately $400,000 from a Mexico office… We are further aware that Axis/Boncamper, on 15th August 2000, revoked the purchase contract and the assets have not been returned.

In February 2000, IC&S was sold to Axis Financial Services Limited, controlled by a sole shareholder/director, Irvin Boncamper of St Kitts, West Indies.

Between February 2000, and August 2000, all assets of IC&S were transferred to an account with the Royal Bank of Canada, in St Kitts in the West Indies.

Liquidator of IC&SLetter to creditors dated 7 February 2003:


Untangling the mess

First Assurance filed for bankruptcy in Oklahoma City in 1993.

In mid 1995, victims of the LA riots found their property insurance worthless, and sued IC&S for claims which rose to $US60 million.

• A class action (on behalf of 5,908 policyholders) was filed under the Racketeer Influenced and Corrupt Organisations Act against both IC&S and Samuel B Love, said to have collected and diverted to their own use more than $US19 million in premiums.

• IC&S settled out of Court and contributed $US150,000 to a $US5 million settlement.

• Mr Love was found guilty of contempt and bankruptcy fraud charges in 2000, and sentenced to 5 years imprisonment at the Federal Training Centre, Okalahoma City.


Untangling the mess

We were instructed by two Mexican companies to take action against IC&S in respect of claims notified, and ignored, by IC&S. Summary judgment proceedings were issued in August 2000.

On 6 October 2000, IC&S was placed into liquidation. The liquidator was faced with a difficult task.

• Company records were largely destroyed or unavailable.

• Management of IC&S was conducted entirely out of NZ.

• Former directors were either incarcerated or unavailable.


Untangling the mess

Investments?

$NZ10.9 million

Government bondsDominion of Melchizedek

Letter of credit Union De Credito Metropolitana, Mexico

Capital NotesBlue Horizon IncColonial Financial Holdings, IncZeoSynd Corp.

Shares Phoenix Resources Technologies, Wasatch Pharmaceutical Inc.

$ 0

$NZ9.8 million$ 0

Fictional country

Authorization revoked in October 1997. Worthless

Worthless

Sold at a loss (Phoenix shared office with Sam Love)


Untangling the mess

Emilio Sanchez, Partner of KMPG Mexico

Emails dated 10 & 11 April 2001

[10 April 2001]

…we have reason to believe that the said credit Union may be in trouble. Please take this information as preliminary information subject to verification…we will try to ascertain the status of this Union, and will revert to you as soon as possible……

[11 April 2001]

The Official Gazette (“Diario Oficial de la Federación”) of the Federal Government of Mexico shows that there is a Resolution dated October 20, 1997, from the National Banking & Securities Commission, buy means of which, this Government Body revokes and cancels the authorisation previously granted to the Unión de Crédito Metropolitana, S.A DE C.V… to operate as a Credit Union under the Laws of Mexico.


Untangling the mess

The 31 December 1999 audited financial statements show investments with a value of $NZ30.6 million prior to a $NZ9.4 million reserve for loss on realisation. We have been unable to obtain any tangible evidence that the investments and the underlying companies exist…

The liquidators final report showed:

• Claims of $NZ34,936,977.85

• Assets of $NZ 618,250 ($500,000 of which was the bond).

Liquidator, investigator and legal fees totalled $439,225. Unsecured creditors received 1.436 cents to the dollar.

Liquidator of IC&S

Letter to creditors

dated 7 February 2003:


Lessons learnt

The case examples of IC&S, and its predecessor First Assurance, highlight:

• Assumptions made in a regulated industry.

• The inherent risk in relying on assumptions when dealing with other industry participants.

• Neither regulators nor industry can be complacent in dealing with trans-national participants that are primarily subject to regulations in another jurisdiction.

fraudnet meeting, miami beach, florida3 march 2006 1 international casualty & surety company...

Documents

new zealand insurance

new zealand directors

new zealand media

new zealand policy holders

fraudnet meeting

miami beach

international insurer

registrar of companies