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HOUSTON—Federal prosecutors have charged six men in an alleged multiyear scheme to sell fake commercial liability policies using a series of fraudulent offshore insurers.
The defendants—including an accountant in St. Kitts, West Indies, and brokers in Texas and Quebec—issued policies to nursing homes, apartment complexes and other businesses across the country, providing bogus financial and reinsurance information to policyholders, according to an indictment brought this month in U.S. District Court in Houston.
One of the policyholders was the operator of the Ethan Allen, a tour boat that capsized and sank in Lake George, N.Y., killing 20 elderly tourists in October 2005. The defendants later denied claims for the accident, backdating documents to make it appear that the coverage never was placed, the indictment alleges.
Charged in the case are M. Irvin Boncamper, the St. Kitts accountant; Christopher Purser of Houston and Robert Steve Mills of Dallas, brokers who operated a pair of affinity groups that funneled business to the insurers; Edmund Hugh Benton, who allegedly helped run Tri-Continental Exchange Ltd., a pool of offshore insurers; William Ballachey, a purported reinsurance intermediary in Brossard, Quebec; and Marc-Thibaut Duchesne, a U.K. citizen whose company, Morganbank P.L.C., provided bogus eurobonds that were reported as “assets” by the insurers, according to the indictment.
Mr. Boncamper was arrested at Miami International Airport in January after arriving on a flight from St. Kitts, according to the U.S. attorney's office in Houston. He was being held without bail.
Mr. Mills was arrested in Bonita Springs, Fla., in January and Mr. Purser was taken into custody in Houston this month.
None had yet entered a plea.
A lawyer for Mr. Boncamper declined to comment on the charges; lawyers for the other two men could not be reached.
The whereabouts of Messrs. Duchesne, Ballachey and Benton were unknown, said federal prosecutors, who have asked for help in locating them.
Mr. Duchesne—who also has used the names Marc Spinks, Carl Von Wasserman and Otto Von Rittner, court records show—escaped this year from a minimum security prison in the United Kingdom, where he was serving a 41/2-year sentence for swindling hedge fund investors of £15 million ($24.2 million). At the time, he was awaiting extradition to the U.S. to face charges in an unrelated penny stock fraud case.
Mr. Ballachey also has run afoul the law previously. He pleaded guilty in a Quebec court to 297 counts of forging premium finance loan applications and was sentenced to eight months of house arrest in 2006. The previous year, he and two other men were charged in U.S. District Court in New York with collecting fees for bogus financial guarantee bonds supposedly written by an Indonesian unit of Allianz A.G. Mr. Ballachey was never extradited from Canada or tried on the charges; the two other men were convicted of wire fraud in 2008.
The scheme alleged in the Houston indictment began with Mr. Purser issuing fake policies in the names of actual U.S. insurers, prosecutors allege. Through his Houston brokerage, Monarch Insurance Services, he allegedly sold liability coverage in 2000 and 2001 in the names of Maryland Casualty Co., a unit of Zurich Insurance Co., and ACE Ltd.'s Westchester Surplus Lines Insurance Co.
Mr. Ballachey purportedly arranged reinsurance with a pair of Indonesian companies, PT ING Insurance Indonesia and PT Assuranzi Allianz Utama Indonesia. The insurance and reinsurance coverages were phony, prosecutors allege. Westchester later sued Monarch, ING denied writing the reinsurance and Allianz said the signature of one of its employees on coverage documents was forged.
Messrs. Purser and Mills went on to form two affinity groups, International Property Owners Assn. and Global Property Owners Assn., the latter after the Texas Insurance Department revoked Mr. Purser's and Monarch's broker licenses and issued a cease-and-desist order to IPOA in 2003.
The affinity groups sold worthless policies on behalf of a string of bogus Caribbean insurers during the next several years, prosecutors allege. The companies included Commercial Acceptance Indemnity Ltd., Heritage Mutual Surety Ltd., United Re-Insurance Group Ltd., Polaris International Ltd. and Brentwood Re Ltd., all based in Nevis; and Builders & Contractors Assurance Co. Ltd. of the Bahamas.
Mr. Duchesne supplied millions of dollars of fraudulent eurobonds that several insurers reported as capital, and Mr. Boncamper prepared phony financial statements and audit opinions, prosecutors allege.
Polaris, for example, reported assets of e174 million ($238 million), virtually all of which were fraudulent Morganbank euro-bonds, in a 2003 statement that featured an audit opinion signed by “Dr. Carl Von Wasserman”—Mr. Duchesne's alias—as an officer of a bogus Swiss company called Bankhaus Schweizer Bundnisses A.G. Mr. Boncamper later wrote a letter saying he had reviewed the “audited” statement and found it in accord with generally accepted auditing standards.
Shoreline Cruises Inc., the Ethan Allen's operator, bought liability coverage from Mr. Purser through the affinity group GPOA in 2004. The policy was issued by United Re-Insurance and reinsured by Commercial Acceptance, Brentwood Re and Polaris, according to the indictment. Mr. Purser renewed Shoreline's coverage in 2005.
After the Ethan Allen sank later that year, Messrs. Mills and Purser scrambled to avoid the ensuing claims, the indictment alleges. Mr. Purser prepared a letter to Shoreline, backdated to a year before the accident, purporting to warn the company against going uninsured. A United Re letter to Shoreline's lawyer later cited the fake document in an effort to make it appear that Shoreline never actually bought the coverage, prosecutors charge.
Along with the other charges, prosecutors also allege that Mr. Mills tried to pressure his daughter into lying to a grand jury investigating the case. The daughter's name had been forged as “claims manager” for United Re. Shortly before her grand jury appearance, Mr. Mills wrote her a four-page note advising her how to answer questions, the indictment alleges.
If convicted, the defendants face statutory maximum sentences of 20 years per count on one count each of conspiracy and money laundering and nine counts of wire fraud.
Separately, Mr. Mills faces 20 years on an obstruction of justice charge.