Friday, December 26, 2014

Arizona Insurance Agent Embezzles $400K In Insurance Premiums; Runs for Congress; Father Helps Make Restitution

From Property Casualty 360 on 12/19/14:

Although Congressmen write law, they are not above it. Former Arizona Congressman Richard Renzi learned this lesson the hard way when he was convicted by a jury on charges of conspiracy, honest-services fraud, extortion, money laundering, making false statements to insurance regulators, and racketeering. In U.S. v. Renzi, the Ninth Circuit Court of Appeal was asked to reverse convictions for blatant insurance fraud by using clients funds held in trust to fund Renzi’s successful campaign for Congress.

The evidence showed that Renzi, who owned and operated an insurance agency, misappropriated clients’ insurance premiums to fund his congressional campaign, and lied to insurance regulators and clients to cover his tracks. Finally, the evidence established that Renzi used his insurance business as an enterprise to conduct a pattern of racketeering activity by diverting clients’ insurance premiums for his personal use, facilitating an extortionate land transfer, and laundering its proceeds.

Renzi owned and operated Renzi & Co. (R & C), an insurance agency specializing in obtaining insurance coverage for non-profit organizations and crisis pregnancy centers. On Dec. 10, 2001, Renzi publicly announced his candidacy for a seat in the U.S. House of Representatives serving Arizona’s First Congressional District. The very next day, Renzi began diverting cash from R & C to fund his congressional campaign. Between December 2001 and March 2002, Renzi transferred more than $400,000 from insurance premiums paid to R & C to his “Rick Renzi for Congress” account. To avoid campaign disclosure regulations, Renzi claimed the money as a personal loan to the Renzi campaign. But most of the diverted funds were directly traceable to insurance premiums R & C had collected from clients.
Because R & C no longer had the money, Renzi did not pay the broker to fund the insurance for his clients. Two months later, Safeco—showing amazing patience—warned R & C that it planned to cancel R & C’s policies for nonpayment.

A month later Safeco began sending cancellation notices to R & C’s clients. With cancellation notices in hand, worried clients began calling R & C. Renzi dictated a letter sent to clients later that month. The letter stated that, because “spiritual counseling was no longer covered” under Safeco’s policy, R & C had “replaced” Safeco with the “Jimcor Insurance Co.” The letter promised that clients would experience “no lapse in coverage.” Jimcor is not an insurance company (While Jimcor Agency was a broker for some of R & C’s policies, Jimcor was not a broker for these particular ones. And although Jimcor Agency was a broker, it was not an insurer.) The new certificates Renzi sent were entirely fabricated. Renzi caused at least 74 letters and phony insurance certificates to be delivered, but only to clients who had called R & C to voice concern.

On November 5, 2002, Renzi was elected to the House of Representatives. A few weeks later, Renzi received a $230,000 gift from his father. That same day, R & C paid the full amount due and Safeco decided to retroactively reinstate all of R & C’s policies.

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