Oriska Insurance Company, a small workers' compensation carrierbeing investigated for fraud by the FBI, remained under the controlof the New York Insurance Department after a court proceedingyesterday.

The Oriskany, N.Y.-based company, which the department hascalled insolvent, was due to challenge the temporary receivershipthat 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, accordingto Andrew Mais, an insurance department spokesperson.

Judge Hester last Thursday allowed the state to take over afterInsurance Superintendent Howard Mills, in a court filing, said ifthe company kept doing business it would be "hazardous to itspolicyholders, creditors and the public."

A department investigation found the company had a $2.4 millionreserve deficiency and, instead of its required surplus topolicyholders 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 theNorthern District in Albany had informed him the FBI had seized "asignificant portion of the books and records of the company" onJuly 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.--waspurchased in 2002 by its then chief operating officer, James M.Kernan; the holding unit also includes Reinsurance Company ofAmerica and Financial Benefits Insurance Company in Illinois andInsurance Company of Americas in Florida.

Mr. Kernan, an attorney and now Oriska insurance president, wasdescribed by Mr. Mills as "the ultimate controlling person" ofOriska Corp.

Among other wanted items listed in the FBI warrant were bankrecords of six persons including Mr. Kernan and Robert AndersonSr., who reportedly owns the searched premises and has a record ofquestionable insurance-related activity.

Others listed in the warrant include Marlene Kernan, Robert J.Anderson Jr., Allen Lill and Teresa Heinrich. Mr. Kernan did notimmediately respond to a request for comment left with hisoffice.

From the Oriska companies and listed individuals the FBI soughtfinancial statements, insurance records, work orders, rentalreceipts, 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. Kernanas a vice president and Mary Agnes Kernan as a director. The exactrelationship of the Kernans to the company president was notimmediately known. Oriska Insurance Company, listed as the KernanGroup, reported net admitted assets of $18.2 million for 2005.

Mr. Mais said the company is now under control of thedepartment's liquidation unit.