Near North Insurance, Former AccountantIndicted A federal grand jury that earlier indicted thehead of the Chicago-based insurance brokerage firm Near North hasadded fraud charges against the broker itself and the firmsone-time accountant.

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The June 12 superceding indictment names Near North InsuranceBrokerage Inc., a subsidiary of Near North National Group; DanielE. Watkins, a former Near North accountant; and Michael Segal, theformer chief executive officer.

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The charges follow the January arrest of Mr. Segal, who is thecompanys founder and former head. He is accused of misappropriatingmillions of dollars from the firms premium trust fund account(PFTA) over a 12-year period for his own and company use.

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According to the indictment released by prosecutors, the amountsranged from $5 million in 1990 to $24 million by 2001.

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Mr. Segal is currently free on $750,000 bail.

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Near North was indicted on seven counts of mail fraud and sevencounts of insurance fraud.

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Mr. Watkins, according to the grand jury, helped Mr. Segal inhis scheme, providing Mr. Segal the money from the fund andcovering over the losses. He, along with Mr. Segal, is charged withseven counts each of insurance fraud and mail fraud. He is alsocharged with one count of misappropriating funds from the firm.

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Mr. Segal and Near North are charged with making falsestatements to the Illinois Department of Insurance to hide thealleged fraud. The indictment also charges that they gave discountsand rebates on insurance premiums financed “in part by withdrawalsfrom the PFTA while it had a deficit balance,” the U.S. Attorneysoffice said in a statement.

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Near North, in a statement on its Web site, said it identifiedthe problems with the trust account and voluntarily brought them tothe attention of the states insurance department in August2001.

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The firm said it has fully cooperated with prosecutors duringthe past 18 months, adding, “As a significant employer, the companyis disappointed that the government has taken this extremeaction.”

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Near North said no individual or company has lost any money as aresult of the problems with the fund.

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“The company will fight vigorously against these charges and doeverything in its power to preserve the future of Near North,” thefirm said.

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Natalie Rofalikos, a spokesperson for Near North, toldNational Underwriter that no action has been taken by anystates to revoke the firms license. She also said that Near Northis continuing to negotiate a deal for the sale of the insurancefirm to Frontenac Company, LLC., which was announced inFebruary.

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A spokesman for the Illinois insurance department said it is nottaking any action against the firm at this time.

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If convicted, Near North could face five years probation andfines of $500,000 for each count. Mr. Segal and Mr. Watkins couldface jail time ranging from 5 to 20 years for each count and amaximum of $250,000 in fines for each count.


Reproduced from National Underwriter Edition, June 23, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.


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