A Texas contractor who conspired with a corrupt Allstateadjuster to cheat 408 insureds was sentenced today to repay morethan $1.3 million to injured policyholders and serve 51 months infederal prison.

The contractor–Roland F. Villarreal, 45–was arrested by the FBIlast year with former Allstate adjuster Chandler Bruton, 38. Laterhe pleaded guilty to conspiracy to launder money, while Mr. Brutonpleaded guilty to conspiracy to commit insurance fraud.

When appearing before U.S. District Court Judge Fred Biery inSan Antonio, Mr. Villarreal–in addition to prison time–wassentenced with Mr. Bruton to make joint-and-several restitution of$1.337 million.

Mr. Bruton appeared before Judge Biery on Wednesday, and wassentenced 30 months in prison, restitution and three yearssupervised probation.

The Texas Department of Insurance said it was not made aware ofthe charges in the case when Mr. Bruton was dismissed in 2003,because under the law at that time an insurance company was onlyrequired to report his activity to law enforcement, which Allstatedid.

The law was later changed, and since September 2005, under thefraud reporting statute, an insurance company must report findingsof criminality to the department.

In pleading guilty, Mr. Bruton admitted to a seven-year-longscheme in which he funneled money that was supposedly going to payfor policyholders' repair work to Mr. Villarreal, who did little orno actual work on the damaged properties.

An offshoot of the case has been a civil suit by Fred Klecka,another adjuster in the Allstate San Antonio office, who charges hewas fired when he ignored management orders not to cooperate withthe FBI investigation of the case. His attorney, Matthew R.Pearson, said the company feared if the FBI had the full details,other employees might be charged in the case.

Mr. Pearson also alleges that policyholders whose claims wereimproperly handled by Mr. Bruton were never informed or made wholeby the company. Allstate has denied his accusations.

According to Mr. Pearson, no criminal complaint had been filedagainst the Allstate managers in the claims section who allegedlytold his client to keep mum.

According to a Web posting by the Coalition Against InsuranceFraud, “observers have pointed to the case as a possiblecontributor to rising insurance premiums and a reason for thepublic's distrust of the insurance industry. Allstate countered thecase alone did not affect premiums.”