Five individuals with a South Florida company that provided workers' compensation insurance services to businesses have been hit with a civil complaint by the Securities and Exchange Commission alleging they pulled off a $30 million fraud.

A complaint filed March 6 in U.S. District Court in Miami charged that, between 2001 and 2004, the defendants "siphoned approximately $30 million" from the company, Certified Services Inc. Certified went bankrupt in 2006.

The SEC also alleged that the defendants "participated in a scheme to inflate Certified's financial statements by reporting approximately $47 million in bogus letters of credit as assets while not recording liabilities which reached a high of about $65 million in the third quarter of 2004."

The SEC accused Danny L Pixler, Certified's former chief executive officer; W. Anthony Huff, an alleged undisclosed control person of Certified; Anthony R. Russo, Certified's former chief financial officer and a licensed certified public accountant; and Otha Ray McCartha, a former board member of Certified.

The complaint states that Mr. Pixler and Mr. Huff used their control over a Certified controlling shareholder, Midwest Merger Management, LLC, to "improperly divert money out of Certified's coffers and into their own pockets by having Midwest enter into bogus agreements with Certified."

It also notes that Mr. Huff had his insurance license revoked in Kentucky in 1998 in connection with a $113,000 insurance premium theft. In 2004, he pled guilty to three counts of mail fraud in federal court in connection with a "multimillion-dollar fraud," and he paid $180,000 in restitution.

The SEC said it is seeking permanent injunctive relief against all defendants, and disgorgement and a court-ordered sworn accounting from all defendants except Mr. McCartha and Mr. Spinelli.

Christopher Martin, senior trial counsel at the SEC, said that Mr. Spinelli and Mr. McCartha had settled monetary penalties as part of a separate criminal case. Additionally, as part of that ruling, Mr. Spinelli and Mr. McCartha will serve 21 and 24 months, respectively, in prison.

"With the criminal action, they are going to jail and there are sizable restitution orders against them," said Mr. Martin.

He noted that the civil proceedings will include Mr. Spinelli and Mr. McCartha in the nonmonetary actions against the defendants, such as an officer and director bar, and an order barring the defendants from participating in any offering of a penny stock.

The charges were filed on March 6, and Mr. Martin said the defendants will have to answer the complaint within approximately 20 days.

"Their answers are due approximately 20 days from now, so they would have to answer the complaint, or file a motion to dismiss, or if they didn't, we would move to default. It's just the normal litigation on the civil side. There's no deadline or court date right now, but the general rule of thumb is they have about 20 days to answer the complaint," Mr. Martin said.

Special Reports /

SEC Names Former WC Provider's Officers In $30M Scam

Related Stories

Recommended For You