Probe Continues Into Bogus Lloyd's Policies

Probe Continues Into Bogus Lloyd's Policies

By Daniel Hays

NU Online News Service, April 27, 12:35 a.m. EDT?With one arrest already in the bag, authorities said they are continuing to investigate an elaborate fraud operation that sold at least $4 million in fake Lloyd's coverage to hundreds of California bars and restaurants and involved operations in four states.[@@]

Yesterday, the first person charged--Richard W. Peterson, a 63-year ex-convict who was stripped of his broker's license in 1999--waived removal from Florida to face charges in U.S. District Court in Manhattan, according to the U.S. Attorney's Office in Miami.

Mr. Peterson, who was said to have used the alias Robert James, has been under investigation by the California Insurance Department, U.S. Postal inspectors and the U.S. Attorney's Office in New York. He has been held without bond since he was picked up at Miami Airport on April 19 after investigators missed catching him at his home in San Francisco.

The criminal complaint against him was issued in New York, where Lloyd's America Inc. is based. It is also the location for offices of an unnamed co-conspirator of Mr. Peterson, described in a postal inspector's complaint as a "purported" surplus lines broker.

Mr. Peterson, in the course of an alleged conspiracy that ran from 1999 through late last year, issued more than 350 fake policies to California restaurants, bars and taverns, said the state's insurance department. According to the complaint against him, the plot continued while Mr. Peterson was under home- and community confinement in 2001 doing an eight-month sentence for bankruptcy fraud.

An industry source told National Underwriter last year that the fake paperwork involved was an excellent reproduction of Lloyd's documents, and was only uncovered because a sharp-eyed California agent had seen a real Lloyd's policy and noticed a difference.

The fraud was said to have kept going because the perpetrators actually adjusted and paid off claims.

California's insurance department said nearly 70 of these purported Lloyd's policies were obtained through a single unnamed California wholesale insurance brokerage.

Lloyd's in October 2003 sent a warning about policies obtained through United Restaurant Services Corp. Surplus Lines Inc.

California Insurance Commissioner John Garamendi said sale of fake insurance policies exposed many "?mom-and-pop' restaurants to tremendous liability."

Mr. Peterson is facing charges of:

? Conspiracy to commit wire and mail fraud.

? Engaging in the business of insurance after having been convicted of a federal felony.

? Use of a fictitious name in a scheme to defraud.

If convicted he faces a maximum sentence of five years in prison on each of the three counts

Mr. Peterson, according to the California insurance department, used the names United Restaurant Services Corp., United Restaurant Services Cooperative, United Restaurant Insurance Services, and California Restaurant Specialty Cooperative (collectively known as URSC.)

The department said that URSC used offices in San Francisco, Las Vegas and Avondale, Ariz. to market fraudulent commercial liability policies to restaurants, bars and taverns throughout California using licensed insurance brokers.

The California insurance department said that in 1999 it had revoked Mr. Peterson's insurance license for stealing insureds' money by illegally raising their premiums, then fraudulently changing their policies to conceal the theft. The department asked any clients who may have purchased insurance from Mr. Peterson and/or URSC to call the department's Consumer Hotline at 1-800-927-HELP.