NU Online News Service, Jan. 5, 3:52 p.m. EST
Georgia Insurance Commissioner John Oxendine announced today that he has launched a criminal probe of M. Clark Fain, III, who headed the now-liquidated workers' compensation insurer Southeastern U.S. Insurance, Inc. (SEUS).
Mr. Oxendine said in a statement he had directed his Fraud Unit to investigate the business practices of Mr. Fain, who presided over SEUS as chief executive officer when the company made a "questionable" $10 million investment in a quail hunting club it owned in Seminole County, when the company was in no financial condition to make such an investment. The transaction was done without proper regulatory approval, explained the commissioner.
The commissioner, in an interview, said in the past Mr. Fain has been one of his political contributors, but that would not influence his inquiry, "I'm trying to put him in jail." He said in the wake of the Enron scandal changes had been made in Georgia law making fraudulent accounting to his department a felony matter.
He said the department had notified Mr. Fain's lawyers he is being investigated. The former CEO,said Mr. Oxendine, is suspected of inflating company assets and understating liabilities, " same thing Enron's doing." A charge of felony insurance fraud carries a prison term of two to 10 years in prison.
Mr. Oxendine noted that on Oct. 27, 2009, he secured an order from Fulton County Superior Court Judge Thomas R. Campbell Jr. putting SEUS into liquidation and naming Mr. Oxendine as the liquidator. On Dec. 29, 2009, the company's physical assets were auctioned off.
"After reviewing financial transactions made by the company, I find no other recourse but to open a criminal investigation into the actions of Mr. Fain," Mr. Oxendine said, adding that that "I can only compare the bookkeeping methods of the company to those of Enron."
Department analysts became suspicious of SEUS when they learned that the company had engaged in the hunting club transaction. At Mr. Oxendine's insistence, SEUS unwound the transaction, according to the department, which said it also discovered the firm was overstating assets while significantly understating liabilities.
"Indications are that this is a case of corporate greed. The questionable accounting engaged in by the company ultimately has a huge negative impact on the lives of decent, innocent citizens," said the commissioner.
The insurer provided coverage to dozens of towns and school boards in South Georgia, according to WALB News 10. The department said SEUS had approximately 209 workers' comp policyholders at the time of the liquidation. The company was first licensed in November 2001 as a captive insurer.
Under the consent order of liquidation, the company was banned from doing further business.
The announcement of the investigation said that anyone who has more information concerning this case can contact Commissioner Oxendine's office at 1-800-656-2298.
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