Tracking the

Hawaiian Insurance Companies


 

 

Sightings from The Catbird Seat

~ o ~

July 1, 2006

Regulators take over property insurer

A buyer is sought for Hawaiian Insurance & Guaranty Co. Ltd.

By Stewart Yerton, Star-Bulletin

Hawaii’s fourth-largest homeowners insurance company has been taken over by state insurance regulators, who are working with counterparts in other states to find a buyer for the Hawaii firm and several of its sister insurance companies.

The move by Hawaii Insurance Commissioner J.P. Schmidt will enable the state to oversee a sale of Hawaiian Insurance & Guaranty Co. Ltd., said Ernest Fukeda, president of HIG.

HIG has suffered from a rash of customer defections following financial troubles suffered by its Alabama-based parent company, Vesta Insurance Group, which was beset by hurricane-related losses in the Gulf South. In March, rating agencies downgraded Vesta’s bond rating to C+, a rating for extremely risky bonds that is considered too low to meet some mortgage lending requirements.

Although Fukeda said HIG is financially sound, its parent’s rating dragged down the local subsidiary, causing concerns among several major mortgage lenders. In May, First Hawaiian Bank, American Savings Bank and Central Pacific Bank instructed HIG-insured mortgage borrowers to meet with their insurance agents to discuss the downgrade. Bank of Hawaii went a step further, telling HIG policyholders to seek another insurer. [Good reasons why the BANKS should never have been allowed to get into the INSURANCE business!].

Although HIG has “more than adequate funds to continue to pay claims” and recently secured the backing of AA-rated reinsurers, Fukeda said the company has lost about 11 percent of its customers so far this year. The company has about 29,000 policyholders, he said….

The question appears to be whether a buyer can be found before HIG suffers more defections, causing its business to deteriorate further. Schmidt said he is working with his counterparts in Alabama, California, Florida and Texas to close a deal with a prospective buyer group interested in acquiring the Vesta affiliates in those states, as well as the Hawaii business.

Schmidt declined to identify the prospective buyer group….

Read the full story at…

http://starbulletin.com/2006/07/01/news/story05.html


 

July 5, 2006

Hawaiian Insurance & Guaranty’s
parent is in default

Associated Press, Star-Bulletin

BIRMINGHAM, Ala. » Vesta Insurance Group is in default on loan agreements and officials say Texas regulators have taken over six of the Birmingham company’s subsidiaries.

Regulators have also seized control of Vesta companies in Hawaii and Florida, which, according to the company’s last annual report, would mean eight of the company’s 10 subsidiaries have been seized.

Six insurers owned by Vesta will be operated by the Texas Commissioner of Insurance as part of a court-ordered rehabilitation, the company announced Monday. Such steps are usually taken when a company is losing customers at a rapid pace, suffered a disastrous loss or might not be able to pay claims….

Vesta was once one of the state’s most valuable publicly traded companies, with stocks selling for about $53 in June 1998. The company’s shares fell 4.5 cents to 4.5 cents Monday….

Vesta, which lost $318 million from 2001 through 2004, hasn’t filed Securities and Exchange Commission financial documents in two years. Its shares have been removed from the New York Stock Exchange.

The company’s troubles began June 2, 1998 when the company began examining accounting irregularities. Chief Executive Robert Huffman resigned. The company erased $49 million of profit reported for 1993 to 1997. Vesta said $29 million of profit came from premiums improperly reported as income….

Read the full story at…

http://starbulletin.com/2006/07/05/business/story02.html

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report

October 27, 2005

VESTA INSURANCE GROUP, INC.

3760 River Run Drive
Birmingham, Alabama 35243

Item 4.01 Changes in Registrant’s Certifying Accountant

On October 27, 2005, PricewaterhouseCoopers LLP (“PwC”) notified the Chairman of the Audit Committee of the Board of Directors of Vesta Insurance Group, Inc. (the “Company”) that it would decline to stand for re-election as the Company’s independent registered public accounting firm after the completion of the following: (i) procedures regarding the financial statements of the Company as of December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004 and the Form 10-K in which such financial statements will be included and (ii) procedures regarding the unaudited interim financial statements of the Company as of September 30, 2004 and for the quarter and nine-month periods then ended and the Form 10-Q in which such unaudited interim financial statements will be included. PwC has advised the Company that its reports on the Company’s consolidated financial statements for the fiscal years ended December 31, 2003 and 2002 and for all prior periods have been withdrawn, and the Company disclosed that its previously issued financial statements may not be reliable pursuant to an Item 4.02 Form 8-K filed with the United States Securities and Exchange Commission on November 19, 2004. The Audit Committee did not recommend or approve PwC’s decision to decline to stand for re-election….

As previously disclosed, the Company has identified material weaknesses in the effectiveness of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of December 31, 2004, management identified the following material weaknesses in the Company’s internal control over financial reporting:

1. As of December 31, 2004, the Company did not maintain an effective control environment. Specifically, the organizational structure was not adequate to support the size, complexity and operating activities of the Company. Further, the company did not maintain effective anti-fraud programs and controls. Specifically, the Company did not have a consistent process for conducting background checks of newly hired employees which resulted in an alleged fraud having been perpetrated by a member of senior management discussed in 3 below….

2. The Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training to support the size and complexity of the Company’s current organizational structure and financial reporting requirements…

3. We did not maintain effective controls over vendor setup in our accounts payable system. Specifically, we did not maintain a process to independently verify the validity of vendors prior to set up for payment in our accounts payable system. This control deficiency contributed to alleged frauds that were material to the financial statements being perpetrated by the Vice President-Chief Information Officer of Vesta Fire Insurance Corporation and an individual within the claims department….

4. We did not maintain effective controls over the completeness and accuracy of our financial reporting and close processes relating to financial statement consolidations, inter-company eliminations and reconciliations of subledger to general ledger balances….

5. We did not maintain effective controls over our periodic evaluation of the carrying amount of goodwill….

6. We did not maintain effective review and monitoring controls over the accuracy of ceded reinsurance balances that are manually input into our general ledger….

7. We did not maintain effective controls over the review of our aged ceded reinsurance balances….

8. We did not maintain effective controls over the accounting for reinsurance contracts at our life insurance subsidiary. Specifically, we did not maintain effective controls over the accounting for certain third party investments held by the Company under a funds held reinsurance agreement. As a result, the Company recorded realized gains and losses in its statements of operations related to the sale of investments that belonged to a third party….

9. We did not maintain effective controls over establishing and monitoring gross insurance reserve amounts related to certain discontinued product lines….

The Company’s Audit Committee of the Board of Directors has discussed these material weaknesses with PwC. The Company and its Audit Committee have authorized PwC to respond fully to the inquiries of the successor accountant concerning these material weaknesses….

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Dated as of November 2, 2005.

VESTA INSURANCE GROUP, INC.

By:

/s/ Donald W. Thornton

Its: Senior Vice President —

General Counsel and Secretary

Exhibit 16.1

November 2, 2005

Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549

Commissioners:

We have read the statements made by Vesta Insurance Group, Inc. (copy attached), which we understand will be filed with the United States Securities and Exchange Commission, pursuant to Item 4.01 of Form 8-K, as part of the Form 8-K report of Vesta Insurance Group, Inc. dated October 27, 2005. We agree with the statements concerning our Firm in such Form 8-K. However, we make no comment whatsoever regarding the current status of the material weaknesses disclosed in the Item 4.01 Form 8-K of the Company or with respect to any remedial actions taken with respect to such material weaknesses.

Very truly yours,

/s/ PricewaterhouseCoopers LLP, Birmingham, Alabama

For more, GO TO > > > Vampires in the Vesta Insurance Group; What Price Waterhouse?


 

January 2, 2006

Ex-Vesta Insurance Adjuster
Accused of Fraud in Ala.

The Insurance Journal

A former Vesta Insurance adjuster has been indicted on forgery and mail fraud charges alleging that she made fictitious claims for more than $220,000, the U.S. attorney’s office in Alabama said.

Felicia Michelle McKinzy, 36, of Birmingham was charged in a 41-count indictment that alleged she made the claims in 2001 and 2002.

“Fraud of this magnitude by an insider at an insurance company not only costs that company, but its policyholders and consumers,’‘ Alice Martin, U.S. attorney for the Northern District of Alabama, said in a news release.

McKinzy is accused of causing Vesta to issue checks to a fictitious customer and mail them to a private mailbox. She is accused of depositing the checks into a corporate account she had established under the same fictitious name.

The indictment also said she forged claims by legitimate policyholders and deposited resulting insurance checks into the corporate account she had established.

www.insurancejournal.com/news/southeast/2006/01/02/63645.htm


 

March 17, 2005

VIA fax @ 808-586-2806

and e-mail: insurance@dcca.hawaii.gov


J.P. Schmidt, Esq.

Hawaii Insurance Commissioner

335 Merchant Street, 2nd Floor, Rm 213

Honolulu, Hawaii 96813

 

Re:     Complaint Against:  Ace Ltd.; Marsh & McLennan; Chubb Group; XL Insurance

          Their Insured:          Kamehameha Schools; P&C Insurance Co., et al.


Dear Commissioner Schmidt:


Due to new information regarding Ace Ltd. and the other companies listed above, this is to file an amended complaint against these companies for fraud, racketeering, bid-rigging, price fixing, unfair competition, and unfair claims settlement practices. I quote some of the latest information from a Forbes article dated March 16, 2005:


Ace Ltd. Slammed by 43 Subpoenas

Forbes


Ace Ltd., the property and casualty insurer recently implicated in a probe of insurance industry practices, on Wednesday said it received 43 subpoenas and legal inquiries regarding its involvement in bid rigging and price fixing.


The Bermuda-based company said in a filing with the Securities and Exchange Commission it received subpoenas and other inquiries from 9 state attorneys general and one from Washington, D.C. Further, insurance commissioners and other regulators from 10 states also launched some form of legal action.


In addition, Ace said the SEC and New York Attorney General Eliot Spitzer have issued subpoenas for information relating to “non-traditional or loss mitigating insurance products.” The insurer said it will continue to cooperate with such requests, and is also conducting its own internal investigation.


Ace was one of four insurers implicated, but not formally charged, in an investigation of brokerage Marsh & McLennan Co. launched in October by Spitzer. Spitzer filed a lawsuit against the nation’s largest insurance broker accusing it of bid rigging, price fixing, and demanding incentive fees from insurance companies in exchange for sending more business their way….


ACE said Chief Executive Evan Greenberg received a $1 million salary in 2004, with a $2.7 million bonus. He is scheduled to get a raise of $25,000 this year, according to the SEC filing.


Greenberg is the son of Maurice Greenberg, who stepped down this week as CEO of American International Group Inc. Greenberg’s older brother, Jeffrey, was CEO of Marsh & McLennan before being ousted in the wake of Spitzer’s investigation. The insurer said it has received legal inquiries from attorneys general in Connecticut, Florida, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Texas and West Virginia.


Insurance commissioners and other regulators from California, Florida, Illinois, Maryland, Michigan, Minnesota, New York, North Carolina, Pennsylvania and Texas have also contacted Ace….


< END OF QUOTATION >


You will, no doubt, recall that in 1992, Hawaiian Insurance & Guaranty Co. was declared insolvent largely due to Hurricane Iniki losses, and that the company was later sold to Vesta Insurance Group. In 1998, Vesta was involved in a financial scandal which was reported by the Honolulu Star-Bulletin on June 2, 1998, as follows:


Hawaii insurer’s parent pounded on Wall St.


Vesta Group, which owns Hawaiian Insurance & Guaranty,
reports ‘accounting irregularities’


NEW YORK — Vesta Insurance Group Inc., which owns a major Hawaii insurer, saw it shares plunge 47 percent today, a day after the parent company said “possible accounting irregularities” will force it to restate earnings for the last two quarters.

Vesta’s president and chief executive officer, Robert Y. Huffman, also has resigned.

However, the company’s Hawaii operation, Hawaiian Insurance & Guaranty Co., said it has not been affected by the changes at the Birmingham, Ala.-based parent.

 

“I expect no impact whatsoever on HIG’s operations,” said Pete Grimes, HIG general manager. HIG had been declared insolvent in 1992 after Hurricane Iniki losses. It was later rehabilitated by the state insurance division and was sold to Vesta in 1995 for $35 million….

* * *

To show you the connection between these entities and Kamehameha Schools, their for-profit captive, P&C Insurance Co., Ltd., and Chubb Group, I quote the following from Vesta Insurance Group’s Form 8-K, dated July 18, 2001:


On July 10, 2001, Vesta Fire Insurance Corporation, an Illinois corporation (“Vesta Fire”) and a wholly owned subsidiary of Vesta Insurance Group, Inc. completed its acquisition of 100% of the outstanding shares of capital stock of Florida Select Insurance Holdings, Inc. for approximately $64.5 million in cash. Vesta Fire acquired the stock of FSIH from FSIH’s four stockholders – Centre Solutions (Bermuda) Limited, Mynd Corporation, Orienta Point Group, L.L.C., and Kamehameha Schools Bernice Pauahi Bishop Estate….

* * *

Vesta Insurance Group, Inc.
Notes to Consolidated Financial Statements

Securities Litigation


Subsequent to the filing of our quarterly report on Form 10-Q for the period ended March 31, 1998 with the U.S. Securities and Exchange Commission (“SEC” or “Commission”), we commenced an internal investigation to determine the exact scope and amount of certain reductions of reserves and overstatement of premium income in our reinsurance assumed business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. This investigation concluded that inappropriate amounts had, in fact, been recorded and we determined that we should restate our previously issued 1997 financial statements and first quarter 1998 Form 10-Q….


We restated our previously issued financial statements for 1995, 1996, and 1997 and our first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders’ equity of approximately $75.2 million through March 31, 1998. Commencing in June 1998, we and several of our current and former officers and directors were named as defendants in several purported class action lawsuits filed in the United States District Court for the Northern District of Alabama. Several of our officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant. In addition, we received various inquiries and requests for information from various state departments of insurance and other regulatory authorities, including a subpoena issued to Vesta on August 24, 1998 by the 34 Commission as part of a formal, non-public order of investigation….


We have several layers of directors’ and officers’ liability insurance coverage (“D&O insurance”), the terms of which may cover all or a portion of the damages or settlement costs of the class action. These policies provide up to $100 million in D&O insurance to cover damages or settlement costs and an additional policy provides another layer of $10 million D&O insurance to cover any damages awarded by a court in these actions. Cincinnati Insurance Company (“Cincinnati”) issued the primary policy that provides the first $25 million of D&O insurance.


Federal Insurance Company (The Chubb Group) issued an excess D&O insurance policy which provides coverage for the second $25 million in losses, if necessary. The balance of the coverage is provided by a group of insurers and was purchased after the class actions comprising the consolidated class action were filed….

 

In September 1998, after these actions were filed, Cincinnati, which provides the primary insurance policy, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to rescind the policy and avoid the coverage….


A dispute has also arisen with CIGNA Property and Casualty Insurance Company (“CIGNA”) (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby we assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement, seeking payment of the balances that CIGNA claims are due under the terms of the treaty. In addition, during the fourth quarter, the treaty was terminated on a cut-off basis. Vesta is seeking recoupment of all improper claims payments and excessive expense allocations and charges from CIGNA. This arbitration is in its early stages and the ultimate outcome cannot be determined at this time….


< END OF QUOTATION>


In previous complaints to your office, and in my RICO lawsuit, I have already detailed many of my allegations against Marsh & McLennan, Inc. and Federal Insurance Company. However, since this news related to Ace Ltd. has just been released, and as Ace Ltd. was one of the insurance carriers used by Marsh & McLennan for the insurance programs of Kamehameha Schools and P&C, I am now requesting that you add Ace Ltd. to the list of companies which I have submitted for your investigation.


More information regarding these matters can be found at the following Internet addresses:


www.the-catbird-seat.net/Claims-By-Harmon.htm

www.the-catbird-seat.net/Claims-Branch-Kamehameha.htm

www.the-catbird-seat.net/Claims-Branch-Marsh-McLennan.htm

www.the-catbird-seat.net/ACE.htm

www.the-catbird-seat.net/ChubbGroup.htm

www.the-catbird-seat.net/MarshBirds.htm

www.the-catbird-seat.net/Bishop4.htm


Due to these recent revelations, I would also strongly encourage your office to join with the Insurance Commissioners of the other states named in the above article, to pursue recovery of overcharges and other damages from these insurance companies and their agents and brokers, for the benefit of Hawaii’s taxpayers and consumers.


Please feel free to contact me if you have any questions or if I can provide any other information which may be helpful in your investigation of this complaint. Thank you very much for your consideration in this extremely serious matter.


Very truly yours,




< Name Withheld >, CPCU, ARM

 

cc:      Fraud Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail: insfraud@dcca.hawaii.gov)

 

Captive Insurance Branch, Insurance Division, Dept of Consumer Affairs

(via e-mail: captiveins@dcca.hawaii.gov)

 

National Association of Insurance Commissioners

(via e-mail: www.external-apps.naic.org/fraud)

 

Michael G. Cherkasky, President and Chief Executive Officer

Marsh & McLennan Companies, Inc. (via fax @ 212-345-4838)

 

John D. Finnegan, President and Chief Executive Officer

The Chubb Corporation (via fax @ 908-903-2027 and info@chubb.com)

 

William K. Slate II, President/CEO, American Arbitration Association

(via fax @ 212-716-5905 and Websitemail@adr.org)

 

Mark Appel, Senior Vice President, International Centre for Dispute Resolution

(via e-mail: AppelM@adr.org)

 

Harry Kaminsky, Vice President, Neutrals’ Services, Phoenix, AZ

(via e-mail: KaminskyH@adr.org)

 

James B. Farris, Senior Case Manager, American Arbitration Association

(via fax @ 559-490-1919 and e-mail: Farrisj@adr.org)

 

Mary Lou Woo, c/o Steven Guttman, Kessner Duca Umebayashi, et al.

(via fax @ 808-529-7177 and e-mail: sguttman@kdubm.com)

 

          Mark Bennett, Attorney General, State of Hawaii 

(via fax @ 808- 586-1239 and e-mail: hawaiiag@hawaii.gov )

 

Dee Jay Mailer, CEO, Kamehameha Schools (via fax @ 808-523-6313)

 

Board of Directors, P&C Insurance Co., Inc. (via fax @ 808-523-6313)

 

Matt A. Tsukazaki, Esq., Torkildson Katz Fonseca Jaffe Moore & Hetherington

(via fax @ 808-523-6001 and e-mail: mat@torkildson.com)

 

Governor Linda Lingle, State of Hawaii (via fax @ 808-586-0006)

 

Hugh Jones, Deputy Attorney General (via fax @ 808-586-1477)

 

Janet Hughes, Internal Revenue Service (via fax @ 303-844-3596)

 

Billy Beaver, Pension & Welfare Benefit Admin. (via fax @ 626-229-1098)

 

Ralph F. Boyd, Jr., U.S. Dept. of Justice (via fax @ 202-514-1116)

 

Lyn Flanigan Anzai, Hawaii State Bar Association (via e-mail: lanzai@hsba.org)

 

Susan Tius, Esq., c/o Rush Moore Craven Sutton Morry & Beh

(via fax @ 808-521-0597)

 

Gerard Jervis, Lokelani Lindsey, Henry Peters, Oswald Stender, and Richard Wong, c/o Kenneth Hipp, Esq., Marr Hipp Jones & Pepper

(via fax @ 808-536-6700)

 

Jeffrey H.K. Sia, Esq., Ayabe Chong Nishimoto Sia & Nakamura

(via fax @ 808-526-3491)

 

          Robert S. Tameler, ALPS, Claims Admin for Bradley Tamm and Greg Dunn
(via fax @ 406-728-7416)

 

          Mike Coulter, Deputy Managing Director, Aon Insurance Managers
(via fax @ 808-540-4301 and e-mail:
mike_coulter@agl.aon.com)

 

          Casimer Fidele, Tradewind Insurance Company
(via fax @ 808-521-7489)

 

          Colbert Matsumoto, CEO, Island Insurance Co.
(via fax @ 808-564-8456)

 

Roy F. Hughes, Esq. (via e-mail: hthughes@hawaii.rr.com)

 

          PricewaterhouseCoopers, c/o Warren Price III, Esq.
(via fax @ 808-533-0549)

 

Terry Mullen, CEO/Pres., John Mullen & Co. (via fax @ 808-531-0053)

 

National Association of Consumer Advocates (www.naca.net)

(via e-mail: info@naca.net)

 

Public Citizen (via e-mail through website: www.citizen.org)

 

U.S. Public Interest Research Group (www.uspirg.org)

(vis e-mail: uspirg@pirg.org)

 

First Amendment Center (www.firstamendmentcenter.org)

(via e-mail: info@fac.org)

 

Trial Lawyers for Public Justice, National Headquarters (www.tlpj.org)

(via fax @ 202-232-7203)

 

Consumer Action (via e-mail through their website: www.consumer-action.org)

 

Consumers Union, DC Office (www.consumersunion.org)

(via fax @ 202-265-9548)

 

Honolulu Community-Media Council (via e-mail: hc-mc@verizon.net)

 

Mark Burch, University of Hawaii (via e-mail: burch@hawaii.edu)

 

CPCU Society (www.cpcusociety.org)

(via e-mail: membercenter@cpcusociety.org)

 

Hawaii Chapter, CPCU (www.hawaii.cpcusociety.org)

(Joseph Hu, CPCU, President: Josephh@servco.com)

(Jeff Bronaugh, CPCU, President Elect: Jeff@kingneel.com)

(Wayne Hikida, CPCU, V.P.: fax: 808-564-8456)

(Ann Donohue, CPCU, Sec.: Ann.donohue@ace-ina.com)

(Janet Ng, CPCU, Treas.: fax: 808-540-4301)

(Marian Brown, CPCU, Past Pres.: Mbrown@atlasinsurance.com)

(Gloria Sumitani, CPCU, Past Pres.: SumitaniGs@aol.com)

(Bruce McEwan, CPCU, Education Chairperson: bmcewan@htbyb.com)

(Greg Tsuda, CPCU, Membership Chairperson: gregt@nogins.com)

 

Risk and Insurance Management Society, Inc.

(via e-mail through their website: www.rims.org)

 

Risk and Insurance Management Society, Inc., Hawaii Chapter

(Nahua Maunakea, ARM, President: via fax @ 808-921-6505)

(Bruce McEwan, ARM, CPCU, Director: via fax @ 808-543-9458)

(Denice Goto, CPA, RIMS Delegate: via fax @ 808-836-4795)


www.the-catbird-seat.net/Complaint-HI-Ins-Comm-3-17-5.htm



October 22, 2003

Takayama denies knowing of theft

The former insurance commissioner’s ex-partner
is accused of stealing $12 million

By Bruce Dunford, Associated Press, Star-Bulletin

Former state Insurance Commissioner Linda Chu Takayama said yesterday she has no knowledge about the alleged theft of $12 million from two liquidated insurance companies by her former law partner.

And she said she will cooperate with the state’s investigations into the matter.

Takayama, a top Democratic Party insider, issued a written statement in response to questions raised by Senate Republican Minority Leader Fred Hemmings and current Insurance Commissioner J. P. Schmidt about her role, after she left office, in the liquidation of the bankrupt insurance companies following Hurricane Iniki.

Schmidt, appointed by Republican Gov. Linda Lingle, said he was concerned about his predecessor’s role, even though the liquidation was unusually successful and the state stands to gain a windfall of up to $15 million.

The final liquidation work was handled by Jerrold Chun, a Honolulu attorney who was arrested last week on three counts of felony theft with allegations that he diverted more than $12 million from insurance claims and creditor settlements resulting from the 1992 hurricane that devastated Kauai.

Schmidt said Chun does not dispute that he received $12 million, but claims former Insurance Commissioner Wayne Metcalf had verbally approved it as a success fee to be paid on top of his hourly rate for negotiating smaller settlements to creditors.

Takayama, as insurance commissioner, recommended in 1993 to the Circuit Court that liquidation of Hawaiian Underwriters Insurance Co. (HUI) and United National Insurance Co. (UNICO) be handled by the law firm McCorriston Miho Miller Mukai, where Chun was among attorneys assigned the case. (The two companies are subsidiaries of Hawaiian Electric Industries subsidiary The Hawaiian Insurance Group (HIG).)

When Chun left the law firm, he took with him what remained of the HUI/UNICO liquidation work, according to William McCorriston, lead partner of McCorriston Miho.

Takayama, an attorney, resigned in 1994 as insurance commissioner to become deputy director of the Department of Commerce and Consumer Affairs. She later left the state job to join Chun as a partner in the law firm Chun Chipchase Takayama Nagatani, which was then handling the remaining liquidation.

Takayama said the state Judiciary’s Office of Disciplinary Counsel found no conflict of interest when it considered her situation several years ago….

“Jerry (Chun) was once my partner, but we have not been on good terms since my departure from the firm in 1999,” she said….

“He left our firm in the early ’90s and the proposition was put to us that he and Linda Chu Takayama would be taking the HUI/UNICO case with them,” he said.

“I understand politics and I understand that Mr. Metcalf may have had a number of reasons to do that,” he said, referring to then-Insurance Commissioner Wayne Metcalf.

Schmidt said that because of the criminal case against Chun, many of the records on the liquidation have been sealed, but said Takayama’s becoming a law partner with Chun and then being appointed by the court as the state’s deputy liquidator in the case “raises some questions.”

Based on the findings in the Chun investigation, Schmidt recently terminated Takayama’s role as deputy liquidator and will look at whether that relationship was proper once he can look at the files, he said.

Takayama said in her statement that after Iniki, HIG was unable to pay more than $300 million in claims.

She said she “created a novel restructuring, rehabilitation and eventual sale of HIG and the satisfaction of virtually all outstanding claims through the affiliated companies of HUI and UNICO under the supervision of the Circuit Court.”

Chun has been released on $150,000 bail, pending a preliminary hearing Nov. 10. Chun has made no public comment on the allegations and a call to his attorney yesterday was not returned.

Read the entire story at…

http://starbulletin.com/2003/10/22/news/story14.html



From Findlaw:

McCorriston Miller Mukai MacKinnon

Insurance Defense and Insurance Law

The Firm represents several major insurers. It has developed a discrete practice in the defense of actions against insurance companies for bad faith and extra-contractual damages, as well as cases involving personal injury, property damage, contracts, products liability, construction, employment discrimination, and professional, directors’ and fiduciary liability. A considerable part of the practice in this area is devoted to insurance coverage issues, both on behalf of insurers and insureds.

Additionally, the Firm has represented the Insurance Commissioner of the State of Hawaii in the highly specialized field of rehabilitating and/or liquidating insolvent insurance companies. Recently, the Firm acted as counsel to the Rehabilitator and Special Deputy Rehabilitator to the Hawaiian Insurance Group, a troubled insurer of Hawaii residential and commercial property, with respect to the restructuring and eventual sale of this insurer to a major U.S. insurance company. During this representation, the Firm negotiated a $32,000,000 settlement in favor of the Rehabilitator.

http://pview.findlaw.com/view/2036815_1

For more on McCorriston, GO TO > > > Dirty Money, Dirty Politics & Bishop Estate



December 14, 2004

Lawyer gets 10 years
for $7.9M client theft

Chun diverted money from firms he was helping to liquidate

By Debra Barayuga, Star-Bulletin

A Honolulu attorney was sentenced to 10 years in prison yesterday for stealing $7.9 million from insurance companies in liquidation after Hurricane Iniki struck Kauai in 1992.

Jerrold Chun, 56, pleaded no contest in August to three counts of first-degree theft, unlawful ownership or operation of a business and 10 counts of money laundering.

He was accused of diverting the $7.9 million to himself on three occasions in June and July 2003 from HUI/UNICO in Liquidation Inc., two insurance companies that were taken over and merged by the Insurance Commissioner after claims exceeded their available funds….

Defense attorney Brook Hart argued that Chun believed he was entitled to the money as a bonus for the work he had done for HUI/UNICO, taking the companies from a $70 million deficit over a 10-year period to a point where they showed a $20 million surplus….

Chun was also diagnosed with a bipolar disorder in 1999 that affected his ability to judge between right and wrong and contributed to his belief that he was entitled to the money, Hart said.

But state prosecutors said Chun had no authority to take a success fee or bonus and that his acts were deliberate and deceptive.

“The defendant himself is a sophisticated individual who had it all and wanted more,” said deputy attorney general Mark Miyahira, who opposed Chun’s request for a deferral or probation….

According to state prosecutors, Chun orchestrated the scheme by requesting more money than was needed from HUI/UNICO to pay off claims, and kept the surplus. “He was biting the very hand supporting his lifestyle,” Miyahira said.

In one case, he settled an insurance claim for more than $2.5 million but requested that HUI/UNICO transfer to his firm’s client trust account $5.7 million to cover the settlement and related obligations. He never mentioned a success fee, which was never authorized, Miyahira said.

Of the $2.3 million surplus, Chun wrote a check to himself for $1.36 million; to George Oda, chief operating officer and president of HUI/UNICO, for $769,740; and a little more than $1 million to Michael Chong of Adjusting Services of Hawaii for “consulting fees,” Miyahira said.

In another instance he requested $3.9 million to resolve a case that had been actually settled for a little more than $247,000. The remainder was transferred into his law firm’s operating account. He then wrote a check to himself for $1.4 million, a check for $894,000 to Oda and $1.3 million to Adjusting Services.

To settle HUI/UNICO’s outstanding tax liabilities, Chun requested $1.2 million from the company, when only $229,564 was owed. After the taxes were paid, he wrote a check to himself for $408,554. Another $239,000 went to Oda and $350,000 to Adjusting Services.

Chun apologized to the court and expressed the shame and humiliation he has gone through because of his actions.

The worst part is knowing it’s all my fault,” he said. “I’m sorry. I’m very sorry.”

Circuit Judge Derrick Chan rejected the defense’s request that Chun begin serving his sentence beginning in January and ordered that he be taken into custody immediately.

Neither Chong nor Oda has been charged in this case.

Read the complete article at…

http://starbulletin.com/2004/12/14/news/index6.html



March 17, 2005

J.P. Schmidt, Esq., Hawaii Insurance Commissioner
335 Merchant Street, 2nd Floor, Rm 213
Honolulu, Hawaii 96813

Re:     Complaint Against: Ace Ltd.; Marsh & McLennan; Chubb Group; XL Insurance

          Their Insured:       Kamehameha Schools; P&C Insurance Co., et al.

Dear Commissioner Schmidt:

Due to new information regarding Ace Ltd. and the other companies listed above, this is to file an amended complaint against these companies for fraud, racketeering, bid-rigging, price fixing, unfair competition, and unfair claims settlement practices.

I quote some of the latest information from a Forbes article dated March 16, 2005:

Ace Ltd. Slammed by 43 Subpoenas

Forbes

Ace Ltd., the property and casualty insurer recently implicated in a probe of insurance industry practices, on Wednesday said it received 43 subpoenas and legal inquiries regarding its involvement in bid rigging and price fixing.

The Bermuda-based company said in a filing with the Securities and Exchange Commission it received subpoenas and other inquiries from 9 state attorneys general and one from Washington, D.C. Further, insurance commissioners and other regulators from 10 states also launched some form of legal action.

In addition, Ace said the SEC and New York Attorney General Eliot Spitzer have issued subpoenas for information relating to “non-traditional or loss mitigating insurance products.” The insurer said it will continue to cooperate with such requests, and is also conducting its own internal investigation.

Ace was one of four insurers implicated, but not formally charged, in an investigation of brokerage Marsh & McLennan Co. launched in October by Spitzer. Spitzer filed a lawsuit against the nation’s largest insurance broker accusing it of bid rigging, price fixing, and demanding incentive fees from insurance companies in exchange for sending more business their way….

Ace said Chief Executive Evan Greenberg received a $1 million salary in 2004, with a $2.7 million bonus. He is scheduled to get a raise of $25,000 this year, according to the SEC filing.

Greenberg is the son of Maurice Greenberg, who stepped down this week as CEO of American International Group Inc. Greenberg’s older brother, Jeffrey, was CEO of Marsh & McLennan before being ousted in the wake of Spitzer’s investigation. The insurer said it has received legal inquiries from attorneys general in Connecticut, Florida, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Texas and West Virginia.

Insurance commissioners and other regulators from California, Florida, Illinois, Maryland, Michigan, Minnesota, New York, North Carolina, Pennsylvania and Texas have also contacted Ace….

< END OF QUOTATION >

You will, no doubt, recall that in 1992, Hawaiian Insurance & Guaranty Co. was declared insolvent largely due to Hurricane Iniki losses, and that the company was later sold to Vesta Insurance Group. In 1998, Vesta was involved in a financial scandal which was reported by the Honolulu Star-Bulletin on June 2, 1998, as follows:

Hawaii insurer’s parent pounded on Wall St.

Vesta Group, which owns Hawaiian Insurance & Guaranty,
reports ‘accounting irregularities’

NEW YORK — Vesta Insurance Group Inc., which owns a major Hawaii insurer, saw it shares plunge 47 percent today, a day after the parent company said “possible accounting irregularities” will force it to restate earnings for the last two quarters.

Vesta’s president and chief executive officer, Robert Y. Huffman, also has resigned.

However, the company’s Hawaii operation, Hawaiian Insurance & Guaranty Co., said it has not been affected by the changes at the Birmingham, Ala.-based parent.

“I expect no impact whatsoever on HIG’s operations,” said Pete Grimes, HIG general manager. HIG had been declared insolvent in 1992 after Hurricane Iniki losses. It was later rehabilitated by the state insurance division and was sold to Vesta in 1995 for $35 million….

< END OF QUOTATION >

To show you the connection between these entities and Kamehameha Schools, their for-profit captive, P&C Insurance Co., Ltd., and Chubb Group, I quote the following from Vesta Insurance Group’s Form 8-K, dated July 18, 2001:

On July 10, 2001, Vesta Fire Insurance Corporation, an Illinois corporation (“Vesta Fire”) and a wholly owned subsidiary of Vesta Insurance Group, Inc. completed its acquisition of 100% of the outstanding shares of capital stock of Florida Select Insurance Holdings, Inc. for approximately $64.5 million in cash. Vesta Fire acquired the stock of FSIH from FSIH’s four stockholders – Centre Solutions (Bermuda) Limited, Mynd Corporation, Orienta Point Group, L.L.C., and Kamehameha Schools Bernice Pauahi Bishop Estate….

* * *

Vesta Insurance Group, Inc.
Notes to Consolidated Financial Statements

Securities Litigation

Subsequent to the filing of our quarterly report on Form 10-Q for the period ended March 31, 1998 with the U.S. Securities and Exchange Commission (“SEC” or “Commission”), we commenced an internal investigation to determine the exact scope and amount of certain reductions of reserves and overstatement of premium income in our reinsurance assumed business that had been recorded in the fourth quarter of 1997 and the first quarter of 1998. This investigation concluded that inappropriate amounts had, in fact, been recorded and we determined that we should restate our previously issued 1997 financial statements and first quarter 1998 Form 10-Q….

We restated our previously issued financial statements for 1995, 1996, and 1997 and our first quarter 1998 Form 10-Q for the above items by issuance of a current report on Form 8-K dated August 19, 1998. These restatements resulted in a cumulative decrease to stockholders’ equity of approximately $75.2 million through March 31, 1998. Commencing in June 1998, we and several of our current and former officers and directors were named as defendants in several purported class action lawsuits filed in the United States District Court for the Northern District of Alabama. Several of our officers and directors also have been named in a derivative action lawsuit in the Circuit Court of Jefferson County, Alabama, in which Vesta is a nominal defendant. In addition, we received various inquiries and requests for information from various state departments of insurance and other regulatory authorities, including a subpoena issued to Vesta on August 24, 1998 by the 34 Commission as part of a formal, non-public order of investigation….

We have several layers of directors’ and officers’ liability insurance coverage (“D&O insurance”), the terms of which may cover all or a portion of the damages or settlement costs of the class action. These policies provide up to $100 million in D&O insurance to cover damages or settlement costs and an additional policy provides another layer of $10 million D&O insurance to cover any damages awarded by a court in these actions. Cincinnati Insurance Company (“Cincinnati”) issued the primary policy that provides the first $25 million of D&O insurance.

Federal Insurance Company (The Chubb Group) issued an excess D&O insurance policy which provides coverage for the second $25 million in losses, if necessary. The balance of the coverage is provided by a group of insurers and was purchased after the class actions comprising the consolidated class action were filed….

In September 1998, after these actions were filed, Cincinnati, which provides the primary insurance policy, filed a lawsuit in the United States District Court for the Northern District of Alabama seeking to rescind the policy and avoid the coverage….

A dispute has also arisen with CIGNA Property and Casualty Insurance Company (“CIGNA”) (now ACE USA) under a personal lines insurance quota share reinsurance agreement, whereby we assumed certain risks from CIGNA. During September 2000, CIGNA filed for arbitration under the reinsurance agreement, seeking payment of the balances that CIGNA claims are due under the terms of the treaty. In addition, during the fourth quarter, the treaty was terminated on a cut-off basis. Vesta is seeking recoupment of all improper claims payments and excessive expense allocations and charges from CIGNA. This arbitration is in its early stages and the ultimate outcome cannot be determined at this time….

< END OF QUOTATION>

In previous complaints to your office, and in my RICO lawsuit, I have already detailed many of my allegations against Marsh & McLennan, Inc. and Federal Insurance Company. However, since this news related to Ace Ltd. has just been released, and as Ace Ltd. was one of the insurance carriers used by Marsh & McLennan for the insurance programs of Kamehameha Schools and P&C, I am now requesting that you add ACE Ltd. to the list of companies which I have submitted for your investigation.

More information regarding these matters can be found at the following Internet addresses:

www.the-catbird-seat.net/Claims-By-Harmon.htm

www.the-catbird-seat.net/Claims-Branch-Kamehameha.htm

www.the-catbird-seat.net/Claims-Branch-Marsh-McLennan.htm

www.the-catbird-seat.net/ACE.htm

www.the-catbird-seat.net/ChubbGroup.htm

www.the-catbird-seat.net/MarshBirds.htm

www.the-catbird-seat.net/Bishop4.htm

Due to these recent revelations, I would also strongly encourage your office to join with the Insurance Commissioners of the other states named in the above article, to pursue recovery of overcharges and other damages from these insurance companies and their agents and brokers, for the benefit of Hawaii’s taxpayers and consumers.

Please feel free to contact me if you have any questions or if I can provide any other information which may be helpful in your investigation of this complaint. Thank you very much for your consideration in this extremely serious matter.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

cc:     Fraud Branch, Insurance Division, Dept of Consumer Affairs (via e-mail: insfraud@dcca.hawaii.gov)

Captive Insurance Branch, Insurance Division, Dept of Consumer Affairs (via e-mail: captiveins@dcca.hawaii.gov)

National Association of Insurance Commissioners (via e-mail: www.external-apps.naic.org/fraud)

Michael G. Cherkasky, President and Chief Executive Officer, Marsh & McLennan Companies, Inc. (via fax @ 212-345-4838)

John D. Finnegan, President and Chief Executive Officer, The Chubb Corporation (via fax @ 908-903-2027 and info@chubb.com)

William K. Slate II, President/CEO, American Arbitration Association, (via fax @ 212-716-5905 and Websitemail@adr.org)

          Mark Appel, Senior Vice President, International Centre for Dispute Resolution, (via e-mail: AppelM@adr.org)

Harry Kaminsky, Vice President, Neutrals’ Services, Phoenix, AZ , (via e-mail: KaminskyH@adr.org)

James B. Farris, Senior Case Manager, American Arbitration Association, (via fax @ 559-490-1919 and e-mail: Farrisj@adr.org)

Mary Lou Woo, c/o Steven Guttman, Kessner Duca Umebayashi, et al., (via fax @ 808-529-7177 and e-mail: sguttman@kdubm.com)

Mark Bennett, Attorney General, State of Hawaii, (via fax @ 808- 586-1239 and e-mail: hawaiiag@hawaii.gov )

Dee Jay Mailer, CEO, Kamehameha Schools (via fax @ 808-523-6313)

Board of Directors, P&C Insurance Co., Inc. (via fax @ 808-523-6313)

Matt A. Tsukazaki, Esq., Torkildson Katz Fonseca Jaffe Moore & Hetherington, (via fax @ 808-523-6001 and e-mail: mat@torkildson.com)

Governor Linda Lingle, State of Hawaii (via fax @ 808-586-0006)

Hugh Jones, Deputy Attorney General (via fax @ 808-586-1477)

Janet Hughes, Internal Revenue Service (via fax @ 303-844-3596)

Billy Beaver, Pension & Welfare Benefit Admin. (via fax @ 626-229-1098)

Ralph F. Boyd, Jr., U.S. Dept. of Justice (via fax @ 202-514-1116)

Lyn Flanigan Anzai, Hawaii State Bar Association (via e-mail: lanzai@hsba.org)

Susan Tius, Esq., c/o Rush Moore Craven Sutton Morry & Beh (via fax @ 808-521-0597)

Gerard Jervis, Lokelani Lindsey, Henry Peters, Oswald Stender, and Richard Wong, c/o Kenneth Hipp, Esq., Marr Hipp Jones & Pepper (via fax @ 808-536-6700)

Jeffrey H.K. Sia, Esq., Ayabe Chong Nishimoto Sia & Nakamura (via fax @ 808-526-3491)

Robert S. Tameler, ALPS, Claims Admin for Bradley Tamm and Greg Dunn (via fax @ 406-728-7416)

Mike Coulter, Deputy Managing Director, Aon Insurance Managers (via fax @ 808-540-4301 and e-mail: mike_coulter@agl.aon.com)

Casimer Fidele, Tradewind Insurance Company (via fax @ 808-521-7489)

Colbert Matsumoto, CEO, Island Insurance Co. (via fax @ 808-564-8456)

Roy F. Hughes, Esq. (via e-mail: hthughes@hawaii.rr.com)

PricewaterhouseCoopers, c/o Warren Price III, Esq. (via fax @ 808-533-0549)

Terry Mullen, CEO/Pres., John Mullen & Co. (via fax @ 808-531-0053)

National Association of Consumer Advocates www.naca.net (via e-mail: info@naca.net)

Public Citizen (via e-mail through website: www.citizen.org)

U.S. Public Interest Research Group www.uspirg.org (via e-mail: uspirg@pirg.org)

First Amendment Center www.firstamendmentcenter.org (via e-mail: info@fac.org)

Trial Lawyers for Public Justice, National Headquarters (www.tlpj.org) (via fax @ 202-232-7203)

Consumer Action (via e-mail through their website: www.consumer-action.org)

Consumers Union, DC Office (www.consumersunion.org) (via fax @ 202-265-9548)

Honolulu Community-Media Council (via e-mail: hc-mc@verizon.net)

Mark Burch, University of Hawaii (via e-mail: burch@hawaii.edu)

CPCU Society, www.cpcusociety.org (via e-mail: membercenter@cpcusociety.org)

Hawaii Chapter, CPCU www.hawaii.cpcusociety.org, (Joseph Hu, CPCU, President: Josephh@servco.com); (Jeff Bronaugh, CPCU, President Elect: Jeff@kingneel.com); (Wayne Hikida, CPCU, V.P.: fax: 808-564-8456); (Ann Donohue, CPCU, Sec.: Ann.donohue@ace-ina.com) (Janet Ng, CPCU, Treas.: fax: 808-540-4301); (Marian Brown, CPCU, Past Pres.: Mbrown@atlasinsurance.com); (Gloria Sumitani, CPCU, Past Pres.: SumitaniGs@aol.com); (Bruce McEwan, CPCU, Education Chairperson: bmcewan@htbyb.com); (Greg Tsuda, CPCU, Membership Chairperson: gregt@nogins.com)

Risk and Insurance Management Society, Inc. (via e-mail through their website: www.rims.org)

Risk and Insurance Management Society, Inc., Hawaii Chapter (Nahua Maunakea, ARM, President: via fax @ 808-921-6505); (Bruce McEwan, ARM, CPCU, Director: via fax @ 808-543-9458); (Denice Goto, CPA, RIMS Delegate: via fax @ 808-836-4795)



< < < FLASHBACK < < <

October 21, 2003

Ex-state insurance
official targeted

By Bruce Dunford, Associated Press

The Honolulu Advertiser

Senate Minority Leader Fred Hemmings says answers are needed to “serious questions” about the role former state insurance commissioner Linda Chu Takayama, a Democratic Party insider, played in the liquidation of two bankrupt insurance companies following Hurricane ‘Iniki.

J.P. Schmidt, the insurance commissioner under the new Republican administration of Gov. Linda Lingle, agrees, even though the liquidation was unusually successful and the state stands to gain a windfall of up to $15 million.

The liquidation was handled by Honolulu attorney Jerrold Y. Chun, who last week was arrested on three counts of felony theft and allegations that he diverted more than $12 million from insurance claims and creditor settlements resulting from the 1992 hurricane that devastated Kaua’i.

Takayama, as insurance commissioner, won court approval in 1993 to assign the liquidation of Hawaiian Underwriters Insurance Co. and United National Insurance Co., subsidiaries of Hawaiian Electric Industries’ subsidiary the Hawaiian Insurance Group (HIG), to the McCorriston Miho Miller Mukai law firm, where Chun was assigned to handle the case, said Hemmings (R-Lanikai-Waimanalo).

Takayama, an attorney, in 1994 resigned as insurance commissioner to become deputy director of the Department of Commerce and Consumer Affairs.

She later joined Chun to start their own law firm, Chun Chipchase Takayama Nagatani, taking the liquidation case with them, said Schmidt, who has filed a civil claim against Chun, seeking the $12 million for the state. That case doesn’t name Takayama….

At some point, private attorney Takayama, with the court’s approval and probably because of her familiarity with the case, was appointed as a “deputy liquidator,” serving “up until we uncovered these misappropriations and what have you, at which time I removed her and Chun and the other folks involved and appointed my own deputy liquidator,” Schmidt said yesterday.

“It raises some questions,” he said. “Until we get the files and look at it, I’m not sure whether it’s improper. If it was improper, then we need to know whether it then led to any improprieties because of the conflict or not.”

A deputy liquidator is responsible to the judge overseeing liquidation and is paid out of funds from the liquidated company, Schmidt said.

Schmidt said that the files with details on the HUI/UNICO liquidation have been subpoenaed in the criminal case against Chun and are now sealed.

“We are working to get access for these documents,” he said.

“A question that has to be asked is during the tenure of Linda Chu Takayama’s partnership with Chun, was she a beneficiary of the business she assigned to him, directly or indirectly,” Hemmings said on Friday. “She can claim ‘I never collected a direct commission,’ but what did she collect?”

However, “if you connect all the dots, there’s a lot of politics and conflicts of interest in it,” he said. “I’m confident the attorney general and insurance commissioner are going to do what should have been done a long time ago regarding the improprieties in the insurance industry.”

Takayama, who is closely allied to U.S. Sen. Daniel Inouye, D-Hawai’i, is a former top aide in the office of the U.S. Senate sergeant at arms. She is also a member of the board of governors of the East-West Center and is chairwoman of the Hawaii Foodbank. Her husband, Gregg Takayama , is a reporter for KHON television news in Honolulu and served for 12 years as Inouye’s press secretary, followed by three years as press secretary for then-Lt. Gov. Ben Cayetano.

In 1999, she was named to a four-year term as one of 78 public interest directors of the Federal Home Loan Banks and is registered with the state as a lobbyist for Abbott Laboratories Inc., Hawaii Pacific Health, Hawaii Psychological Association and Pfizer Inc.

The attorney general’s office launched a criminal investigation of the HUI/UNICO liquidation after an internal investigation by Schmidt’s office found that Chun negotiated substantially lower payouts for three claims and then kept the difference from the original claim amount.

After Hurricane Iniki hit on Sept. 11, 1992, homeowners and property owners flooded the two companies with claims that overwhelmed their reserves, at which time HEI said it would not provide additional capital, which resulted in a Circuit Court order granting Takayama’s motion for the state to take possession of the companies and their assets.

In April 1993, Takayama, then the insurance commissioner, filed a complaint against HEI on behalf of creditors and policyholders, alleging the company had misled the public about its financial support of HIG and had mismanaged and drained HIG’s financial assets.

In February 1994, HEI agreed to pay a $32 million settlement to reduce the anticipated $73 million deficit faced by its HIG subsidiary.

Schmidt said Chun did such a good job in liquidating the assets of HUI/UNICO that not only will the policyholders will get their claims, the state general fund could end up with a potential windfall of $10 million to $15 million.

“This liquidation is very unusual and will be able to pay 100 percent of policyholders’ claims,” he said. “Sometimes they only get 10 to 20 cents on the dollar.”

Schmidt said Chun doesn’t dispute that he received $12 million, but claims former insurance commissioner Wayne Metcalf had verbally approved it as a “success fee” to be paid on top of his hourly rate for negotiating smaller settlements to creditors.

While Schmidt isn’t involved in the criminal case, he said defense attorneys may be looking for some kind of “global settlement” involving both the criminal and civil claims, something that would be up to the attorney general’s office.

“The fact is, if all the money returns, it does not mean that a crime has not been committed and does not mean from a civil perspective the state has not suffered damages that need to be recompensed,” he said.

# # #




MORE TO COME




For now, here are some more “birds of a feather” that
you’ll also find building nests in this tree…

ACE UP THE SLEEVE

ACT 221

AIG: THE UN-AMERICAN INSURANCE GROUP

ALOHA AIRLINES

ALOHA, HARKEN ENERGY!

AMERICAN SAVINGS BANK: BEHIND THE BLINDS

APOLLO ADVISORS

ARBITRATE THIS!

THE BANKRUPTCY BUZZARDS

THE BERMUDA FRAUDS

BUZZARDS OF PARADISE

THE CHUBB GROUP

CITIGROUP: VAMPIRES IN THE CITY

CONFESSIONS OF A WHISTLEBLOWER

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

THE CROSSROADS GROUP

DIRTY GOLD IN GOLDMAN SACHS

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

THE FIRING OF EVAN DOBELLE

HARMON’S LETTERS TO THE FBI

HARMON’S LETTER TO THE IRS

HAWAIIAN AIRLINES

HAWAIIAN HOME LANDS

HOW TO PLUCK A BILLIONAIRE

HOW TO PLUCK A NON-PROFIT

I SING THE HAWAIIAN ELECTRIC

KAJIMA: BLOOD, BRIBES & BRUTALITY

THE KAMEHAMEHA SCHOOLS PENSION PLAN

KEMPER INSURANCE COMPANIES

MARSH & McLENNAN: THE MARSH BIRDS

MARSH & McLENNAN’S GUY CARPENTER

MARSH & McLENNAN’S PUTNAM

THE MYTH & THE METHANE

THE NESTS OF CB RICHARD ELLIS

 PARADISE PAVED

POINTING THE FINGER AT WORLDPOINT

PREDATORS IN PARADISE

THE PRUDENTIAL: A NEST ON SHAKY GROUND

THE QUEEN LILIUOKALANI TRUST

RICO IN PARADISE

THE SILENCE OF THE WHISTLEBLOWERS

SUKAMTO SIA: THE INDONESIAN CONNECTION

THE TORCH OF ERIC SHINE

THE VULTURES IN MAUNAWILI VALLEY

THE POOP ON AON

THE ROYAL & SUNAMERICA

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

Part IPart IIPart IIIPart IV

TRANSYLVANIA TRAVELERS IN ST. PAUL

VAMPIRES IN THE CITY

VAMPIRES IN THE VESTA INSURANCE GROUP

VULTURES OF THE SANDWICH ISLES

WHAT PRICE WATERHOUSE?

WILLIAM SIMON SAYS…

WOO VS HARMON

YAKUZA DOODLE DANDIES

ZEPHYR INSURANCE COMPANY

ZEROING IN ON ZURICH FINANCIAL SERVICES

# # #






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Last Update August 27, 2006, by The Catbird


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