Posted on 26 Jan 2009
LINCOLN, Neb. January 22 (BestWire) — Nebraska authorities are investigating an alleged pyramid scheme involving an insurance agency that recently declared bankruptcy with more than $100 million in debt.
Attorney General Jon Bruning's office, along with regulators from the Department of Insurance and the Department of Banking and Finance, is investigating First Americans Insurance Agency, which filed for Chapter 11 bankruptcy Jan. 12. Bruning has said the size of the loss indicates potential criminal activity, perhaps a pyramid scheme. Spokeswoman Leah Bucco-White said the investigation began with concerns raised by insurance and banking regulators about the agency and its three principals.
The Grand Island, Neb. agency declared bankruptcy between $100 million and $500 million in debt with less than $10 million in assets, said attorney Bob Craig, who is representing the agency. The face value of the debt is approximately $105 million, he said. The value of the assets does not include the "intrinsic value" of the agency, according to Craig.
"Whether it is or isn't a Ponzi scheme is not a salient issue for me," said Craig. The attorney said he was retained by the principals to represent the agency, but he is not representing the principals.
"The interest of my client and the interests of those who control my client may at some point diverge," he said.
The agency borrowed money from more than 200 creditors, private individuals who have promissory notes, Craig said.
"It's not going to get paid back," he said.
(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com) BN-NJ-01-22-2009 1704 ET #