The principals of a former Oklahoma insurance company are facing at least 27 felony charges.
Financiers Scott W. Hartman and Andrew B. Scherr were charged with crimes including fraud, filing false financial statements, failure to pay state taxes, conspiracy to commit a felony, conspiracy against the state, uttering forged instruments and issuing spurious certificates of stock.
Prosecutors filed the felony charges against the two on May 08, 2018, News OK reported.
In February 2013, Hartman and Scherr agreed to purchase BancInsure, which was contracted to offer temporary liability coverage for uninsured motorists in Oklahoma; the company later changed its name to Red Rock Insurance. As part of the agreement with the state to buy the insurance company, the two purchased it for $1 and pledged to invest a minimum of $30 million into the company.
But more than a year later, the Oklahoma Insurance Department sued the company and its owners, claiming that Hartman and Scherr did not make good on their promise.
“As of this date, there has been no infusion of any cash whatsoever in the company,” the department said in court documents filed August 2014.
At that time, an Oklahoma County District Court judge declared the company insolvent and ordered the state Insurance Department to permanently take control of the firm. Red Rock was also determined to be in a hazardous financial condition, with its assets to be liquidated. The judge ruled the company had a negative $9.4 million balance to policyholders at the end of June 2014.
The most recent court filing claims Red Rock management used notes and bonds from four entities to provide capital to the insurer.
“It was determined that none of the four entities actually existed and that none of the individuals who signed on behalf to the entities were actually officers of those entities,” the filing stated.
The filing also stated that Hartman and Scherr were initially paid $50,000 annually from BancInsure and Red Rock, but their salaries were later raised. Hartman’s salary increased to $100,000 while Scherr’s jumped to $250,000.
Both the state and the insurance department, in January 2016, filed a civil action against Hartman, Scherr and other Red Rock principles in Oklahoma County District Court, claiming negligence and seeking over $10,000.
The case is ongoing, with a pretrial conference set for August 16, 2018.
