Oklahoma regulators file lawsuit against failed New York insurer

Insurance officials in Oklahoma are suing the directors and former executives of the failed Red Rock Insurance Co., alleging they used the company for personal gain

Insurance News

By Lyle Adriano

Oklahoma insurance regulators claim that two financiers from New York took control of a local insurer using $30 million in counterfeit assets, then abused the insurer for personal gain. Regulators filed a lawsuit Jan. 29 in a state court in Oklahoma.

The insurer in question, Red Rock Insurance Co., is being liquidated by regulators. Officials say that Red Rock lost $23.6 million in asset value due to the alleged scheme.

The complaint contends that Hartman and Scherr agreed to increase Red Rock’s capital by $30 million after purchasing the financially troubled insurer. The capital the two contributed, however, was backed by bonds from one Altmark Ltd. The bonds were discredited after it was found that the person supplying them—Cecil Franklin Speight—was found guilty of fraud charges in relation to selling forged Altmark bonds.

The lawsuit continues, claiming that after the two had gained control of the insurer, their company paid $610,000 for a shell company purportedly controlled by the two principals that had “little or no assets or value.” The shell company also allegedly provided $4.7 million in unsecured loans to people and entities, as well as paid grossly excessive fees” to both Hartman and Scherr.

Scott W. Hartman and Andrew B. Scherr, the two defendants, were partners in New York-based Foster Jennings, Inc.—the company that purchased Red Rock.

Scherr’s attorney, George Gibbs, asserted that his client denies the accusations. Gibbs also argued that his client did not mean to deceive or swindle anyone, and that his client is willing to cooperate with regulators to resolve the matter.

An attorney for Hartman could not be reached for word. Jeffrey Hoffman, who previously represented Hartman in another case last year, said at that time that his client was a victim of a con involving supposedly counterfeit assets.

Three former Red Rock executives are also defendants in the suit. 
 

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