Baton Rouge, La. – Former Insurance Commissioner Jim Brown’s lax oversight of a failed insurer’s assets cost one former owner around $2.4 million, including interest, according to a state appeals court.
The 1st Circuit Court of Appeal found in a ruling Wednesday that in the early 1990s, Brown breached his fiduciary duty in liquidating American National Agents Insurance Group of New Orleans. The appeals court upheld a state district court’s ruling that the Insurance Department owed Barbara M. Presley $1.25 million plus interest, or around $2.4 million in total.
Lewis Unglesby, Presley’s attorney, said the state’s Office of Risk Management is liable for the judgment, which still can be appealed.
Although the lawsuit and ruling are against the former insurance commissioner personally, state law protects state officials from paying those sorts of losses, Unglesby said.
Judy Wright, a spokeswoman for the Insurance Department, said the department’s attorneys and the state Office of Risk Management are reviewing the ruling, which was issued Wednesday.
“We have not yet come to a decision on our next move,” Wright said. Wright said she did not know when the department will make that decision.
The lawsuit has been dragging on since the early 1990s.
In December 1992, the Insurance Department, under Brown, determined that American National Agents Insurance Group was insolvent. Five months later, the company was placed into liquidation.
In 1993, the department sued Presley and her husband, Sam Presley II, alleging the couple defrauded the company and was liable for the amount of the company’s insolvency.
In 1994, the Presleys countersued, claiming Brown had improperly placed American National into liquidation and that the company was mismanaged.
Brown had appointed Charles Reichman to serve as investment funds manager for the Insurance Department.
Reichman hired Richard Bickerstaff of Hattier, Sanford & Renoir to manage American National’s stock portfolio.
Reichman and Bickerstaff were later accused of concocting a plan to sell the stock held by American National, which prosecutors said generated large fees for Bickerstaff, some of which he was accused of kicking back to Reichman.
Reichman pleaded guilty to bribery and income tax evasion charges. Bickerstaff pleaded guilty to failing to report a felony.
Meanwhile in 1996, the Presleys were indicted by a federal grand jury for racketeering, conspiracy, fraud and money laundering related to American National.
Prosecutors said Sam Presley defrauded auto insurance customers out of $7 million. By then, the Louisiana Insurance Guaranty Association, which pays the claims of failed insurers, had paid out $13 million in American National claims.
Sam Presley eventually pleaded guilty to conspiracy to commit racketeering. In exchange, prosecutors dropped the charges against his wife. Sam Presley was sentenced to 6½ years in prison and died shortly after being released.
In 2003, then Insurance Commissioner Robert Wooley reached a settlement with Barbara Presley, but it did not include claims related to the stock portfolio that was sold off from American National.
Under the settlement, the American National estate will be paid one-third of up to $1 million, and 25 percent of anything after that, less attorney’s fees and expenses.
Brown said on Thursday that Barbara Presley owes the Insurance Department $8 million and that any money she receives will eventually go right back into the American National estate.
Unglesby said he is glad that the long, tough litigation is almost over.
The Insurance Department can still ask the 1st Circuit for a rehearing, Unglesby said. He said any request is likely to be denied, but the process takes around six weeks.
The department then has 30 days to ask the state Supreme Court to review the 1st Circuit’s decision, Unglesby said. The Supreme Court typically takes around six weeks to decide whether it will grant or deny the writ. So the case could be over by December, Unglesby said.