Oerview of DFS take over of Aries Insurance Insurance Company

My name is Paul Fraynd and below is an overview of events that occurred when

The Florida Department of Financial Services (“DFS”) was appointed receiver of Aries Insurance

Company (“Aires”), an insurance company that I formed in 1983 along with other members of my

family. This is a case of being a political prisoner and of clear extortion by the State of Florida.

I was born in South America on May 3, 1956 and attended high school there. I have two

sisters and one brother. After completing high school I came to the USA and attended the University

of Miami, studying English for six months. Then I transferred to Ann Arbor, Michigan where I

attended the University Of Michigan School Of Engineering and in 1979, I graduated with a B.S. in

Electrical Engineering and a B.S. in Computer Engineering. I attended the 5 year program and

graduated with a dual degree. I have been a US Citizen for 25 years.

After my graduation, I returned to Miami, Florida and started a job working for International

Computer Systems, as the Marketing Manager. The company was one of the first computer

distributors in Florida selling Apple and IBM -PC personal computers. I combined my knowledge of

computers and marketed systems that included software and hardware. While working at this

company I had the opportunity to sell a system to an insurance and premium finance consultant and

became knowledgeable in the insurance premium finance business. Finance interested me a lot

more than selling computers and I decided to form a premium finance company that lent funds to

insured’s that could not pay their premiums up front to the insurance companies.

I formed Omega Finance Corporation in 1982 and left the computer business and went full

time in the insurance finance business. I borrowed funds from local Miami based banks in order to

finance the initial phase of the company’s development. Omega grew and soon became one of

Florida’s largest premium finance companies, with over 1500 retail insurance agents generating

finance agreements on behalf of Omega.

During 1983, competition became fierce and most insurance companies formed their own inhouse

premium finance companies. Seeing this trend, I decided to form an insurance company and

offer insurance as well as financing of the premiums through Omega’s already establish network of

producers. The minimum capital require in 1983 for an insurance company to operate was

$1,500,000. I raised the funds with a combination of family funds and bank loans to obtain the

initial funds for the finance company and the newly formed insurance company. the Aries Insurance

Company (“Aries”) came from these businesses. The finance and insurance company grew over

 the years and then I formed Onyx nderwriters, Inc., in 1986, an insurance managing general agency.

 I also formed Gamma djusters, Inc., a claims adjusting operation. All of the companies became subsidiaries of Onyx

Insurance Group, Inc. (“Onyx”) and in 1991 Onyx sales of insurance and finance exceeded $40

million per year. Aries had been approved to write insurance and several other states including

California, Texas, Arizona, and Utah. My father, brother and sister joined the company and also

worked for it. While I was building the Onyx Insurance Group, I also got married in 1984 and had 3

sons. Ariel - age 16, Daniel - age 13 and Alex - age 7.

In 1992 Hurricane Andrew hit South Florida and caused devastating losses to individuals and

businesses in South Florida. Onyx and Aries were Miami based companies and had a lot of risks

insured in South Florida. While Onyx saw most of their competitors go out of business because of

not being able to pay for their claims, Aries was able to pay all of its insured’s claims and remain in

business, while seeing their competitors not honor their claims.

 

After 1992 very few insurance companies remained in Florida willing to continue to write

insurance, mostly on property risks. Over 20 local domestic companies were liquidated by DFS

under the direction of then Insurance Commissioner Tom Gallagher. A long time friend, business

partner and confidant named Michael J. Svaldi was appointed the head of the Division in charge of

“liquidating” and “rehabilitating” insurance companies. Mr. Svaldi was appointed receiver of the

insurance companies by Gallagher. His assignment was to liquidate these companies. I met Mr.

Svaldi in 1992 when the DFS was considering selling Books of Business from insolvent insurance

companies to other insurance companies, in an effort to not continue to request funds from the

Florida Guaranty Fund known as FIGA. FIGA is a State Association that its function is to assess all

Insurance Companies for funds, on a prorate basis depending on their writings of premium in

Florida, and these funds are then used to pay claims and return premiums due from insolvent

companies to their insured’s. FIGA went insolvent as a result of the massive amounts of losses that

insolvent insurance companies had as a result of Hurricane Andrew and Mr. Gallagher and Mr.

Svaldi made an attempt to sell off their Books. FIGA eventually issued Bonds and raised the funds

needed to pay all claims. No Books of Business were sold because the terms imposed by Mr.

Gallagher were unrealistic. I told this to Mr. Gallagher and he got upset at me. He wanted to sell

unearned premium reserves to Aries on a Homeowners Book of Business from one of the insolvent

companies, Guardian Property and Casualty, but refused to pay the unearned premium reserve to our

company. I told him I could not do this transaction at the terms he proposed and we had a parting of

the ways. Because I did not accept his proposal, I expected future retaliation. This would come in

the form of regulatory pressure, fines and constant regulatory harassment and abuse of power.

 

After surviving Hurricane Andrew, Aries was sitting on a great opportunity. It could grow in

writings because there was very little competition and it only needed to increase its capital. Aries

looked for additional capital to grow and it secured a capital contribution from it lead Reinsurance

Company General Reinsurance Corp. (“Genre”). Genre contributed $10 million to Aries for a 20%

stock ownership in Onyx Insurance Group, Aries Insurance Company’s parent company.

The shortage in insurance companies willing to write homeowners in Florida after

Hurricane Andrew was so large that Tom Gallagher had started a state owned and managed

insurance association known as The Residential Joint Underwriting Association (“RPCJUA”)

and its mission was to insure homes and condominiums that could not obtain insurance in the

private market. Also, the Florida Windstorm Underwriting Association (“FWUA”) had been in

place to write the wind risk of the home and the RPCJUA would write the property of the home

or condo. So an insured would end up with two policies, the RPCJUA would insure the property

and liability and the FWUA would insure the wind. Most of the officers and directors for these

state owned companies were personally handpicked by Tom Gallagher.

A scandal broke up in the RPCJUA when, under the direction of Tom Gallagher, a managing

general agency known as Smissi was formed and then DFS Chief Examiner, John Kummer was

appointed President of it. Massive corruption, self dealing, mismanagement, bribes and more were

soon uncovered at the General Agency that was underwriting policies for the RPCJUA and the

FWUA and the company was forced to disband. Another best friend and confidant of Tom

Gallagher was behind the wrong doings at the scandal riddled MGA, James Bax.

Onyx and Aries grew for the next 5 years by 15% each year and the companies were thriving.

Bill Nelson had been elected Insurance Commissioner, replacing Tom Gallagher and Onyx had a

good relation with DFS under Bill Nelson’s direction. Onyx Insurance Groups’ combined premium

writings for the year end 2000 reached $100 million and employed over 600 employees. It’s net

worth exceeded $20 million. These were the 5 most prosperous years of Onyx and Aries.

Tom Gallagher was running for Insurance Commissioner again and Gallagher and Michael J.

Svaldi reappeared at the Aries Offices asking for political contributions for Gallagher’s re-election

campaign. In fear of future regulatory retaliation, Onyx contributed to Gallagher’s campaign fund.

This was also true for most insurance companies under the regulatory oversight of DFS. Gallagher

would request contributions from all. Those that didn’t follow with considerable contributions

would face examiner’s at their offices, billing $20,000 to $30,000 per month for as long as one year.

In 1999, Gallagher was re-elected again as Insurance Commissioner and took over as the

head of DFS. By then, the homeowner’s insurance problem in the State was out of control. The

RPCJUA and the FWUA had grown so much that their ability to pay for losses if another hurricane

were to strike Florida was not there. Several actuaries and other storm damage forecasters had said

that another major hurricane hitting Florida would result in the RPCJUA and the FWUA going

insolvent and they could phase an insolvency that could exceed $10 billion dollars if the hurricane

would hit a major city in the East or West coast of Florida. Mr. Gallagher decided to combine both

of these insurance pools into one entity and Citizens Property Insurance Company was formed. It

combined all of the risks written by the RPCJUA and the FWUA into one entity run by the same

officers and directors appointed by Gallagher back when the RPCJUA and the FWUA were formed.

These two State Insurance pools faced mismanagement abuses, self dealings by its employees,

officers and directors and they all combined to form one happy family at Citizen. Mr. Gallagher

knew this for years but these employees were all his friends and political cronies, so Gallagher did

nothing about it. This combination was fertile ground for the issues facing Citizen today.

By June of 2001, Onyx continued to grow and again looked to raise additional capital to

support its growth. Onyx considered doing an IPO. Wall Street was extremely interested in

Insurance Stocks and Onyx considered it to be a good next step to continue funding its growth.

Onyx obtained a valuation in 2001 by the firm of Payne Weber/USB and the value of Onyx

stock was valued at over $100 million. Onyx was considering selling 30% of its shares in the public

market for $35 million. This would provide the capital needed for the continued growth of the

companies.

Aries became one of the largest Florida insurers and the public offering was going to be a

success. Aries focused selling insurance to the small to medium risks for automobile and

commercial insurance. Everything was going very well but DFS continued to put pressure on Aries

and made some unusual demands. One of the demands was that Aries replace its CFO of 15 years by

one recommended by DFS. At Mr. Wayne Johnson, DFS head of Insurance Company Solvency,

insistence and recommendation, I replaced Steve J. Bacon, Aries’ CFO for Lisette Lozano. Miss

Lozano worked for DFS in the liquidation and rehabilitation division for many years under Mr.

Michael J. Svaldi. Miss Lozano was hired by Aries as the new CFO in early 2000 and replaced the

existing CFO. Everything was looking very good as Onyx prepared itself to go public.

Until September 11, 2001, the World Trade Center terrorist attack occurred. Insurers and

Reinsurers were devastated from the losses and several of Aries’ reinsurers were severely impacted

by this event. The reinsurers started after 9/11, to delay claim payments back to Aries. Aries would

only assume a small percentage of the risk on each insurance policy it wrote. Aries would re-insure a

large portion of every risk. For example, if the risk was worth $1 million, Aries would issue the

policy for the total amount of $1 million but would re-insure $900,000 of the risk’s value with its

reinsurers. Aries would also share the premium collected from the Insured with the reinsurers. So if

Aries reinsured say 90% of the risk it would also pay 90% of the premium to the reinsurers. When a

loss occurred, it would pay the full $1 million and it would recover $900,000 from its reinsurers.

Aries continued to meet all of its claims obligations but its reinsurers were not reimbursing Aries for

their proportionate share of the losses. A large reinsurance accounts receivable was developing in

Aries Books. Aries reported to DFS on a quarterly basis and the first indication of this problem was

reported by Aries to DFS in its September 30, 2001 statutory financial statement filed with DFS on

November 15, 2001.

Aries continued to pay all losses and by year-end 2001 the reinsurance receivable was

exceeding $40 million, due Aries. The reinsurance companies were also regulated by DFS under the

direction of Tom Gallagher and we decided to meet with Tom Gallagher I his office in Tallahassee

and discuss the problems facing Aries. We brought up the problem to the regulators as soon as it

became clear to us that we could not collect the accounts receivable from the reinsurers. Lissete

Lozano, the Aries CFO came to see me in early 2002 and she tendered her resignation. She gave me

a couple of reasons for her action, mainly too much pressure and the high work load and claimed she

was looking at another job opportunity at the request of Tom Gallagher and Michael J. Svaldi.

Mr. Svaldi was working as an outside consultant by then, and was working on the

rehabilitation of a company named Union America Insurance Company and he had offered Lissete

Lozano the CFO position. Lissete left Aries and went to work for Union America, a job that did not

last and wasn’t very rewarding to Miss Lozano and far from what she had envisioned.

We decided to meet with Mr. Tom Gallagher in early 2002 and traveled to Tallahassee along

with my father and sister. We met with Mr. Gallagher and discussed at length our current situation at

Aries and asked him for his assistance in helping Aries with the problems it was facing with the

nonpayment of account receivables from it reinsurers.

Mr. Gallagher suggested that we place Aries in his hands and agree to have DFS rehabilitate

Aries. r. Gallagher indicated that if we appointed DFS as the receiver for Aries he could provide

us with the help we needed. We thought about this proposal and believed that Mr. Gallagher was

sincere about his proposal, but were soon to find out that it was all a big scam to have us place Aries

in his hands without a fight and have the DFS and all of Gallagher’s consultant friends take over

Aries asset’s and feed of them like a school of sharks would feed from a piece of meat that would fall

in their infested waters. allagher assured us that this was a joint effort by DFS and the Aries executives, in

rehabilitating Aries and assist it getting back on its feet. What occurred after this was the opposite

and it came unexpected to us but eventually we would learn that this was Mr. Gallagher’s M.O. and

it was done to many companies in the past 25 years that DFS would take over with the pretense of

rehabilitation to find themselves in liquidation soon after that.

After our meeting with Mr. Gallagher in Tallahassee, Mr. Svaldi came to visit me at Aries

and continued to pursue the concept of allowing DFS to rehabilitate Aries and offer his “consulting

services” to Aries. This consulting turned out to be nothing more than having a spy from Tom

Gallagher in our company.

On May 9, 2002, the Aries directors agreed to place Aries in rehabilitation and allow DFS to

be appointed trustee. Mr. Svaldi assured us that this was the right thing to do in order to save Aries.

On May 13, 2002, an army of armed security guards and over 20 employees of DFS and

consultants came to the Onyx’s offices in Miami and took over effective-physical-control of all of

the companies under Onyx Insurance Group. Only Aries was going to be rehabilitated but DFS took

over the entire operation. The security force that descended on Onyx was right out of a movie when

armed commandos take over a hostile place. We soon learned that the security contract was awarded

to an Israeli firm very close to Gallagher and at a cost of $150,000 per month. We checked on

alternative bids and there was none.

This Israeli owned security firm was hired without competitive bidding and the cost was 3

times greater than other proposals that we obtained. Mr. Gallagher would not make a change even

though Aries would save $100,000 per month. Aries was also saddled with many other expenses

including 20 to 30 DFS employees added to the Aries expenses, a reinsurance consultant from the

Norman Reitchman Company named Saul Greenfield at a cost of $50,000 per month, outside

accountants at a cost of $25,000 per month, William Thompson and Andy Kaplan; a computer

consultant of $10,000 per month. The Aries expenses after May 2002 were increased at the request

of Tom Gallagher by over $600,000 per month. Several political friendly law firms were added to

represent Aries and all received very profitable engagement agreements with an hourly rate plus a

contingency fee based on recoveries.

Within two weeks of DFS arrival, we realized that DFS was not in our offices to rehabilitate

Aries, they were there to liquidate the company and rape Onyx and Aries from all of their assets. In

asking Svaldi what was going on his words were “they eat what they kill.” Prior to DFS taking over

Aries, there was an order in place to let go over 100 DFS employees from the rehabilitation and

liquidation division but that stopped as soon as DFS got a hold of Aries. Now everyone’s job was

safe. In discussions with Svaldi about the actions of DFS he responded “Tom Gallagher ask me why

was I consulting for a company that he was going to shut down? Gallagher knew from the day of our

meeting in his office in Tallahassee and envisioned way before this meeting that he always intended

on doing what he did to Onyx and Aries. Taking down companies and awarding lucrative consulting

and representation agreements to political friends of Gallagher was the way things were done at the

Gallagher’s camp. This was the way Gallagher paid his political friends. He never cared one minute

what would happen to the owners who built the companies with their own money and a lot of hard

work. He has destroyed other companies for over 20 years in similar ways!

One man that has made millions representing companies in the hands of DFS under

Gallagher’s command is Thomas Tew with the law firm of Tew, Cardenas, in Miami. Tom Tew has

made over $100 million in legal fees over the years representing companies in liquidation under

engagements granted by Gallagher.

All one needs to do is look on the DFS web site of companies in rehabilitation or liquidation

under Gallagher’s vein and you will see all of the names of companies that have suffered the same

consequences as Aries did. I can name from memory Union America Insurance Company,

Underwriters Guarantee Insurance Company, Superior National Insurance Company, First Miami

Insurance Company, South Eastern Insurance Company (there are many more . . . ).

Once DFS takes over an insurance company, the same pattern of mismanagement, waist of

company assets, self-dealing, awarding of lucrative claims handling contracts, legal engagements,

computer processing contracts and literally every aspect of operating the company in liquidation is

awarded to political friends of Tom Gallagher. These actions are all over Citizens Property

Insurance Company. What a coincidence that Michael J. Svaldi is one of Citizen’s founding

directors! And as usual, when some of their dirty deeds start becoming public, Mr. Gallagher refers

the matter “to his criminal division” so that an investigation is made on the owners of the company.

The investigation ultimately leads to a bogus indictment in order to discredit the owners and cover

his tracks. This is what occurred at Aries and is occurring at Citizen’s Property Insurance Company

and has occurred in most of the other companies Gallagher has taken over.

I tried to reason for over a month after the May 09, 2002 seizure of the Onyx Companies with

Tom Gallagher and Michael Svaldi about what was occurring at Onyx and it went on deaf ears.

Aries expenses for operating went up dramatically and soon into the rehabilitation process of

Aries, DFS filed a motion to liquidate Aries. This occurred only 3 weeks into the rehabilitation

process and I brought it up to Mr. Svaldi who asked Tom Gallagher why a liquidation order had been

filed. The order was reversed; it was too soon to do what it was standard operation procedure at

DFS. Gallagher had made several appearances with the press indicating that “regulations were

working with the Aries Management to Rehabilitate the Company” and soon Mr. Gallagher reversed

the order and the order miraculously reversed in the court docket of the Aries receivership case.

Probably Mr. Gallagher realized that we would make too much noise if he made his plan to obvious

and decided to wait longer to liquidate the company, besides, Aries had $100 million in assets and its

cash reserves were above $25 million and all of them would have to be used up until DFS could

succeed at obtaining a liquidation order. Most orders filed in Leon County Court by DFS would

automatically get approved by the courts. Most orders were submitted in ex-parte motions (meaning

one side present in court only) and DFS would file the orders without advising our attorneys in

writing, as the law requires with copies of the motions and orders to our attorneys and would simply

attend the hearing and give the Judge their side of the story.

Other actions taken by DFS were: selling of non-Aries assets to third parties and keeping the

funds collected for allegedly “the estate of Aries.” DFS has refused and has never provided any

detail accounting of the estate to us or anyone else. (This is true with other liquidated insurance

companies).

DFS employees moved in to the Onyx mail room and intercepted all incoming mail and took

all checks coming in the mail for non-Aries companies and divided the funds to DFS accounts. DFS

sold the Onyx Underwriters Book of Automobile business to Mercury Insurance Group for a minor

one-time payment. The Book had over 300,000 automobile insurance policies worth easy several

million dollars and it sold it for less than $100,000 and never even gave credit to Onyx for the

payment received by Mercury Insurance.

Absolutely nothing was being done by Gallagher or DFS to collect on the reinsurance. The

main reason Gallagher took over the company (Aries) was to collect the reinsurance and absolutely

nothing was being done or was ever done. No effort to collect on the reinsurance was done by the

consultant collecting $50,000 per month! All that occurred in the so called “rehabilitation effort at

Aries” was to add more and more consultants to do work on Aries. Friendly real estate brokers and

appraisers were engaged to sell off the Aries and Onyx real estate assets. A typical scheme was to

have the property appraised for1/3 of its value and have it sold through a “friendly broker” to a real

estate company formed by Gallagher’s friends or fronts and to sell the property at the reduced price

and then have the new company “flip” the property for its market value. This occurred at Aries with

6 acres of land located in Opalocka, Florida. The property was appraised by Gallagher’s people for

under $600,000, sold for this amount even though we provided an MAI appraisal for $1,600,000.

Consultants and brokers as well as attorneys and “friendly” claims adjusting companies all took a

bite on Aries assets until there were none left.

The biggest abuse that occurred at Aries was awarding Miss Lisette Lozano the handling of

all claims during the liquidation phase of Aries. By November 2002 Aries ran out of funds and DFS

filed for liquidation. This was a necessary step so that the Florida Insurance Guarantee Association

“FIGA” could become liable to pay all outstanding claim losses and return premiums to Insureds.

Miss Lozano incorporated in November 2001 a company in Florida called Lozano Adjusting

Services, Inc. and this company billed over $120 million in to FIGA to pay claims. Part of the funds

went directly to Lozano Adjusting Services, Inc., for the job of adjusting the claims and the rest of

the funds were used to pay claims. Lozano’s incentive was to pay claims fast and the larger the

claim paid, the larger her fee was. Out of $120 million paid to in claims by Lozano at least 50% was

paid in very generous payments of losses to insured’s. Payments made of losses not covered because

DFS had destroyed the integrity of the Aries computer database and many claims were paid without

verifying coverage and many other fraud PIP claims were paid without care whether the treatments

were real or not. Her goal was to just send money to insured’s or medical PIP clinics and to spend

the funds from FIGA. DFS failed to collect over $50 million from Aries reinsurers and inflated the

claim payments through the Lozano claims operation to cause a total FIGA payout of over $150

million.

It was much easier and profitable for the adjusting company to get money from FIGA and pay

out claims than properly adjust claims and deny “not covered” claims or collect reinsurance payment

on losses.

If DFS and Lozano would have done their job properly, FIGA’s responsibility for Aries

losses would have been much, much less than the amount claimed by FIGA was spent on Aries to

date. I am sure that the shareholders of Lozano Adjusting Services were not interested in saving

FIGA any funds. As a matter of fact, DFS made a second request to FIGA for an additional $100

million to complete the liquidation of Aries but when FIGA balked and started asking questions,

DFS soon enough advised FIGA that the initial funding was going to be enough! The DFS and

company actually attempted to defraud FIGA of $100 million additional funds on top of the $150

million that was already used to date. No one has questioned the Lozano Adjusting Services

finances and I am sure that doing so will reveal how Mr. Gallagher’s cronies use these “friendly”

adjusting companies to defraud FIGA and the estate of insolvent companies of millions of dollars.

Perhaps billions in the case of Citizen Property Insurance Company! It’s the same M.O.!

During 2003, FIGA began to ask questions to Tom Gallagher about what occurred at Aries

and why $150 million had been used and remained unaccounted for.

Under the pressure (from FIGA) Gallagher took his usual route - - “it was stolen by the Aries

principals.” “And we are going to criminally prosecute them for it,” Gallagher said!

This again is Gallagher’s solution to problems that might compromise him or his cronies.

Well into 2004, after the alleged investigations performed by Mr. James Cobb, Assistant

Statewide Prosecutor and Lieutenant Mark Dee and Captain Satner of the DFS Insurance Fraud

Division, a massive fraud had been discovery at Aries.

Tom Gallagher and James Cobb issued joint press releases that James Cobb’s investigations

had followed the money trail and discovered a theft of $60 million by the Fraynd’s! from Aries. The

Fraynd’s were indicted on the alleged crimes and charged with numerous counts of theft,

racketeering, trust violations, etc. One million dollars on each of us was set. We were outside of the

country at the time of the Indictments, and we arraigned for the bond and flew back to the US and

surrendered. We returned to fight the case and clear our names from any accusations. We have been

in court defending ourselves for over one and a half years, have made numerous requests to the

Statewide prosecutor James Cobb, requesting the evidence that he had of the alleged theft and of the

other charges and to date he has not provided us any evidence at all that can support any of the

alleged crimes that he charged us with.

This is a case where Gallagher after being pressured by FIGA for answers on the Aries

receivership regarding the accounting of funds, simply turned it over to the statewide and had Lt. Dee

and James Cobb make up a criminal case against us with whatever they can come up with.

While the criminal case was proceeding against the Fraynd’s, Mr. Gallagher had a “buffer” as

he calls it from DFS’s wrong doings. It’s interesting to point that DFS initially filed civil actions

against the Fraynd’s for the exact alleged wrong doings of the Fraynd’s in the criminal case and lost

in civil court, unable to prove any of these allegations. DFS abandoned all civil actions. The

criminal allegations followed against the Fraynd’s by Gallagher after being unsuccessful in civil

court.

Criminal defense attorney for the Fraynds have been defending the Fraynd’s since 2004 and

have made numerous demands to the Statewide Prosecutor’s Offices and on DFS for the evidence

supporting their allegations and James Cobb nor Mark Dee have been able to provide not even one

piece of evidence that would support the alleged $60 million theft.

No evidence had been produced by Jim Cobb of the offices of Statewide Prosecutor by

October 2005 and as pressure was mounting to justify their actions, James Cobb revoked my bond

and had me arrested in November 9 of 2005 and has had me held in custody in Leon County Jail

since then. His words were clear and explained his motive for doing so and for refusing to reinstate

my bond so that I am released so that I can prepare for my defense. He openly says “he wants to

keep me in custody so that he can “shake me down” and force me and my family to accept a guilty

plea and pay back restitution in the amount of $30 million. DFS and the Office of Statewide

Prosecution cannot provide any proof that any funds were taken by the Fraynd’s from Aries yet

simply wants to extort $30 million from us. DFS took civil actions against Aries’ lender (Ocean

Bank of Miami), Aries Actuaries (Milliman International), Aries independent auditors (Weisberg and

Brausse) and are attempting to collect funds against their malpractice insurance policies. They

alleged that the experts professionals misrepresented the Books of Aries and are asking for millions

from them. DFS also sued the Fraynd’s under an AIG directors and officers insurance policy for

errors committed by the officers and directors of Aries, yet they have blamed the Fraynds for Aries

demise in their criminal action. The Fraynd’s relied on their experts to prepare and submit the

financial statements. DFS is accusing the experts but is attempting to at the same time blame the

Fraynd. It is important to note that Ocean Bank engaged a forensic accounting firm that reconciled

all funds received by Onyx and subsequently paid out to Aries and accounted for all funds being

properly paid to Aries and reflected on Aries and Onyx’s Books. These experts have proven false,

all of the accusations of DFS and the Statewide Prosecutors against the Fraynd’s. DFS and

Statewide have violated my rights, my civil liberty and simply want to prove their case right

regardless of what means it takes. DFS and Statewide claim that because this is a “political year”

they need to do this and it would be difference if their bosses were not running for the Florida

Governor’s position! They are attempting to extort $30 million from us and have decided to keep me

in custody until they wear me down and agreed to their terms. Who would think I would become a

political prisoner in America in 2006!

We were prepared to go to trial and the trial was going to commence on May 6, 2007 and the

night before the trial, James Cobb, The States lead prosecutor call our attorneys and told them that

they didn’t want to go to trial and if we would be willing to accept a guilty plea for a very reduced

charge and a short prison term. Being that the trial was going to occur in Tallahassee and the court

system in Tallahassee is very biased and very pro government, our attorneys recommended that we

take the plea and I agreed to also serve 1 year in prison so long as the rest of my family would not go to prison.