FLORIDA OFFICIALS TARGETED A PROMINENT HISPANIC INSURANCE COMPANY, THE ARIES INSURANCE COMPANY AND ITS OWNERS FOR POLITICAL REASONS.
April 22, 2011
Keeping insurance Companies healthy in Florida is the stated purpose of the Florida Department of Insurance and the Florida Department of Financial Services (“DFS”). Yet, their appointed receivers, consultants, and scores of attorneys, usually failed to do just that. Such was the case of The Aries Insurance Company (“Aries”) when DFS failed to collect the re-insurance money contractually owed to Aries, a South Florida insurance company that in the aftermath of September 11 2001 ran into financial troubles by being unable to collecting from its re-insurers. Sadly, an immigrant Hispanic family was forced to watch as their American Dream and the private insurance company they had built over twenty years was brought to financial ruin by those very State agencies that were duty-bound to create an atmosphere in which the company could thrive.
Aries Insurance Company (a Florida domestic insurance company) served the South Florida Hispanic business community for more than 20 years, during a time that national insurance companies refused to insure the Hispanic community. Aries Insurance Company was the American Dream of the Fraynd Family. This Hispanic family emigrated from Latin America to follow the American Dream. In 1981, Marcos Fraynd, patriarch of the family, invested $2 million to establish Orion Insurance Company, later renamed Aries Insurance Company. Their dream thrived until shortly after September 11, 2001, when it became another casualty of that horrible day.
After September 11, 2001, General Reinsurance Corporation (“GenRe”) – (A major International Reinsurance Company), the main Aries re-insurer, made a decision to stop paying the re-insurance receivables it owed to The Aries Insurance Company, solely for its own financial benefit. Outraged by GenRe’s actions, the Fraynd family contacted the then Insurance top regulator Tom Gallagher to assist the Fraynd family and The Aries Insurance Company to collect the reinsurance receivables from GenRe. On May 9, 2002, the Aries Insurance Company and the Fraynd Family voluntarily invited the Florida Department of Insurance and The Florida Department of Financial Services to work with the Aries management team together to collect the re-insurance money from General Re. As of March 31, 2002, GenRe owed Aries $21M. The Fraynd Family offered to invest an additional $20 Million in order to save Aries but DFS did not accept it because their intent was simply to take over Aries and spend the rest of the assets.
At an arbitration held in October 2002, the receiver’s (“DFS”) only demand for payment of monies owed by GenRe were those bills prepared by Aries’ management before March 31, 2002, prior to the receiver’s (“DFS”) appointment by the Tom Gallagher. That arbitration panel ruled in November 2002 that Aries owed GenRe $3.7 million, but directed GenRe to pay all unpaid reinsurance receivables owed to Aries after the receiver prepared and presented those bills. Prompt action by the Florida receiver would have enabled Aries and its policyholders to survive. Even then, the Florida receiver took no action to collect the millions of dollars owed by GenRe, preferring instead to vilify Aries management for the Receiver’s own inaction. Located on the same premises with The Aries Insurance Company was Onyx Underwriters, Inc., another Fraynd Family business. Onyx was the general agency for Aries and all Onyx Underwriters, Inc. affiliates. To bolster Aries’ rehabilitation, the Fraynds voluntarily turned over more than $20 million dollars from Onyx Underwriters to the receiver and assigned all rights to collect all funds due from finance companies, agents, policy holders, and others.
Upon receiving that money and rights to collect all of the assets of Aries, the Florida Department of Insurance receiver inexplicably ordered the management team that ran both Aries Insurance Company and Onyx Insurance Group of Companies to leave the premises. Instead of working together with the Fraynds and Aries as agreed on May 2002, the receiver and the Florida Department of Insurance turned a voluntary rehabilitation into an expensive legal battle. The Fraynd Family had no other option to protect their policyholders but to hire a team of attorneys to preserve their legal rights under the U.S. Constitution and to fight this abuse of power by both receiver and the Florida Department of Insurance.
The Florida Department of Insurance appointed over the years, several overpaid and under qualified receivers to setup a team to collect those overdue funds and collect premiums, settle bills, pay claims, collect re-insurance receivables, and rehabilitate The Aries Insurance Company. This never happened as it was never the intent of DFS to rehabilitate Aries. The intent was always to liquidate Aries and use all of the Aries assets to hire politically connected friends. During the next 10 years DFS and the appointed receiver, Huge Dates paid over $25Million from Aries Insurance Company’s Bank accounts to re-insurance consultants, financial consultants, influential law firms’ attorneys, accounting firms, computer consultants, security firms and Insurance Adjusting firms that were hired because of their political connections, and many DFS government employees while the reinsurance bills were never even prepared or sent to the reinsures in a timely matter. Experts that DFS hired using Aries funds were paid over $2Million so that they would testify against the Fraynds in Criminal and Civil actions.
One such Insurance adjusting firm was Lozano Insurance Adjusters, Inc. formed and owned by Lisette Lozano, a former DFS employee and close friend of Tom Gallagher. Lisette Lozano incorporated her adjusting firm on November 2002, just days before the Aries claims were going to be adjusted and paid. Lozano Insurance Adjusters, Inc. was awarded the multimillion dollar contract to adjust all of Aries claims and her fee was a percentage (%) of the amount of the claim she adjusted so her incentive was to over inflate the claims rather than reduced the claims. Lisette Lozano was given this opportunity, and then agreed to testify in court against the Fraynds. Lozano was a former DFS employee and became CFO of Aries, as a result of pressure by DFS for Aries to hire Lozano because the former Aries CFO was not “trusted” by DFS. After severe regulatory pressure including severe auditing fees against Aries for overbearing financial examinations by DFS to Aries, Aries agreed to hire Lozano. Lozano only worked for under a year for Aries Lozano resigned just months prior to the May 2002 DFS take over and left Aries without a CFO to prepare and file its 2001 Statutory Statement. The failure to file the statutory statement by Aries was one of the reason DFS sent investigators to Aries to perform yet another financial audit.
DFS examiners at the direction of Wayne Johnson, former chief examiner for DFS and now, the Division Director of Rehabilitation and Liquidation, had been sending examiners for years had from DFS to perform audits of the Aries’s books and records and all examinations had always resulted in showing that Aries was a solvent Insurance company. These same examiners that came in to Aries on May of 2002 proceeded to then, not admit assets in the Aries balance sheet so that it would then show that Aries was insolvent. With Aries alleged insolvency, DFS could take full control and liquidate Aries. In good faith, the owners of Aries voluntarily agreed to allow DFS to come in and assist the owners in rehabilitating the company. DFS took full control only after two weeks into the process of rehabilitation of Aries and took full control and attempted to liquidate Aries.
DFS has never successfully rehabilitated any insurer in the state of Florida. One has to wonder why the insurance department of the State of Florida has a division that calls itself, the Division of Rehabilitation and Liquidation. It should just be renamed the “Division of Liquidation”. As one former DFS employee once said: ”DFS is self funded, they eat what they kill”.
An adjusting contract similar to the contract that was awarded by DFS to Lozano in the Aries case, was awarded to several other adjusting firms during 1992 after the aftermath of Hurricane Andrew, resulting in one of the largest Insurance losses in US history. Similarly the Aries unpaid claims could have been settled for half of the $150 Million that was paid in claims to those insured by Aries. The claims were all paid with funds provided by the Florida Guaranty associations. This all results in higher premiums that are passed on to Florida policy holders by the other insurance companies that must fund the Florida Guaranty funds.
Failed candidate for governor of Florida, and former State of Florida CFO, Tom Gallagher, took umbrage when the Fraynd Family decided to fight back and take control of Aries again. In 2004, the Florida Statewide Prosecutor turned what should have been an insurance dispute into criminal charges against several Fraynd family members. After more than three years of litigation in the criminal courts and 8 different versions of the indictments filed against the Fraynds, the Statewide Prosecutor was forced to drop the most serious charges in return for technical violations of the insurance laws, extracting a promise that the Fraynd Family would not participate in the Florida insurance business ever again.
The Fraynd family, brought to the brink of financial ruin by the State’s overly aggressive legal actions, reluctantly settled the criminal charges in order to bring their ordeal to an end. The result of this debacle is that Florida’s regulators have saddled Florida’s taxpayers with millions of dollars in excessive fees and costs billed by the Florida receiver. The Florida receivership failed the Fraynd Family, Aries, Onyx, the South Florida Hispanic community, the 600 people previously employed by the Fraynd family, the 3000 statewide agents of Aries and Onyx , and the hundreds of thousands of Aries policyholders and the Florida Tax payers.
The Fraynd Family watched as their Hispanic-American owned company, successful for almost two decades, was first milked and then destroyed by its receiver the highly paid consultants and attorneys milked the company and refused to work with them as a team to rehabilitate a company that DFS had always considered solvent and that that insured thousands and provided jobs to the South Florida Hispanic community. One such example of a highly paid attorney is the E. Barclay Cale, http://www.calelaw.com/ who came out of retirement just to handle the civil prosecution of the Aries owners and executives and has made a carrier of collecting millions in fees from the Aries Insurance perusing this matter. This two attorney law firm has collected over $4Million in legal fees to date.
DFS continues to attack the Fraynds using funds from Aries and using the same baseless criminal charges to file civil charges against the Fraynds in order to obtain judgments against them and then proceed to attempt to collect even more funds to allegedly pay the Florida Guaranty Funds back for the over $150 Million in claims that they authorized to be paid to Aries policy holders
(See the most current financial statement as of December 2010 for Aries Insurance Company below posted on the DFS website showing that well over $25 Million has been misspent so far by DFS in legal fees, salaries and travel expenses and fringed benefits from that almost $70 Million has been collected from Aries assets but a large portion of these collected funds have been spent by DFS.
http://www.myfloridacfo.com/Receiver/company_pdf/498/498_123110.pdf )
Update October 2016
As of March 31st 2016 the total collections as reflected in the financial statement posted on the DFS website shows that the new figure for legal fees, salaries and travel expenses and fringed benefits is now over $35 Million or $10 Million more spent since December 2010 and the collected amount only increase buy $3,706,000 to $73.7 Million which means that the DFS and its legal profesional team has spent over $6 Million during the last 5 years of the Aries Estate and have brought no additional collections to the Estate of Aries. The is a serious Government waste of the Aries Estate assets and no additional funds returned to FIGA which ultimately affects the tax payers of the State of Florida and the Insurance consumer buying public.
Most of these additional fees have been spent by DFS employees and the las firm of
http://www.calelaw.com
See the most recent financial statement for the Estate of The Aries Insurance Company at:
http://www.myfloridacfo.com/division/receiver/Companies/aries/documents/AriesInsuranceCompany3312016FinancialStatement.pdf
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