Broker Gets Decade Sentence in $4.6 Million California Fraud

A California broker took $4.6 million in premiums while issuing false insurance certificates to companies, according to the guilty plea in the case against Mitchell B. Zogob, who is now set to spend 10 years in state prison.

The 51-year-old former broker from San Juan Capistrano pleaded guilty to five felony counts of grand theft by embezzlement, five felony counts of insurance fraud and a long list of other counts of illegal insurance activity, forgery and tax fraud, the California Department of Insurance said. Zogob had been a career licensed broker but ceased his renewal in 2002, about the same time he opened two companies: Professional Employers Assurance Group and Program Administrators Inc., through which he collected fraudulent workers' compensation insurance premiums.

The companies to which Zogob sold the forged policies -- representing the documents as insurance certificates issued by such firms as American International Group Inc.'s Granite State Insurance Co., Hartford Insurance Group, Regency and Transglobal Indemnity Ltd. -- represented tens of thousands of employees, according to the insurance department.

"The judges here are doing a good job as far as holding these people accountable," said Susan Kang Schroeder, chief of staff for the Orange County District Attorney, the office that prosecuted the case. "These people really have an influence on commerce and the economy."

Schroeder said white-collar crime wasn't always treated as seriously in sentencing. "Getting double-digit sentences ... it's a departure from the past," she said. She described this as "one of the larger" premium fraud cases her office has dealt with in recent years, though it's an area the district attorney is "very aggressive in prosecuting," she said.

California Insurance Commissioner Steve Poizner said in a statement this kind of fraud is "especially egregious because it leaves companies who are buying insurance for their workers and their employees unprotected. It hurts legitimately injured workers from receiving the benefit they deserve."

The top five writers of workers' compensation in California in 2008, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database, were: State Compensation Insurance Fund of California, with 22.6% market share; American International Group Inc., with 7.6%; Liberty Mutual Insurance Cos., with 6.7%; Travelers Group, with 6.3%; and Berkshire Hathaway Insurance Group, with 5.7%.

(Jesse A. Hamilton, Washington bureau manager: [email protected])