C. Gavin Gatta Jr., Shore insurance maven, admits to $20M fraud [Asbury Park Press, N.J.]

Oct. 08--C. Gavin Gatta Jr., an Ocean Township man and former partner in what was one of the state's biggest insurance agencies, pleaded guilty this morning to pocketing more than $20 million from companies who thought the money was being used to pay his customers' premiums.

Gatta, 48, used the money in part to finance a lavish lifestyle that included a Mercedes, a Porsche, an Aston Martin and several Ferraris, prosecutors said.

"Even with his name on the company letterhead, Gavin Gatta wasn't satisfied with an honest living," U.S. Attorney Paul J. Fishman said. "Instead, he traded it all for quick, stolen millions."

Gatta was president of Smith Gatta Gelok, a Wall insurance company. He resigned last June and his company was quickly sold to Insurance Office of America, based in Longwood, Fla.

http://www.app.com/singlecopy">Pick up Sunday's Asbury Park Press to read more about Shore insurance maven C. Gavin Gatta Jr.'s spectacular rise and fall

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Gatta pleaded guilty to wire fraud before U.S. District Judge Dennis M. Cavanaugh in Newark. He faces a sentence of up to 20 years in prison and a fine of $250,000, or twice the gain or loss of the offense. He was released on a $250,000, unsecured bond. Sentencing is scheduled for Jan. 24, 2011.

"He's fully accepted responsibility and he'll accept the consequences of his conduct," Gatta's lawyer, Edward Dauber, said. "It's a difficult day for the Gatta family, and they are looking to move on."

Prosecutors said Gatta defrauded companies that provide what's known as premium finance insurance. The product is commonly used by businesses that don't have enough cash to pay for their insurance policies up front.

They turn instead to companies to finance their premiums, borrowing the money and repaying the finance company monthly.

The finance company sends the money to the broker, who takes a commission and then forwards the rest to the insurance companies.

Gatta, however, admitted that in 2003 he began preparing fake premium finance applications for customers who didn't need or request them. The finance company sent him the money. Rather than pay the insurance carriers, who already had been paid by his clients, he kept it.

When the bill came due, he would fabricate another premium finance application, using some of the proceeds to pay off the first, similar to a Ponzi scheme.

The guilty plea sheds light on the abrupt sale of Smith Gatta Gelok, an insurance agency owned by Gatta, David Smith and Kenneth Gelok that had grown fast since the three acquired the Louis Pipi Agency in 2001.

In July, the New Jersey Department of Banking and Insurance said it was investigating Gatta after he resigned, suspecting that he violated the state's insurance laws.

A consent order by the department said Gatta agreed to have his license suspended. The department's investigation is continuing, a spokesman said.

"This has become a far too familiar story," said Michael Ward, special agent in charge of the FBI's Newark division. "Gavin Gatta followed this script from inception to epilogue, and despite the expensive jewelry and numerous luxury automobiles, is simply the latest to plead guilty in this pattern of activity."

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