CEO of defunct workman’s comp firm is focus of Ga. Insurance Department’s criminal probe [The Atlanta Journal-Constitution]

Jan. 7--The Georgia Department of Insurance has begun a criminal probe into the business practices of the ex-CEO of a workmens' compensation insurer that was declared insolvent last year, leaving most of its business and municipal clients responsible for paying active claims.

The investigation involves M. Clark Fain, former chief executive of the now-defunct Southeastern U.S. Insurance Inc. It comes nearly three months after a Fulton County judge ordered the company's assets -- including a multi-million hunting preserve in Southwest Georgia -- be put in liquidation under the oversight of Insurance Commissioner John W. Oxendine.

Atlanta-based SEUS started in 2001 and had 209 -corporate and municipal clients when it was declared insolvent.

Fain and his attorney did not return telephone calls seeking comment Wednesday. But they issued a statement through public relations firm MS&L.

"We are confident that a fair review of the facts will ultimately clear and exonerate Mr. Fain and the company," it said. "The Georgia insurance commissioner has had continued and complete oversight of SEUS' actions, including the acceptance of quarterly and annual statutory reports filed timely since 2002.

"All SEUS transactions in these reports were based on the advice of competent industry professionals, conducted lawfully and within the guidelines prescribed by state statutes as overseen by the insurance commissioner."

Oxendine said the probe was sparked by irregularities in the company's books and a loan for more than $10 million that Fain received from the SEUS to purchase land in southwest Georgia to build a nature preserve.

Oxendine said the firm also closed ongoing claims related to workmens comp cases that were still active.

"They were doing it because they didn't have the money," Oxendine said. "If they were to put a $1 million or $2 million claim on the books, it would have shown they were insolvent."

He estimates the company's insolvency is about $20 million to $30 million.

"We belive they've been lying for at least two years," Oxendine said, adding that if criminal charges are filed, each violation carries a penalty of up to 10 years in prison.

In statement, Fain and his attorneys counter that claims only went unpaid after the insurance department took over SEUS' operations and that Oxendine "often failed to respond to submissions made by SEUS in a timely manner."

Most of SEUS's clients that have employees with active claims won't be allowed to tap into the state's insolvent insurance pool to cover them because SEUS initially wasn't required to pay into it because of the way the company was structured.

Many clients likely wouldn't have been able to access the pool anyway, Oxendine said, because when an insurer becomes insolvent, the pool only covers corporate claimants with less than $25 million in total assets.

Those with claims filed in 2006 or later, and which don't exeed the $25 million-in-assets threshhold, generally are covered.

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