E-Mails Reveal Early Concern Over Hartford Insurance Switch

Nov. 20--HARTFORD -- City and school finance officials were concerned with the city's decision to do business with an insurance executive who is now the target of a federal grand jury investigation months before the controversy became public, e-mails obtained by the Courant reveal.

The e-mails show the concerns included what one official called a "blatant conflict of interest" involving city Treasurer Adam Cloud's relationship with Earl O'Garro Jr., who allegedly failed to pay $670,000 in premiums to two of the city's insurance carriers.

John Griffin, the director of risk management for the city and Hartford Public Schools, wrote in October e-mails that Cloud moved a liability policy from RC Knox, "the city's contracted insurance broker," to Hybrid Insurance Group, a company owned and operated by O'Garro, soon after O'Garro signed a lease for office space at 30 Lewis St. That building is owned by Cloud, his father and brother.

The lease began Jan. 2, 2012, documents show. Less than 30 days later, Griffin wrote, RC Knox received notification that the coverage was moved to Hybrid "with no change in coverage terms, cost or insurer."

Records show that the city's pension commission switched insurance agents to Wentworth, DeAngelis & Kaufman Inc. in February 2012. Cloud has said that Wentworth partnered with Hybrid to offer a policy that "provided increased coverage at a reduced cost" to the city. Cloud has acknowledged recommending Wentworth and Hybrid to the commission.

John Droney, Cloud's attorney, said Wednesday that the pension commission's approval of Wentworth and Hybrid had nothing to do with O'Garro's lease at 30 Lewis St. and dismissed the accusations as "an attempt at political assassination."

He pointed out that Cloud had no vote in the hiring of Wentworth and Hybrid. The treasurer recommended them based on their offering, he said, and the pension commission and city corporation counsel approved the hiring.

"To suggest there is some sort of improper behavior here is just plain wrong," Droney said. "There's just no connection. All we have here is speculation, innuendo and an attempt at political assassination and we're not standing for it anymore."

Griffin declined to comment.

O'Garro -- who is now a target of a federal grand jury investigation -- signed a lease for 5,100 square feet of space at 30 Lewis St. He paid $7,650 a month in rent, according to the lease. Sanford Cloud, Adam Cloud's father, is listed as the landlord.

Hybrid moved into the space in early 2012. The Clouds have said they moved to evict Hybrid earlier this month after O'Garro failed to pay rent, and the company has vacated the property.

A Hartford schools memo says $670,000 in insurance premiums has been unaccounted for since the city treasurer's office wired the money to Hybrid on July 18. Griffin has filed a complaint with the state alleging that Hybrid never paid the premiums to insurance carriers Starr Indemnity and National Casualty. The city's excess liability coverage remains in place, however, officials said.

O'Garro contacted Cloud directly in July, saying premium payments were late and the city's policies were in danger of being canceled. Cloud forwarded O'Garro's e-mails -- which included Hybrid's wire transfer information -- to the city's former finance director, Julio Molleda, asking him if the money could be wired "by tomorrow."

"When you add the above to the facts of the treasurer's wire instructions to Hybrid, far outside accounting and insurance standards, his personal recommendation of Hybrid and the connection to lobbying efforts," Griffin wrote in an Oct. 9 e-mail, "it is hard to see this as anything other than a blatant conflict of interest at a minimum."

Christopher Cloud, Adam Cloud's brother, was a lobbyist for Hybrid. Records show Christopher Cloud had a $30,000 contract with O'Garro that began in 2012, though Cloud has not received full payment for his services.

Last month, FBI agents served subpoenas on city hall, the Hartford school system, the state insurance department and the state Department of Economic and Community Development requesting contracts, complaints, financial information, reports and e-mails related to Hybrid Insurance Group.

Among the e-mails that federal authorities sought are any messages sent or received by top Hartford officials, including Mayor Pedro Segarra, Superintendent Christina Kishimoto and Adam Cloud, that mention Hybrid or O'Garro.

Federal investigators also requested from the economic and community development department any Hybrid-related e-mails that were sent or received by Adam or Christopher Cloud.

In early 2012, Hybrid was awarded a $100,000 state loan and a $26,320 matching grant through Connecticut's Small Business Express program -- run through the DECD -- to help fund the firm's relocation from Windsor to the Lewis Street building. Hybrid has defaulted on that loan.

'We have no record ... of paying Hybrid'

A key point of concern has been the wire transfer that Cloud's office made to Hybrid. Typically, city officials have said, the payment would be made to an insurance agent, and the agent would send the money to the broker.

Cloud has said Molleda gave him approval to wire the money directly to Hybrid, instead of the agent.

But e-mails from Griffin and Paula Altieri, the school system's chief financial officer, in October indicate the finance department recorded the payment as going to H.D. Segur, an insurance agent for the city -- not Hybrid.

"That no one in city finance knew [Cloud] sent the funding to Hybrid and the transaction gets posted ... as having gone to Segur is also extremely troubling," Altieri wrote in an Oct. 5 e-mail obtained by the Courant through a Freedom of Information request.

An e-mail chain shows Griffin reached out to finance employee Ellen McCreery about the recording of payment.

On Oct. 15, McCreery wrote to Griffin: "Clearly we think we paid [Segur] instead of Hybrid per the listing here. We have no record anywhere ... of paying Hybrid anything."

Calls to McCreery and the city's interim finance director, Joseph Ruffo, have not been returned. Altieri declined to comment Wednesday.

A report by Craig Trujillo, the city's deputy chief auditor, addressing the wire transfer said the finance department never prepared a "warrant" for the wire transfer -- a document required to send the money -- because "the accounting department staff was not informed of the transaction by the former finance director."

"The city treasurer's office wired the funds to [Hybrid] based on a verbal approval between the former finance director and the city treasurer, rather than a 'warrant' as required," he wrote in the report. "The city finance department and treasurer's office have not produced documentation that there was or is a legal obligation requiring the city to pay [Hybrid] directly."

Trujillo said at an internal audit commission meeting last month that Cloud and Molleda were "negligent" and used "poor judgment" in wiring the money to Hybrid.

Attempts to reach Molleda were unsuccessful.

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