Former Broker Sentenced to Five Years Prison for Taking $300,000 in Premiums

Former commercial insurance broker Richard Pisacane was sentenced to five years in state prison and ordered to pay $300,355 in restitution to Lincoln General Insurance Co. following his guilty plea to second-degree misapplication of entrusted property.

Superior Court Judge Lourdes I. Santiago in Hudson County, N.J., issued the sentence, said N.J. Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor in a statement.

Pisacane, 65, of Wayne, N.J., was the chief executive officer of the now-defunct insurance brokerage firm Northern Financial Group, Inc., Bayonne, N.J., and was an agent for York, Pa.-based Lincoln General Insurance Co. At the guilty plea hearing, Pisacane admitted that between Feb. 12, 2004 and March 31, 2005, he received more than $300,000 in insurance premiums from customers who were purchasing commercial insurance, yet he failed to remit the premiums to Lincoln General. Pisacane admitted he kept the funds for his personal use, including paying his children's college tuition bills and making credit card and car payments, according to the attorney general's office.

The investigation was launched at Lincoln General's request, said Rachel Goemaat, a spokeswoman for the New Jersey Attorney General's office. Lincoln General worked with the policyholders involved by a case-by-case basis, she said.

Lincoln General entered into voluntarily run-off on May 29, 2009, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database.

The company had been owned by Kingsway Financial Services (NYSE: KFS), but Kingsway disposed of its interest in Lincoln General by donating stock ownership in the company to 20 charities. The Pennsylvania Insurance Department filed a lawsuit in an attempt to force Kingsway to unwind the transaction, which regulators said resulted in Lincoln General changing owners without prior regulatory approval.

The Commonwealth Court of Pennsylvania dismissed the department's legal action against Kingsway in May, but the insurance department said it would appeal the decision (BestWire, May 3, 2010).

Kingsway said its indirect wholly owned subsidiary, Kingsway America Inc., got rid of its interest in its wholly owned subsidiary, Walshire General Assurance Co. -- the sole shareholder of Lincoln General -- by equally donated the stock to 20 charities. Each charity received 5% of the stock, so there is no majority shareholder of Lincoln General.

A trio of judges in Pennsylvania said the Kingsway transaction did not violate insurance laws of the state and therefore did not require approval (BestWire, April 6, 2010).

Lincoln General's Best's Financial Strength Rating was withdrawn at the company's request.

(By Meg Green, senior associate editor, BestWeek: [email protected])