Minnesota Surety And Trust Being Liquidated After Finding Evidence Of Fraud

The Minnesota Department of Commerce is working to liquidate the assets of Minnesota Surety and Trust Co., which has been accused by regulators of having a history of financial problems, administrative incompetence and demonstrating evidence that it has engaged in fraudulent activity.

As of June 30, the company, an Austin, Minn.-based subsidiary of First Heartland Surety and Casualty Insurance Services Co., reported negative equity capital of $32,454 and negative year-to-date income of $404,873, according to figures provided by the department.

Minnesota Surety has been charged by the department with altering files in anticipation of a regulatory exam by the Colorado Division of Insurance. The company allegedly made at least 4,000 false entries in books, reports and statements in order to make examiners and believe the company was in compliance.

According to the department's statement of charges, in preparation for the Colorado regulatory exam scheduled for February 2011, Peter Plunkett, president of Minnesota Surety, allegedly devised an elaborate scheme to doctor records to make them appear to be in compliance with the law.

Plunkett allegedly traveled to Colorado in early January 2011 to visit with an executive from a similar company, Pioneer General Insurance Co., that had recently been fined $533,000 following an exam by the Colorado Division of Insurance. That executive, Dave Hyatt, allegedly gave Plunkett the examination report that outlined Pioneer's violations.

According to the Minnesota Department of Commerce's statement of charges, Plunkett allegedly attempted to avoid a similar fine by circulating the Pioneer exam report to Minnesota Surety agents working in Colorado. From there a "market conduct do list" was created to retroactively bring Minnesota Surety's files into compliance.

Plunkett allegedly created four sets of ink stamps and in January and February 2011 sent two agents to Colorado to help agents there alter bail bond documents in advance of the Colorado market conduct exam. Though the forms held by Minnesota Surety were altered so that they appeared to comply with the law, the copies retained by customers who secured bail bonds from Minnesota Surety lacked the required stamping.