Pennsylvania Attorney General Charges Four People in Alleged Insurance-Fraud Pyramid Scheme

The Pennsylvania Attorney General's office filed charges against four people in connection with an alleged $7.5 million insurance pyramid scheme that officials say duped customers including three universities and a hospital.

Attorney General Tom Corbett identified the central figures in the alleged scheme as Brian J. Murray, chairman, chief executive officer and principle of the now-defunct Murray Insurance Agency in Scranton, Pa., and Christine M. Oliver-Shean, the company's former president. Both are charged with a series of crimes, including criminal conspiracy, money laundering, theft, insurance fraud, forgery, participating in a corrupt organization, tampering with evidence, obstructing law enforcement and tax crimes.

For more than 10 years, Murray Insurance collected premiums from clients without buying the insurance, according to the grand jury presentation. The pair allegedly provided clients with forged, altered or bogus paperwork to make it appear that the clients had coverage when, in fact, they did not, and, if a claim was made, Murray Insurance would pay it using premiums from other clients, the presentation said. Oliver also allegedly applied for loans from premium financing companies on behalf of clients without their knowledge, and deposited the funds into Murray Insurance's main operating account.

"It is interesting to note that the building in Scranton where Murray's insurance business was headquartered is known as 'One Pyramid Center,' because this was a massive illegal pyramid -- allegedly stealing millions of dollars from new clients to conceal past thefts and keep the scheme in operation," Corbett said in a written statement.

Victims included the University of Scranton, Marywood University in Scranton, Loyola College of Maryland, St. Joseph's University in Philadelphia, and other educational institutions; Mt. Airy Casino Resort in Mount Pocono, Pa.; the borough of Phoenixville, Chester County, Pa.; Moses-Taylor Hospital in Scranton, and other businesses and nonprofit groups, according to the grand jury presentation.

The pair also is accused of using an offshore business, Gaffer Insurance Co. Ltd., to conceal more than $10 million in income and avoid paying Pennsylvania taxes.

The latest charges stem from an investigation that initially resulted in the arrest last month of Murray, involving the theft of more than $1.3 million in premium payments that were collected by his company (BestWire, July 6, 2010). The criminal activity outlined in the grand jury presentment is in addition to those earlier charges.

A bookkeeper who previously worked at Murray Insurance told the grand jury that all money received, including premiums, commissions and interest, were deposited in the main operating account, known as Journal 42. The bookkeeper testified that funds in Journal 42 were used to pay utilities, rent and payroll, and that funds were also transferred back and forth between accounts held by Gaffer Insurance and other accounts held by companies owned by Murray.

In addition, the presentation states that Oliver was twice caught stealing, and not only kept her job, but was promoted. An investigator told the grand jury that in executing a search warrant at Murray Insurance in October 2009, authorities found 13 checks, issued between October 1996 and September 1997, totaling nearly $42,000 and made payable to "cash" and endorsed by Oliver. The checks were drawn on the insurance agency's main operating account. When questioned, Oliver told the investigator she needed the money to care for her sick mother, who died in 1999. She said Murray forgave her because of the circumstances.

Oliver told the grand jury she began working for Murray Insurance in 1982, and was promoted to vice present in the early 1990s, and, despite her diversion of nearly $42,000, Murray promoted her to the position of president in 2001. Between October 2002 and May 2006, Oliver wrote 82 checks totaling nearly $550,000 and drawn on the insurance agency's main operating account that were deposited in a personal checking account jointly held by Oliver and her husband, according to the grand jury presentation. The stolen money was used in part to pay credit-card debt. A certified public accountant discovered the theft in September 2006.

Murray Insurance Agency collapsed in September 2009 when Murray filed for personal bankruptcy and corporate bankruptcy on behalf of his agency.

Also charged is Murray's wife, Diane D. Murray, and Oliver-Shean's husband, Timothy G. Shean. Multiple felony charges also were filed against the Murray Insurance Agency and two companies set up by Murray, the Mallow Holding Co. and Gaffer Insurance.

One former employee told an investigator that it was a joke at the Scranton office that Gaffer had a location in Bermuda, according to the grand jury presentation. Employees in Scranton handled Gaffer accounts, opened mail and answered phone calls to Gaffer, she said.

Murray and his wife were released on bail pending a preliminary hearing on Aug. 31. He is under house arrest. Oliver was released on bail, while her husband was released on his own recognizance.

(By Diana Rosenberg, senior associate editor, BestWeek)