Texas Brokers Accused of Defrauding Hospital of $4 Million

Copyright 2009 A.M. Best Company, Inc.All Rights Reserved BestWire

June 26, 2009 Friday 03:52 PM EST

277 words

Texas Brokers Accused of Defrauding Hospital of $4 Million

Alyn Ackermann

HOUSTON

Two Texas insurance brokers are facing federal charges of defrauding a hospital of $4 million by taking premiums for nonexistent policies and charging inflated premiums on real policies, according to the U.S. Attorney's Office for the Southern District of Texas.

Brent A. Carter of Harlingen and Michael N. Swetnam Jr. of Los Fresnos were allegedly involved in a scheme to defraud the Valley Baptist Hospital system in southern Texas of approximately $4 million dollars in connection with the sale of surplus lines of insurance and phantom policies for hurricanes between 2006 and 2008, U.S. Attorney Tim Johnson said in a statement.

Carter and Swetnam, who have offices in the Brownsville, Texas area, were charged in a 10-count federal indictment with conspiracy, mail fraud and wire fraud, Johnson said.

According to the indictment, Johnson said, Carter and Swetnam allegedly overcharged the hospital on two Zurich surplus policies, altering the documents to misrepresent the premium owed by the hospital. The fraudulent premium enabled Carter and Swetnam to make a 100% profit, in addition to their standard 10% commission, for more than $2 million.

Swetnam and Carter also are charged with selling the hospital two nonexistent policies for hurricane coverage for two seasons from 2006 to 2008, making approximately $2 million,

If convicted, the two face maximum penalties of up to 25 years in prison and $500,000 in fines, according to Johnson.

Last year, a former Texas Unitrin claims adjuster was sentenced to 12 years imprisonment after a fraud conviction (BestWire, Dec. 10, 2008).

(By Alyn Ackermann, senior associate editor, BestWeek: [email protected])

June 27, 2009