Midwest Life (LA)
CO, NE Settle Dain Rauscher Lawsuits
Colorado and Nebraska this week settled lawsuits against the Dain Rauscher Corporation in connection with the 1991 failure of Midwest Life. The Colorado litigation was settled for $21.6 million, with proceeds to be divided among policyholders and the Colorado GA. In Nebraska, that association will receive all of the $500,000 settlement of its suit. With these settlements, all guaranty association litigation relating to Dain Rauscher's involvement with Midwest Life has been resolved.
Midwest Life (LA)Retrial Set, Acquittals Sought Following Criminal Trial
Federal prosecutors are planning to retry former Arkansas state Representative Doug Wood and Shreveport lawyer James Adams on Aug. 2 in the Midwest Life criminal trial, United States vs. Jackson, in which the prosecution alleged that the nine defendants in the case committed fraud in several transactions, which resulted in losses to policyholders of Midwest Life Insurance Co., Fidelity Fire and Casualty Insurance Company, and Public Investors Life Insurance Company (PILICO). Wood and Adams are also seeking acquittal on charges left unresolved by the jury in the original trial. Adams is also seeking a new trial on his conspiracy conviction. In support of a new trial, Adams' lawyer noted that a juror sent a note to the judge indicating that his instructions to the jury had not been followed, casting doubt on the verdict.
Wood served as president of Midwest Life and PILICO from April 1990 through February 1991, while Adams represented several of the companies and individuals involved in the case. The trial in the U.S. District Court, Eastern District of Louisiana (New Orleans) began Jan. 19. The week before Wood and Adams went to trial, five of their co-defendants, including Gary Jackson a co-owner of Southshore Holding company, pled guilty to collective counts of conspiracy, mail fraud, wire fraud and money laundering. Judge Lemelle is scheduled to sentence all five on May 12. The remaining two defendants, one of whom is the co-owner of Southshore, Bob Shamburger, are considered fugitives from justice. At the trial's conclusion, the jury on March 3 convicted Adams on one count of conspiracy, but failed to reach a verdict on a conspiracy count and 10 mail fraud counts that Woods faces. Jurors also could not reach a verdict on 13 counts of fraud and money laundering that Adams faced. On March 5, Judge Lemelle declared a mistrial on Woods' charges and the charges against Adams that were left unresolved by the jury.
The U.S. Attorney's Office of Louisiana had served NOLHGA in December with a federal trial subpoena in the case, requesting that NOLHGA provide witness testimony regarding guaranty association costs in connection with the Midwest Life insolvency. Ultimately, NOLHGA was not called upon to testify, however, that possibility remains in the retrial. A hearing on the United States v. Jackson retrial has been scheduled for April 21.
Task Force Chair - Luther Hill; Executive Life (CA)Court Upholds Adverse Gersenson Decision
On April 8, the Superior Court of Pennsylvania in Gersenson v. Pennsylvania Life and Health Insurance Guaranty Association affirmed a June 12, 1998, decision by Judge Stephen Levin of the Philadelphia County Court of Common Pleas awarding $16.6 million to plaintiffs.
This class action was initially filed in April of 1994, on behalf of Pennsylvania resident annuity-holders who participated in the Executive Life Plan and whose principal complaint was that the Rehabilitation Plan provides for lower rates of interest than the rates guaranteed in the ELIC contracts (Pennsylvania's law at the time did not contain interest rollback provisions.). Plaintiffs also sought damages for their inability to access their money during the moratorium period. Following interim rulings, in January 1998, plaintiffs filed a Motion for Summary Judgment seeking judgment in an amount in excess of $17 million. Judge Levin ruled that the California Conservation Court order approving the Executive Life Rehabilitation Plan was not entitled to full faith and credit, and that the guaranty association could not fulfill its statutory obligation by participating in the Plan without ensuring that policyholders received benefits equal in monetary value to the benefits they were entitled to under their original contracts. Judge Levin also ruled that the guaranty association was entitled to deduct $100 per claimant from its aggregate liability to the class.
The guaranty association appealed the judgment to the Superior Court of Pennsylvania, and NOLHGA filed an amicus brief in support of the association's position that the conservation court's order approving the Executive Life Plan must be given full faith and credit by Pennsylvania courts. In reaching it's April 8 decision, the Superior Court found that the Conservation Court's order was not entitled to full faith and credit because Pennsylvania policyholders were denied due process on account of the inadequacy of the ELIC plan election notice.
Staff Contact - Executive LifeStructured Settlement Class Action Filed
On March 19, a civil antitrust class action, Carranza vs. Altus Finance, was filed by an Executive Life structured settlement holder, on behalf of himself and other beneficiaries of structured settlement annuities issued by Executive Life, against the group of French investors who purchased most of the Executive Life assets and assumed restructured Executive Life policies. The plaintiffs are seeking treble damages and disgorgement of profits. Altus Finance Cooperation, Credit Lyonnais, Aurora National Life Assurance Company, CDR Enterprises, Inc., Mutuelle Assurance Artisanale de France, MAAF Vie, Omnium GenŽve, SA and New California Life Holdings, Inc. are named as defendants in the action.
Aside from the fact that it is brought as an antitrust action, the complaint is very similar to that filed by the California Commissioner, alleging that officials of the French firms concealed that they had secret "parking agreements" allowing a single bank, Credit Lyonnais, to control and manage New California Life Holdings, Inc., the sole shareholder of Aurora, and pleading causes of action in fraud, deceit, conspiracy and unlawful business practices.
The action appears to seek recoveries that the estate has a right to seek on behalf of all the creditors of Executive Life, including the guaranty associations. A copy of the class action complaint can be found on NOLHGA's Website in the Special Publications Section (CA0076).
Task Force Chair - Art Dummer; Staff Contact -Year 2000 Insolvency Contingency Plan Committee
Continuing the Committee's ongoing update of activities, please note the following:
A new e-mail address has been established at NOLHGA should guaranty association administrators wish to forward any Year 2000 information that may be of interest to the Committee. The address is [email protected].
Committee Chair - Jack Falkenbach; Staff Contact - Paul PetersonETC.
Congratulations to NOLHGA's Dana Woodward, nee Carroll, on her April 10 wedding. Dana will be using her married name.
MPC Registration and Hotel Reservation Deadline
Administrators are reminded that the deadline for registering for the May MPC meeting and securing a hotel room is April 18.
CALENDAR/CONFERENCE CALLS
April 19 Y2K Insolvency Contingency Planning Committee, Herndon, VA.
April 27 ELIC Task Force Meeting, Philadelphia, PA, 10 am
April 27 NOLHGA Audit Committee Meeting, Tysons Corner, VA, 1 pm
April 27 NOLHGA Executive Committee Meeting, Tysons Corner, VA, 2 pm
April 28 NOLHGA Board of Directors' Meeting, Tysons Corner, VA 3:30 pm
April 30 Legal Committee Claims Valuation Subgroup, Hilton O'Hare, Chicago, IL, 10 am
May 11 Legal Committee, Wyndham Garden Hotel (O'Hare Airport), Chicago, IL, 10am(Please Note Time Change)