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Monday, February 23, 2009

Will Corporate Fraud Investigations Target Alabama?

The Washington Post reports that officials in Congress and the Department of Justice are looking at ways to provide more resources for investigations of corporate fraud.

The tanking Bush economy seems to have heightened interest in rounding up wrongdoers in corporate boardrooms. If new attorney general Eric Holder and his troops are serious about going after business fraud, they might want to focus some resources on Alabama.

While recent public attention has focused on problems in the mortgage and banking sectors, Holder & Co. might want to focus on an under-the-radar industry that appears to be rife with corruption.

It's called reinsurance, and the Justice Department has a spotty record at policing the field over the past 10 years or so. Perhaps that record will improve in the future, and a good place to start would be Alabama.

That's because an Alabama company, which happens to be owned by a prominent member of the University of Alabama Board of Trustees, was implicated in one of the government's largest and most successful prosecutions for reinsurance fraud.

The case, based in Pennsylvania, resulted in the 1997 conviction of Philadelphia lawyer and businessman Allen W. Stewart. The government was able to retrieve some $17 million through forfeiture proceedings.

Alabama connections in the Stewart matter were so strong that prosecutors and fraud experts from Alabama were deeply involved in the case. And yet, the Department of Justice chose not to pursue a case against the Alabama company when the Stewart prosecution was over.

The statute of limitations on the activities from the mid to late 1990s almost certainly has run. But has the Alabama company changed its ways? Is it still conducting business in a fraudulent manner? That might be a question that Holder & Co. will want to look into.

And considering that Holder has extensive legal experience in Pennsylvania, and strong family connections to Alabama, those questions might hold a special interest for him.

Either way, evidence is overwhelming that a prominent figure in the University of Alabama System has a business that has not always operated in an ethical fashion. We will be examining that business, and its owner, here at Legal Schnauzer.

It's interesting that Allen W. Stewart currently is serving a 15-year federal prison sentence. But an Alabama businessman whose company was implicated in the same case has avoided serious scrutiny. Maybe it's about time that changed.

When we reported back in October on a Virginia case involving General Reinsurance, a subsidiary of Warren Buffett's Berkshire Hathaway, we noted the reinsurance trail led in a roundabout way to my unlawful termination at UAB.

The Schnauzer has continued to sniff the reinsurance trail, and we will be reporting our findings in the not-too-distant future.

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