Bloomberg Markets magazine in its January 2014 issue, reports on Alabama Reassurance and its connections to the prosecution of Philadelphia entrepreneur Allen W. Stewart. The case involving Alabama Re centered on two clauses in an insurance contract--one clause stated that there were no other "understandings between the parties." But a second clause, reached on or about the same day, limited Alabama Re's possible losses in its contract with Stewart's company, Summit National Life Insurance. The clauses guaranteed that Alabama Re would suffer little or no loss, and a federal jury found the contract to be fraudulent.
Here's how Bloomberg Markets described the central issue in the Stewart case involving Alabama Re:
"The owner of one imperiled insurer, Philadelphia lawyer Allen W. Stewart, was convicted by a Philadelphia jury in 1997 on 135 counts of racketeering, wire fraud and money laundering and sentenced to 15 years in prison.
Nine of those counts concerned a reinsurance agreement with Alabama Re. In 1991, Stewart’s Fidelity General Life Insurance Co., facing insolvency, paid Alabama Re $412,500 to take on $15 million of its liabilities, according to the indictment. Regulators in California and Arizona rejected the agreement, saying it didn’t really shift the liability. Fidelity and Alabama Re then signed a new agreement in March 1993, which included a clause saying there were no other 'understandings' between the parties.
Yet on or around that same day, a side agreement was signed with Fidelity’s parent company, Summit National Life Insurance Co., the indictment says, limiting Alabama Re’s possible losses to $481,250, guaranteeing that Alabama Re would suffer little or no loss."
|Paul Bryant Jr.|
Photographer: Glenn Baeske/The Huntsville Times/Landov