WEST PALM BEACH (CN) - The former CEO of Reebok sued Travelers Casualty and Surety Co., claiming the insurance giant unjustly refused to indemnify him for $25 million embezzled by his accountant. The accountant is in prison.
Paul Fireman claims in Palm Beach County Court that Travelers, his corporate theft insurer from 2008 to 2009, stiffed him after the massive embezzlement by his longtime accountant Arnold Mullen.
Mullen, who had unfettered access to Fireman's accounts for years, admitted in 2009 that he had embezzled $25 million from to finance his own real estate deals and business ventures. He was sentenced to 30 years for embezzlement, but the term was reduced to 5 years after he agreed to cooperate with investigators.
Although Fireman has recovered a yet-to-be disclosed sum from Mullen, he says a substantial portion of the embezzled money is still unaccounted for.
Fireman's corporate theft policy with Travelers, the enactment of which coincided, to the week, with the alleged time of the embezzlement's discovery, represents one of Fireman's last resorts to recoup some of these outstanding losses.
According to the complaint, Travelers denied coverage, claiming the corporate entity declaring the losses, Fireman's investment company PFP Associates, was not insured by Fireman's policy.
But Fireman says that interpretation "fails to express or conform to" the spirit of their insurance agreement; he says Travelers is obligated to cover fraud or embezzlement suffered by any entity in the corporate network of his investment companies.
Policy documents filed with Fireman's complaint show that the policy provides retroactive coverage and has a maximum payout of $1 million per year.
Consequently, the size of a prospective payout could depend in large part on how Mullen's acts of embezzlement are dated.
Fireman's 2009 fraud complaint against Mullen alludes to questionable account activity stretching back to the mid-nineties.
Fireman's attorney, Robert Friedman, declined to comment on the case, as did Fireman's representatives at PFP Associates' Palm Beach Gardens office.
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