New York Demands $10 Million From Execs

MANHATTAN (CN) - New York state claims in court that directors of Professional Liability Insurance Co. of America steered millions of dollars of self-serving contracts to companies connected to their families, including a cemetery in Hollywood.

New York Financial Services Superintendent Benjamin Lawsky sued 22 of the insurance company's officers in New York County Supreme Court.

According to the dry, lengthy complaint, in 2004 nonparty RBT Trust II bought the Professional Liability Insurance Co. of America (PLICA) through a stock purchase agreement, and owned the company for two years.

During this time, defendants James Douglas Cassity and his son Brent Cassity were sole beneficiaries of that trust, and Howard Wittner was its sole trustee, according to the complaint.

The elder Cassity is also the president of Hollywood Forever, a Tinseltown cemetery that received a promissory note from PLICA, according to the complaint.

The Cassity family also served as principals of Bayside Capital LLC, which they appointed to act as the administrative manager for PLICA and the PLICA Management Company, Lawsky says.

"Under the Administrative Agreement, Bayside was to pay PLICA's office rent, salaries and expenses, including expenses for clerical assistance, postage, telephone, and general accounting," the complaint states. "In exchange, Bayside was to receive compensation of six percent (6%) on all direct business written by PLICA."

In 2005, Bayside's compensation was increased to 10 percent, and raised to 14 percent in 2008, Lawsky claims.

"Additional bonus payments were made to Bayside," the complaint states. "No specific contract terms allowed for such additional bonus payments."

Another PLICA director, defendant Howard Wittner, tapped his own law firm, Wittner, Spewak, Maylack & Spooner, to defend PLICA's claims, according to the complaint.

Lawsky says claims other PLICA directors were members of the Wittner firm: defendants Donna Fitzpatrick, Jean Maylack, David Spewak, David Von Gontard, and Kirk and Gregory Wittner,

This arrangement "resulted in excessive payments to the Wittner Firm for services rendered," according to the complaint.

In March 2008, the New York Insurance Department lowered the boom on PLICA's president and CEO Howard Nathans.

"[T]he New York Insurance Department notified PLICA via email and voicemail that PLICA was not to transfer any assets to any other entity, whether affiliated or not, without prior approval of the New York Insurance Department," the complaint states. "[Defendant] Howard Nathans acknowledged this request on March 14, 2008 and agreed that PLICA would comply with the March 2008 Directive. Despite this agreement, upon information and belief, PLICA paid in excess of $4.5 million to RBT Trust I and II, and other Cassity related entities without prior approval of the New York Insurance Department in 2008."

According to a chart that follows that paragraph, more than $4.2 million of that money went to Bayside, more than $150,000 to the RBT Trust II, and more than $126,000 to Forever Enterprises.

The complaint does not state what relationship, if any, Forever Enterprises has with Hollywood Forever.

Lawsky demands that the PLICA directors cough up at least $10 million for breach of fiduciary duty and violations of insurance laws.

He is represented by Beth Simon with Anderson Kill & Olick.

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