Captive insurance company manager indicted for fraudArticle added by Roccy DeFrancesco on November 29, 2013
Roccy Defrancesco

Roccy DeFrancesco

MI

Joined: May 24, 2006

I have some unfortunate news that recently came to my attention about the captive insurance company (CICs) industry. I say unfortunate because CICs are one of my favorite risk-management tools that business owners can use to help them reduce their income taxes and grow their wealth.

Even though this is not a flattering article about CICs, if you have not learned about them as unique planning tools, you should.

Fraud

I found something on www.state-journal.com that just shocked me. I found that one of the more prominent CIC managers, Frederick Turner, J.D., has been “indicted for fraudulent insurance acts.”

Mr. Turner is the founding principal of Active Captive Management and from what I’ve been told, it’s one of the larger CIC players in the business.

I don’t know Mr. Turner, but he sounds like a bright guy on paper (J.D., cum laude in law school, etc.) And before I tell you about the criminal indictment, let me state for the record that I have not read the facts or allegations supporting the indictment (which are not available yet). Everyone is innocent until proven guilty, and I personally have no opinion on Mr. Turner’s guilt or innocence. Having said that, when a prominent CIC manager is indicted for fraud, that’s a really big deal in the financial services industry, and I felt compelled to make everyone aware of the indictment.

I got my hands on the actual criminal indictment that was filed in the State of Kentucky (a state with favorable CIC legislation). It stated as follows:

The Grand Jury charges: That on or about the 14th day of June, 2013, in Franklin County, Kentucky, the above named defendants: Frederick Turner and Donald Olson, acting alone or in complicity, committed the offense of fraudulent insurance acts over $500 when they knowingly and with intent to defraud or deceive filed an insurance policy with the insurance commissioner knowing that it contained false, incomplete or misleading information.”

When I got my hands on the indictment, I called the prosecutor’s office and asked them if it was real. I was told it was real, and that the docket number was 13-CR-253-1.

Wow. It’s hard to believe that one of the more prominent CIC managers is under a criminal indictment for fraud.

What do you do with this information?

Well, if you have a client who works with Mr. Turner’s firm, you might consider contacting his office for an explanation as to what’s going on. If it were me, I’d be looking for another CIC administrator to bring to my clients as an alternative. This is the only prudent and professional thing to do.
Lessons we can learn

What this really should teach everyone is that, no matter how good someone looks on paper, it’s vitally important that you do everything you can to vet the experts you work with.

The reality is that a local financial planner, insurance agent, CPA, or even attorneys do not have the time to research and vet the various firms that offer tax planning help. Section 79 plans are a terrific example. The average advisor who is pitched this plan by an IMO or insurance company will think they sound great.

However, when you really break down the math and understand how to properly set up and administer a plan, you’ll learn that most of the 79 plan administrators do not do things appropriately.

I’ve not had to take such drastic steps with CICs, but this fraud indictment certainly raised my eyebrows and should do the same for any advisor who worries about making sure they are recommending the best team of advisors to their clients.

See also:

The 10 questions of captive insurance, Pt. 1

Captive insurance companies and life insurance: A very bad combination

Affordable captive insurance company (CIC) solutions
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions
Post Article