The founder of a Baltimore County insurance company was arrested Wednesday in connection with an alleged scheme to make it appear that the firm — now being liquidated by a Delaware court — had millions of dollars in cash it did not actually possess.
Jeffrey Cohen, 39, former CEO of nightclub and bar insurer Indemnity Insurance Corp., was indicted by a federal grand jury Tuesday on charges of making false statements to an insurance regulator. The indictment was unsealed Wednesday as government agents raided his house in Reisterstown.
An attorney who has represented Cohen in the past could not be reached for comment.
The charges relate to Cohen's claim to Delaware regulators that the company had $5.1 million in unencumbered cash at Susquehanna Bank, according to documents filed in U.S. District Court in Baltimore. Indemnity's physical headquarters is in Sparks, but it is domiciled for regulatory purposes in Delaware.
The four-page indictment offers few details, but it refers to an incident laid out in court filings in the Delaware liquidation case.
In an order finding that a lower court did not violate Cohen's due-process rights, Delaware's Supreme Court ruled in April that he submitted a form to regulators that "appeared to have been faxed from Susquehanna Bank confirming the account balance" but was not in fact from the financial institution.
When state insurance investigators sought to reach the representative who supposedly signed the form, "Cohen thwarted the Insurance Department's inquiries by providing a false post office box, telephone number, fax number, and email address," the Delaware court ruled.
"The Insurance Department's investigation uncovered a similar scheme involving an account allegedly held at Royal Bank of Canada – Barbados, as well as additional misrepresentations in Indemnity's financial statements that hid its true financial condition," the Delaware order stated.
Delaware regulators said in court documents that Indemnity, while reporting surpluses, actually had a policyholder deficit of $9 million before the state seized it last year.
Cohen's detention hearing is at 2 p.m. Friday, the U.S. attorney's office for Maryland said. The charges carry a maximum penalty of 15 years in prison and a $250,000 fine.
In a January interview, Cohen denied Delaware's fraud allegations. He said the company was financially sound and preparing to go public when regulators took it over, a move that he alleged in a short-lived Maryland lawsuit was "retribution" because he supported one of the Delaware insurance commissioner's primary opponents in 2012.
In a Delaware court filing, he accused the state of running the insurance company into the ground after stepping in.
"I will quite literally spend the rest of my life and every dollar to my name fighting this," he said in an interview.
Officials with the Delaware Department of Insurance could not be reached Wednesday for comment. But state officials said in January that Indemnity was not a healthy company when regulators seized it.
"At the time this action was taken, the department ... had serious concerns that the company was financially impaired or insolvent," said W. Harding Drane Jr., a Delaware deputy attorney general, in an email. "Subsequent investigation during the seizure confirmed the department's concerns and uncovered additional fraudulent conduct."
In its April ruling, Delaware's Supreme Court said Cohen also interfered with the company after he was forced out. Indemnity alleged that Cohen monitored company email, "sent threatening text messages to members of management" and caused the firm's credit rating to be downgraded by disclosing confidential information.
The Delaware Chancery Court sanctioned Cohen in January — not over those issues but for the way he returned a company-owned Aston Martin, Ford Mustang Shelby GT and Range Rover.
Ordered to bring them back, Cohen blocked Indemnity's front entrance with one sports car and a parking lot entrance with the other. The company had to tow them because he didn't leave the keys. Cohen said he tried to do so that day but the office was locked.
He said in January that he regretted the "stupid, childish" way he returned the vehicles.
"That was the one thing I've done wrong in this whole thing," he said.