The nightclub insurer promised to fight for its clients — its promotional material shows a man socked in the face with a boxing glove.
But founder Jeffrey B. Cohen fights everything. He went after competitors, clients, former employees and even neighbors, filing dozens of lawsuits around the country. The Reisterstown man once sought a restraining order to keep a rival company from attending an adult industry convention.
Now Cohen, 39, faces the biggest fight of his life — his company, Indemnity Insurance Corp., was seized by regulators, and federal agents said in court documents that he appears to have been plotting to attack a judge. The fallout is rippling across the country, buffeting the thousands of bars, nightclubs and strip joints Indemnity once insured and leaving injured patrons with unpaid claims.
"The devastation is huge, it really is — it's just huge," said Jan Trendowski, a Connecticut attorney who defends bars against claims.
Delaware regulators say Sparks-based Indemnity had a policyholder deficit of $9 million — despite claims of a substantial surplus — when they stepped in last year. Regulators allege that Cohen created an email address and opened a P.O. box in a bank's name in order to fake documents that made it appear the company had more assets than it did.
Federal agents arrested him in June on charges related to that alleged scheme. As they raided his house the same day, according to court documents, they found more evidence to back up the claims of fraud — and items of an entirely different nature.
Agents said they uncovered an arsenal of weaponry, disguises and "survivalist gear." A notebook detailed plans for what appeared to be a plot to harm the judge in the Delaware liquidation case and an elected official, while a recording Cohen made on an apparent "reconnaissance" mission to that state justified killing as a necessity that few could understand, according to court documents.
Those findings have not led to additional charges.
His court-appointed attorney declined to comment. Cohen told agents he was writing a novel.
His whole life reads like one.
A bouncer's rise
A former nightclub bouncer, Cohen started insuring businesses in that industry around 2001. As the business grew, he amassed a house on the water in Florida, three in Maryland and too many vehicles to fit in his four-car garage in Reisterstown — including an Aston Martin owned by his company and a Lexus SUV with the vanity plate "RISKTKR."
He told company auditors his net assets exceeded $43 million, according to court documents.
Clients stretched from Florida to California, including the publicly traded Rick's Cabaret chain of gentlemen's clubs. Indemnity had 4,000 policyholders before regulators stepped in, court documents said.
"It gobbled up a lot of the market," said Brad Sharon, director of marketing and sales at Fairmont Insurance, a New York insurance broker that specializes in that niche — and is among the many that Cohen sued over the years.
Indemnity grew fast by charging substantially lower premiums and advertising that it would aggressively defend customers from lawsuits.
"The reason we're a very successful company is because I'm a fighter," Cohen told The Baltimore Sun in January, after his company was seized but long before he was arrested. "I fight claims better than any company out there — that's why we're so profitable."
Indemnity also paid independent insurance agents and brokers far higher commissions than the industry standard, giving them an incentive to sign clients up, said Pike Barber, owner of Hospitality Insurance Agency, a Florida company that connects nightclubs and other businesses with policies.
Barber said Cohen pitched him on Indemnity's policies six or seven years ago. Barber's team took a look, had concerns about the long list of exclusions — such as claims involving a thrown bottle or other "flying object" — and sent Indemnity questions that went unanswered, he said. Barber took a pass.
Tony Carastro, another Florida insurance agent, was also skeptical. When Cohen flew down for a meeting, he wanted to talk about cars and connections and didn't seem to have a grasp on the fundamentals of the industry, Carastro said. He said he had concerns about Indemnity's published financials.
"This company could be shut down very soon and it's going to be a [mess] when it happens," he wrote in a 2009 email that was filed as evidence in a lawsuit.
Now the companies that did sign on with Indemnity for liability coverage are "out on their own," Barber said. On judgments against them that Indemnity was supposed to pay. On lawsuits that Indemnity was supposed to defend them against. On claims that might arise later but date to when Indemnity insured them.
Because of the way Indemnity was organized, it did not contribute to state guaranty funds, so policyholders can't turn there. They can file a claim in Indemnity's liquidation case — for whatever assets might be found.
"Basically all those policyholders are in shell shock," Barber said. "I'm sure some people could [end up] losing their hospitality establishment."
Injured patrons, meanwhile, are stuck.
Attorney Timothy Pothin said a client stabbed in the neck at an Indemnity-insured restaurant in Connecticut — an attack that caused brain damage and paralysis — won a $4.3 million judgment last year that remains unpaid. Pothin said he can't get it from the business, the U.S.S. Chowder Pot. He'll file a claim in the liquidation case, but, he said, "we're likely to collect pennies on the dollar."
'I'll give you the best rate'
Florida strip club mogul Michael J. Peter lives in an exclusive Fort Lauderdale community, where he docks his yacht and takes his dog Jake for walks. His neighbor a few doors down also had a dog named Jake, and the two would often exchange idle banter.
Peter, now in his 60s, once owned dozens of strip clubs across the country. After a stint in federal prison for a mail fraud conviction that was later overturned, his empire had shrunk to four clubs. He'd insured them for years with a Chicago company and wasn't looking for a change.
Then brokers in Colorado and Texas called to urge him to take a look at a hot new company that had just signed up the Rick's Cabaret chain. And one of his bartenders at the Solid Gold club in Fort Lauderdale mentioned that a regular customer — "Jeff, your neighbor" — was one of the country's biggest adult-club insurance underwriters.
Peter realized it was the same guy.
The next time they saw each other while walking the dogs, Peter mentioned insurance. Cohen said he would take care of him. "I'll give you the best rate available," Peter recalled Cohen saying.
It was a good product that saved his adult venues 20 percent on what others charged, Peter said. He switched three of his four clubs to Indemnity.
"My experience was all positive," he said.
Clients such as Ron Furman, owner of Max's Taphouse in Fells Point, said Indemnity was attentive. Cohen would send a representative "to talk to our staff about how to handle situations so things didn't happen."
"And if there was any kind of claim, they were very on top of things," Furman said.
But other companies said that when they ran into trouble, Indemnity rescinded their coverage.
The Saloon in Minnesota — one of several businesses that made breach-of-contract claims — said in court documents that it provided accurate information about the bar when it applied for coverage. But Indemnity "knowingly included false representations" in the paperwork to give the insurer a way out if a big claim hit, and one did in 2010, the Saloon's complaint states.
The bar ultimately settled with both Indemnity and the claimants, said attorney Bruce Larson, who represented the Saloon. His response to news that regulators seized Indemnity: "That is great."
No fight too small
When Cohen learned that others in the industry were questioning his company's health, he went on the offensive. He sued one competing Illinois company on multiple occasions, alleging defamation over comments that Indemnity was undercapitalized.
That company, Axiom Insurance, and another, Founders Insurance, said in later suits that their clients began receiving emails around 2008 from an anonymous email address — "email@example.com" — making claims about their businesses. Both traced the email address to Cohen, who in at least one deposition admitted he had access to the account.
The Founders case was dismissed, while Axiom and Indemnity reached a settlement in which they agreed not to disparage each other, according to records in a subsequent case.
"I've been in this business for over 30 years and never seen anything like this before," Axiom CEO Dragan "Dan" Djordjevic said in an interview. "He wanted to get me out of business."
Djordjevic said he hadn't met Cohen before depositions were taken in one of the lawsuits. But when Cohen learned they would both be at a conference in Las Vegas, Cohen asked a court for a restraining order to try to prevent Djordjevic and his colleagues from attending.
No fight was too small. When his homeowners association in Reisterstown filed a complaint in 2009 over a deck and addition it said he'd broken the rules to build, he countersued the association and several neighbors.
His suit — later settled — documented various decks and fences in the Belmont Farm neighborhood that did not appear to meet the association's strict requirements either.
"He was very litigious and very 'I'm going to do it my way, and if people don't like it or it's not allowed, it doesn't matter, because I do what I want and nobody can challenge me,'" said Mike Pavo, one of the neighbors Cohen sued.
After Cohen was forced out of Indemnity in 2013, more suits piled up.
He sued a former employee over a $14,000 payment in a pending case that Cohen claims was a loan and the employee says was a bonus check.
He sued his life insurance company after it refused to pay a claim he'd made that he was disabled and unable to work due to "chronic migraine clusters." That case too is pending.
He sued multiple people associated with the Delaware liquidation case, including Insurance Commissioner Karen Weldin Stewart, alleging that the case was a vendetta because he'd supported one of her 2012 primary opponents. (Some of those suits are active; others have been dismissed.)
Cohen also sued his homeowner's insurance company when it investigated a claim he made about fire damage at another Baltimore County home in October. Bankers Standard Insurance said in court documents that the fire at his 8,500-square-foot property on Cooperfield Court in Phoenix had been intentionally set and that all evidence pointed to Cohen.
A neighbor saw him leave 20 minutes before another neighbor saw the fire, said the insurer. Baltimore County police said its arson investigation is ongoing; no charges have been filed.
"The owner of a million dollar home who is looking to commit insurance fraud is not going to start a small garage fire to recover repair fees that are likely to be well below the policy limits," Cohen insisted in court documents.
But Bankers Standard argued that there was a reason. Cohen had little money coming in after he was forced out of Indemnity, the company said. In a deposition full of testy exchanges, a Bankers Standard attorney questioned him about his statements to Delaware officials that his homes were worth less than the loans on them and he couldn't afford to post a court-ordered $500,000 security deposit.
"In the months leading up to the fire, Plaintiff's life was unraveling," the insurer said in court documents for the pending case.
Today the massive house stands empty, the garage doors charred black. Acres of grass stretch out on all sides, unkempt.
A business unravels
In 2010, Indemnity's then-regulator found problems.
"Our examination disclosed numerous issues regarding the Company's record-keeping, and numerous internal control weaknesses and issues in the Company's accounting and reporting processes," the D.C. Department of Insurance, Securities and Banking wrote.
After accusing the examiner of bias and unprofessional conduct, Cohen redomiciled Indemnity for regulatory purposes in Delaware.
A year and a half later, according to court documents, Delaware insurance officials conducting their own examination of Indemnity found far more serious problems.
One of Cohen's many affiliated entities had collected $20 million in premiums for Indemnity but never turned them over, the agency said. Documents didn't match up. Cohen refused to cooperate and told his vendors not to do so, either, the agency alleged in court documents.
In 2013, he was forced out and ordered to return his company vehicles — the Aston Martin, a Ford Mustang and a Range Rover. He parked the Mustang in front of Indemnity's door.
Earlier this year, he purchased a check cashing and Keno business in Northwest Baltimore.
In June, city police say, they observed people getting payouts after playing video lottery terminals. Cohen was in the back room, and would be charged along with another employee with running an illegal gambling establishment.
But that proved the least of his troubles. Two and a half weeks later, federal agents — some in full-body armor — raided his house in Reisterstown.
Court documents related to that search show that agents found several high-powered weapons, including one that they say cost $25,000 and others with long-range scopes; notes referencing firebombs and explosive gas; and an order form for incendiary ammunition.
Agents say he kept a "target list," and they found printouts of maps to the homes of Delaware judge J. Travis Laster and an elected official from that state. They also recovered a digital recorder on which Cohen discusses killing.
"Society needs to look at the fact that killing isn't wrong in certain circumstances," he is alleged to have said on the recording. "Killing culls the weak, killing culls the wrong so that society can have a better chance of survival."
Peter, the strip club owner, who's tangled with the federal government, said he'd keep an open mind on the accusations Cohen faces.
"I've been around the government," he said. "Sometimes things aren't what they appear to be, from their representations."
On Monday, U.S. Magistrate Judge Timothy J. Sullivan ruled that Cohen was "indigent" and appointed a public defender for him. Later that day, however, Sullivan said it appeared to him that Cohen might have "sufficient resources to contribute financially toward the payment of counsel fees."
In one of Cohen's emails to himself, federal agents said in court documents, he wrote that cash in offshore holdings "would not be an admitted asset." The agents also said in court documents that Cohen "substantially admitted" to the fraud allegations he'd denied for months.
But he's a fighter. And he's not stopping now.
In a handwritten letter Cohen sent the judge in his case, on paper borrowed from another inmate at the Chesapeake Detention Facility where he is being held, he wrote: "There are several motions that I need to file in this matter asap."Copyright © 2014, The Baltimore Sun