D.A. Bragg, Port Authority IG Announce Indictment Of $250 Million Off-Shore Insurance Scheme

Manhattan District Attorney Alvin Bragg, Jr., today announced the indictment of INTER-INSURANCE AGENCY SERVICES LTD., Chairman and owner TIMOTHY "TIM" BARRY DERHAM, 60, and his nephew, Chief Technology Officer DONALD "TRIP" A. DERHAM III, 32, for issuing more than 40 unauthorized insurance policies purportedly providing more than $250 million in coverage to clients while the company's equity was less than $600,000.

As alleged, from March 2014 through April 2022, INTER-INSURANCE defrauded clients - including companies operating at Port Authority of New York and New Jersey ("PANYNJ") airports, construction firms, and homeowners - by issuing unauthorized and fraudulent insurance policies from Barbados-based International Underwriting Insurance Company ("International Underwriting"), which was owned by TIM DERHAM. The defendants are charged in a New York State Supreme Court indictment with various counts of Grand Larceny in the Second and Fourth Degrees, Scheme to Defraud in the First Degree, and Offering a False Instrument for Filing in the First Degree.[1]

District Attorney Bragg said: "New Yorkers trust that when they purchase insurance, whether to safeguard their home or operate on an airport tarmac, they are paying for protection in times of crisis. As alleged, these defendants flagrantly lied and issued worthless insurance policies from their off-shore company while pocketing thousands in premiums and fees. I thank our partners at Port Authority's Office of the Inspector General for their partnership in rooting out fraud and protecting New Yorkers."

Port Authority Inspector General John Gay said: "The Port Authority takes misconduct like this seriously and acted immediately when this fraudulent scheme was uncovered. We thank our partners at the Manhattan District Attorney's office for their collaboration and shared commitment to protecting the integrity of public projects."

According to court documents and statements made on the record in court, from March 2014 through April 2022, International Underwriting was not authorized to conduct business in New York State. During that period, International Underwriting had a net-worth of less than $600,000, far less than the $45 million equity required for an insurance company based outside of the United States to be approved to conduct business in the United States. Despite the company's limited assets and equity, a majority of the unauthorized International Underwriting insurance policies were for coverage that ranged between $1 million and $25 million. The defendants also failed to report the insurance policies to the Excess Line Association of New York.

TIM DERHAM determined which International Underwriting policies were issued and the prices of those policies while managing the company's affairs. TRIP DERHAM assisted with operational and management decisions of International Underwriting, while also creating business records - including policy documents and company invoices - that frequently contained information he knew to be false. The defendants did not disclose to clients that International Underwriting was not an admitted insurer in New York, nor that it was unauthorized as an excess line insurance company in New York.[2]

In one email exchange, an INTER-INSURANCE employee forwarded to TRIP DERHAM a third party's request for confirmation that International Underwriting was authorized to conduct business in New York State, noting, "Also do we have anything that states we do business in NY? Authorization - thanks!" TRIP DERHAM replied to the employee, "I don't have any documentation showing that [International Underwriting] is authorized to do business in NY. :-/"

In another email exchange, when an inquiry arose regarding a $25 million aviation commercial general liability policy, INTER-INSURANCE's Chief Financial Officer wrote to other employees, "Well this could go horribly wrong. I'm pretty sure [International Underwriting] doesn't have $25,000,000 in reserves to cover a loss if one occurred."

The defendants stole from three Manhattan-based clients by selling them unauthorized, fraudulent International Underwriting insurance policies. One individual paid the defendants more than $110,000 in premiums and fees for policies that purportedly provided $15 million in coverage, a second company paid $51,000 in premiums and fees for policies that purportedly provided $15 million in coverage, and a third company paid $2,375 in premiums and fees for an insurance policy that purportedly provided $5 million in coverage.

Two INTER-INSURANCE clients operated on the "Aircraft Operation Area" of JFK Airport, which requires companies to have specialized license plates issued by the PANYNJ Police Department and have commercial general liability insurance with $25 million in coverage per occurrence; this coverage is reported on Certificate of Liability Insurance ("COI") forms submitted to the PANYNJ.

From April 25, 2019, to April 22, 2020, the defendants created and distributed fraudulent COIs on at least four occasions that were filed with the PANYNJ's Risking Financing Unit located at 4 World Trade Center in Manhattan. Three COIs were submitted in connection with applications for specialized plates, and one in connection to a tenant alteration project. The defendants falsely identified International Underwriting's status on the COIs to conceal that the company was not authorized to issue insurance policies in the United States, and falsely represented that it could provide coverage amounts of $22 million and $25 million.

The scheme was uncovered when INTER-INSURANCE failed to provide basic information about International Underwriting to a third-party verifying insurance requirements for a contract on PANYNJ property.

Assistant D.A. Jaime Hickey-Mendoza is handling the prosecution of this case under the supervision of Assistant D.A. Christopher Beard (Deputy Bureau Chief of the Rackets Bureau), Assistant D.A. Judy Salwen (Principal Deputy Chief of the Rackets Bureau) and Executive Assistant D.A. Jodie Kane (Chief of the Investigation Division). Rackets Bureau Paralegals William Barsky and Scott Kauffman assisted in the investigation, in addition to Counterterrorism Analyst Elena Christenfeld. Forensic Accountant Investigator Francine Wexler also assisted in the investigation, under the supervision of Irene Serrapica, Principal Deputy Bureau Chief of the Forensic Accounting and Financial Investigations Unit, and Robert Demarest, Chief of the Forensic Accounting and Financial Investigations Unit.

District Attorney Bragg thanked the Port Authority of PANYNJ's Office of Inspector General, particularly Principal Confidential Investigator Mona Forman, Investigative Manager Mia Chang and former Supervisor of Confidential Investigations Fred Ferrone.

District Attorney Bragg also thanked the New York State Department of Financial Services, the Excess Line Association of New York, and the National Association of Insurance Commissioners for their assistance with the investigation.

Defendant Information

INTER-INSURANCE AGENCY SERVICES, LTD.

Charges:

• Grand Larceny in the Second Degree, a class C felony, two counts
• Grand Larceny in the Fourth Degree, a class E felony, one count
• Scheme to Defraud in the First Degree, a class E felony, one count
• Offering a False Instrument for Filing in the First Degree, a class E felony, four counts

TIMOTHY "TIM" BARRY DERHAM

Charges:

• Grand Larceny in the Second Degree, a class C felony, two counts
• Grand Larceny in the Fourth Degree, a class E felony, one count
• Scheme to Defraud in the First Degree, a class E felony, one count
• Offering a False Instrument for Filing in the First Degree, a class E felony, four counts

DONALD "TRIP" A. DERHAM III

Charges:

• Grand Larceny in the Second Degree, a class C felony, two counts
• Grand Larceny in the Fourth Degree, a class E felony, one count
• Scheme to Defraud in the First Degree, a class E felony, one count
• Offering a False Instrument for Filing in the First Degree, a class E felony, four counts

###

[1] The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. All factual recitations are derived from documents filed in court and statements made on the record in court.

[2] An excess line insurance policy is an insurance policy issued by an insurance company not admitted in New York State.

Public link

Please use the above public link if you want to share this noodl on another website.