Calif. Man Pleads Guilty in $4M Fraudulent Policy Scam

A former insurance broker/agent faces up to 20 years in prison after pleading guilty in New York to conspiracy charges related to insurance fraud. The case stems from the findings of a joint investigation by the California Department of Insurance Investigation Division (CDI), and United States Postal Inspection Service (USPIS).

On July 19, Richard Peterson, 65, of San Francisco, pleaded guilty to charges of conspiracy to commit wire and mail fraud, engaging in the business of insurance after having been convicted of a federal felony, and using a fictitious name in a scheme to defraud.

The case revolved around his fraudulent sale of $4 million worth of fake insurance policies, purportedly underwritten by Lloyd’s of London (Lloyd’s). His plea was entered in Manhattan at the United District federal court, southern district of New York.

Peterson reportedly operated a fake insurance brokerage between 2000-2003 using the names United Restaurant Services Corporation, United Restaurant Services Cooperative, United Restaurant Insurance Services Inc. and California Restaurant Specialty Cooperative (collectively known as URSC.) With offices located primarily in San Francisco, he marketed fraudulent commercial liability policies claiming to specialize in placing commercial liability insurance for restaurants, bars and taverns throughout California.

Peterson,without authorization, reportedly issued commercial liability insurance policies purportedly placed with underwriters at Lloyd’s of London and obtained through two insurance brokerages, Surplus Lines Inc. and Heritage, Inc.

Investigators from the CDI Investigation Division worked closely with the Manhattan office of the United States Postal Inspection Service, and the Office of the United States Attorney, Southern District, to obtain the federal complaint on these offenses.

In addition, in 2001, Peterson was convicted of bankruptcy fraud, a felony, in Northern California. Previously, in 1999, CDI revoked Peterson’s insurance license for running an insurance program for restaurants and bars in which he obtained insurance policies but then altered those, including fraudulently obtaining additional money from the insureds beyond what was owed for the premiums.

Peterson’s license was revoked prior to that in 1994 for soliciting the purchase of certificates of insurance through two entities he owned, AAMB Insurance Agency Inc. and Bay Area Hospitality Cooperative, Inc., from an insurance company he also owned that was not authorized to transact business in California.

Peterson, who used the fictitious name “Robert James,” was first taken into custody in this current case around April 2004 in Florida. That arrest came after investigators from the CDI and USPIS agents from New York and San Francisco tried to arrest him at his San Francisco home. When he fled to Florida they notified federal authorities in Miami.

In addition to a potential prison term, Peterson faces a maximum fine of $250,000, or twice the gross gain or loss resulting from the crime for each count. Peterson remains free on bail in San Francisco until his scheduled sentencing on Oct. 19, 2005 for in New York.