Two charged in bicoastal restaurant insurance brokerage scheme

A Canadian man has been extradited to the U.S. to face trial on charges that he swindled $7 million from the victims of a fraudulent commercial insurance policy scheme, according to Acting New York Insurance Superintendent Eric R. Dinallo.

Ian Stuart-Smith, 56, is now being held in New York’s Metropolitan Correctional Center pending trial in Manhattan Federal Court. A pre-trial hearing is scheduled in May.

According to the insurance department’s frauds bureau, Stuart-Smith posed as a New York wholesale insurance broker authorized to sell insurance for various underwriters such as Lloyd’s of London. Officials allege that Stuart-Smith, who used several aliases, sold fraudulent policies to hard-to-insure bars and restaurants, including several on Long Island.

The charges allege that Stuart-Smith operated purported brokerages named Surplus Lines Inc., Heritage Inc. and Rupertsland Insurance Intermediaries Ltd., located in New York and Ontario, Canada.

In addition, early last month, a San Francisco man, Richard Peterson, 66, who allegedly had business ties with Stuart-Smith, was sentenced to 10 years for insurance fraud. Peterson was involved in the sale of approximately $6 million worth of fake insurance policies that he falsely claimed were underwritten by Lloyd’s of London, according to the California Department of Insurance.

CDI investigators said Richard W. Peterson (also known as Robert James) claimed to specialize in the placement of insurance for restaurants and bars. Between 2000 and 2003, Peterson issued policies he said he placed with underwriters at Lloyd’s and obtained through two New York insurance brokerages: Surplus Lines Inc. and Heritage Inc., CDI said. When a broker tried to confirm coverage, he found the policies were fraudulent. Lloyd’s advised CDI that the company did not receive any applications for insurance or any premium funds from the bogus policies.

Peterson pleaded guilty on July 19, 2005 to wire fraud and engaging in the business of insurance after having been convicted of a felony. At sentencing in Manhattan, U.S. District Judge Denny Chin also ordered Peterson to pay restitution of $6.6 million and ordered the forfeiture of $6.6 million, as well as Peterson’s interest in four properties (two buildings in San Francisco, a condominium in Las Vegas, and another in the Cayman Islands).

Peterson illegally operated under the names United Restaurant Services; United Restaurant Services Corp.; United Restaurant Services Cooperative; United Restaurant Services Inc.; United Restaurant Insurance Services; and California Restaurant Specialty Cooperative Inc. located primarily in San Francisco.

Although his broker/agent license was revoked by CDI in 1999 for similar activities, Peterson misrepresented himself as a licensed insurance broker able to place insurance coverage.

Topics New York Fraud Agencies Excess Surplus Numbers Lloyd's