Former insurance mogul’s firm fined $1.4 million

The brokerage firm from which a former insurance mogul siphoned millions of dollars was ordered in December by a federal judge to pay a fine of $1.4 million, reported the Associated Press.

The politically connected Michael “Mickey” Segal was sentenced to 10 years in prison in late 2005 by U.S. District Judge Ruben Castillo. He was found guilty in June 2004 of racketeering, fraud, embezzlement and other charges and was ordered to forfeit $30 million, the largest forfeiture verdict ever handed down by a federal jury in Chicago.

According to accounts of the trial, Segal raided a trust fund account that insurance brokers keep to safeguard policyholders’ money. While not declaring it, Segal used the money on business ventures and a lavish lifestyle for himself and his family. Customer funds were used for everything from a Gold Coast neighborhood condominium to therapy sessions, opera tickets and for gifts from the well-known, high end jeweler, Tiffany.

Segal was responsible for a $30 million fraud, in the end however, the actual out-of-pocket loss to customers and others came to about $1.15 million. That sum included more than $300,000 that prosecutors said Segal stole from the CTA by allowing one of his companies to take an improper commission.

The same jury convicted Segal’s firm, Near North Insurance Brokerage, of mail fraud, making false statements and embezzlement.

Castillo said that although Segal controlled the firm, its employees and board had an obligation to alert authorities to the misconduct going on there but failed to do so.

“It became a dysfunctional corporation. In fact, it became a criminal enterprise,” Castillo said.

Near North is being dissolved and the $1.4 million fine will have to come from its assets after the firm is sold.

Segal’s former bookkeeper, Daniel E. Watkins, also was sentenced to two years probation with six months of that time in home confinement. Watkins, who pleaded guilty in March 2004 to stealing more than $70,000 from Near North for his own purposes, also was ordered to pay restitution of more than $100,000 and a fine of $5,000.

Prosecutors had asked Castillo to sentence Watkins to less than the approximately two-year prison term called for in sentencing guidelines because of his cooperation in the case, which included wearing a wire to work for two months.

During Segal’s two-month trial, prosecutors alleged Segal looted more than $20 million from a premium trust account at his brokerage and used the money to support a lavish lifestyle.

Numerous witnesses testified during trial that Segal siphoned money from the restricted account despite warnings that it was illegal to do so. Illinois law requires the firm to keep customers’ payments in the restricted trust account.

“There is evidence of a dark side to Mr. Segal one that is mean-spirited, one that is immoral, one that is unethical,” U.S. District Judge Ruben Castillo said to a courtroom packed with more than 60 spectators according to an AP account. “Your life’s work was a corrupt insurance entity,” the judge said.

Defense attorneys during trial said Segal was the victim of dishonest underlings and shoddy accounting, and repeatedly argued that no Near North customer ever lost money.

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