Federal Court Orders Former Insurety Capital CEO to Pay $9M for Self Dealing

A federal court in Florida has ordered the former CEO of an insurance industry finance company to pay almost $9 million, plus interest and attorney fees, to his former firm after he engaged in self-dealing and failed to disclose his interest in other companies.

Christopher James Pagnanelli violated employment and confidentiality agreements, revealed trade secrets and failed to divulge conflicts of interest to 777 Partners and Insurety Capital, a Miami-based finance company that provides cash advances to independent marketing organizations, the July 17 judgment reads.

“Defendant breached his contractual loyalty duties in violation of the employment agreement by engaging in self-dealing and self-interested transactions during his employment with the company, which he did not disclose,” U.S. District Judge Jose Martinez wrote.

Among other alleged misdeeds, Pagnanelli secretly took a 20% stake in a health benefits company, along with commissions on policies sold, then directed Insurety to provide funding for the benefits company, the court explained. The finance firm suffered extensive financial losses on what turned out to be a risky investment.

The alleged scheme began after Pagnanelli was named CEO of Insurety in January 2018. He was suspended 15 months later when the company began an investigation into his alleged actions. Insurety is one of the portfolio companies of 777 Partners, a international venture capital and finance firm that this month announced plans to raise millions for its growing stable of professional soccer clubs.

777, with a reported $10 billion in assets under management, this month also signed a major deal with Boeing on new airplane orders, according to Reuters and Bloomberg news services. 777 Partners also owns Brickell, a property-casualty insurance holding company.

Insurety may be best known for funding providing funding to IMOs, which allows the IMOs to pay advance commissions to independent insurance agents, mostly in the life and health insurance arenas. “Insurety offers IMOs the ability to satisfy and retain their insurance agents by advancing several months of future commissions earned by the insurance agents,” the court explained. In exchange for the commission advance, Insurety acquires the rights to the agent’s future commissions, plus an administrative fee, which is known as the per-member per-month fee (PMPM).

Pagnanelli took Insurety in a new direction, largely to line his own pockets, the court found.

In May of 2018, Pagnanelli brokered a deal between David Lindsey and Landon Jordan, by which Lindsey funded the acquisition of American Workers Insurance Services Inc., a medical benefits company, and Association Health Care Management Inc. In return, Pagnanelli was paid a percentage of AWIS’ fees on insurance policies sold. He was also given the ownership stake in AWIS, through a holding company.

He then introduced AWIS to Insurety Capital.

“Defendant’s percentage of AWIS’s fees incentivized Defendant to direct Insurety’s funding to AWIS in order for Defendant to make more money for himself,” the judge noted. “After the initial funding was provided, Defendant continued to direct Insurety’s funding to AWIS in increasingly larger and riskier amounts in order to benefit himself personally, all while continuing to conceal his interest in AWIS.”

Pagnanelli’s text messages, revealed in court documents, showed that he knew what he was doing and even referred to lining his own pocket, the judge wrote.

It has not been reported if Pagnanelli plans to appeal the ruling. His attorneys, along with lawyers and officials with Insurety could not be reached for comment Thursday. The judgment can be seen here. The amended complaint by the plaintiffs can be seen here.