Major League Baseball’s Washington Nationals sued an insurance company for $1 million for declining to provide crime insurance coverage for an alleged fraud scheme involving a team executive linked to the signing of a player who was four years older than he claimed.
The Westchester Fire Insurance Co., of Philadelphia, a unit of ACE Group, denied the team’s claim and “repeatedly rebuffed the Nationals’ good faith effort to resolve this coverage dispute,” according to the complaint.
The disagreement turns on the Nationals payment in 2006 of a $1.4 million signing bonus to a prospect, 16-year-old Esmailyn Gonzalez, who turned out to be 20-year-old Carlos Alvarez Lugo.
Alvarez, in a sworn statement about the circumstances of the bonus, acknowledged his fraud and said that he kicked back $300,000 to Jose Rijo, who at the time was an assistant to the Nationals’ general manager, according to the complaint. The case was transferred today to U.S. District Court in Washington from Superior Court of the District of Columbia.
Had they known Alvarez’s true age and identity at the time, the Nationals likely would not have paid any bonus at all, team lawyers wrote. “The $1.4 million signing bonus thus represented a complete loss resulting from the dishonesty, theft and fraud” by Rijo, Alvarez and another former employee of the Nationals’ front office, they wrote.
The Nationals reported the incident to Westchester as employee dishonesty falling under the terms of a $1 million commercial crime insurance policy, according to the suit.
Carla Ferrara, a spokeswoman for Westchester’s parent, ACE, declined to comment on the complaint.
John Dever, a spokesman for the Nationals, said he had no contact information for Alvarez or Rijo, who pitched 14 years in the Major Leagues, mostly with the Cincinnati Reds.
Rijo maintained his innocence in a 2011 Washington Post article, telling the newspaper he never received money from Alvarez and didn’t know him before the Nationals signed him.
The case is Washington Nationals v. Westchester Fire Insurance Co., 13-cv-1214, U.S. District Court, District of Columbia (Washington).
Editors: Peter Blumberg, Mary Romano