Pennsylvania seeks to recover damages from Saul P. Steinberg and other former executives who allegedly are at fault for Reliance Global Holding’s bankruptcy, as well as the failure of its subsidiary, Reliance Insurance Company, according to the Associated Press.
The Pennsylvania Department of Insurance filed the lawsuit on Monday, June 24, naming the New York financier and 17 former Reliance executives, claiming they neglected to stop Steinberg from draining cash from the company.
The suit allegedly blamed the former executives for a branch of fiduciary duty, aiding and abetting others’ misconduct and approving abuse of company funds, alleging that they carelessly approved dividend payments, asset sales and tax arrangements that benefited the Steinbergs while the company was suffering enormous losses.
The suit further alleged that factors such as shareholders’ prolific lifestyles, including Steinberg, the personal debt of Steinberg, and the massive debt of parent holding companies were the main causes of Reliance’s downfall.
According to a Department spokesperson, the state is hopeful to collect millions of dollars to counterbalance the estimated $122 million Pennsylvania property and casualty insurers and their customers are paying to cover failed companies, including Reliance.
The suit further stated that Reliance Insurance Co. was the largest property and casualty insurance company subjected to insolvency proceedings in U.S. history. Pennsylvania Insurance Commissioner Diane Koken was named liquidator on Oct. 3, 2001, months after Reliance was first taken over by the state on May 29.
Steinberg resigned as chairman of Reliance Group Holdings and its subsidiary, Reliance Insurance just before the state seized the company. Reliance Group Holding filed for bankruptcy protection in June of 2001, after it defaulted on more than $500 million in bonds and bank debt.