A director and part owner of Hillcrest Insurance Co. in Gainesville has been ordered to return $600,000 in policyholders’ money he used in February 2009 to buy stock in a bank he founded and part owned.
Florida Insurance Commissioner Kevin McCarty also ordered the executive, Vernon Smith, to divest himself of all interest in Hillcrest.
McCarty’s order alleges that Smith’s investment “was not made in the best interest of Hillcrest or the policyholders of Hillcrest, and was a violation of the fiduciary relationship to Hillcrest resulting in personal gain.”
By September, the stock’s value had fallen to $0, resulting in a $600,000 loss for Hillcrest.
Regulators said Hillcrest also did not provide adequate notice to regulatory officials that the transaction to invest in his Riverside Bank was to occur.
The order says regulators will consider whether Hillcrest management should be allowed to continue to transact business in the state if they are found to be incompetent or untrustworthy. It said if Smith does not comply with the order, the state would hold a hearing “to determine the competency and trustworthiness” of Smith.
The March 24 order gives Hillcrest 21 days to have Smith return the money plus pay a $10,000 penalty.
Hillcrest was firmed in 2005. it is managed by Tower Hill Insurance Group.
At a recent Florida Cabinet meeting, McCarty, backed by Gov. Charlie Crist, called for legislation to allow him to look into payments made by insurers to affiliated agencies and other companies. A House insurance committee last week failed to advance one such measure.
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