Kentucky Trial: Insurance Fraud? Or Not?

Jurors in a Kentucky state courthouse are basically asked to believe one of two things pertinent to a civil lawsuit being tried there: Former Kentucky resident Paula Singer was either fired from Bluegrass Bloodstock Agency in 2001 for being a poor manager; or, that the former head of the company’s equine insurance division was unjustly terminated because she was on the verge of uncovering a scheme of international fraud involving her boss.

A trial stemming from a wrongful-termination lawsuit filed by Singer in 2001 started Jan. 26 in Woodford County Circuit Court against Bluegrass, its president, Rick Trontz, and a former executive, Richard Vimont.

Singer claims she was fired after questioning documents that ultimately indicated the defendants wrote a post-dated $75,000 insurance policy on a dead foal owned by Kentucky horseman Nick Bentley. Singer contends she discovered a suspicious transaction that later led to the uncovering of alleged improper dealings between Trontz and an English insurance broker named Peter Trend, which allegedly provided Bluegrass discounted premiums, among other benefits.

“The discovery of the tip of that iceberg caused the defendants, Richard Trontz and Richard Vimont, to fire her … at a meeting scheduled to discuss a raise,” Singer’s attorney, Michael Meuser, told the 14-member jury in his opening remarks Jan. 26.

Singer, in testimony and court documents, also claims she was “devastated” by the firing, and is seeking at least $47,000 in lost wages, as well as other damages, including for emotional distress.

“She was tremendously embarrassed by the firing,” said Meuser, calling the Lexington area equine industry a “close-knit” community. “Word spread quickly that she had been fired, and given the seriousness of what she discovered, she was not in a position to freely discuss the things which led to her firing.”

But the defendants have repeatedly denied the existence of any fraudulent dealings with Trend, who is a long-time friend of Trontz’s, dating back to the 1980s when both worked with Fasig-Tipton’s former insurance division. They also claim that Singer was simply fired because she was a poor manager of people.

“It has nothing to do with a ‘tip of the iceberg,’ or any iceberg,” said defendants’ attorney Frank Becker in his opening remarks. “The proof is they did absolutely nothing wrong. The proof is that Paula Singer was a manager of the insurance department … and not only did she fail to do some of those responsibilities, not only did she fail to follow direction, but in fact, she was a bad boss. She was cruel to her employees. She ran off every employee.”

Singer’s allegations

Trontz, who founded Bluegrass Bloodstock in 1984, is alleged by Singer of having made bribes of $125,000 in 2000 to Trend, who in turn extended favorable premiums to Bluegrass. The allegations also appeared, along with claims against others, in a United Kingdom civil trial against Trend in 2003 that was brought by his former employer, ACE London Services.

That legal action was settled in 2004 when Trend agreed he had breached his employment contract with the company, but without admittance to specific allegations involving Trontz. A judgment of more than $800,000 was levied against Trend, who was later barred from doing business with any Lloyd’s of London syndicates, and is believed to be bankrupt, according to court documents.

In an exchange with Meuser from the witness stand Jan. 27, Trontz denied the $125,000 payments to Trend were bribes.

“They were loans,” Trontz said, indicating the payments were lent to help Trend remodel a house.

“But you did not disclose to Trend’s employers that the payments were improper?” Meuser then asked Trontz, who calmly responded, “No, I didn’t think it was necessary … I didn’t think they were improper.”

“And the loans allowed you to insure the Bentley foal for $75,000 … and it was only after the discovery of this that you fired Paula Singer?” Meuser immediately asked in follow up questions.

“Absolutely not,” Trontz responded. “No.”

Becker declined to cross-examine either Trontz or Vimont, who also testified Jan. 27. The defendants are expected to introduce their witnesses and related evidence later in the trial, which is scheduled to run through Jan. 29. The trial is scheduled to resume Jan. 28, weather permitting.

Dead-foal policy

Thus far, much of the trial has focused on issues involved with the $75,000 insurance policy extended to Bentley for his foal, a Peaks and Valleys filly out of the unraced Black Tie Affair mare Starcrossed Affair.

The filly, which was foaled April 6, 2001, died a few days later in a veterinary clinic. Singer on one hand alleges the insurance was too high for a typical Bentley horse insured by Bluegrass Bloodstock, specifically noting the mare had been purchased at auction for $10,500 in 2000, and the stud fee for Peaks and Valleys at the time was about $10,000. Documents were produced by Meuser for the jury suggesting the insurance placed was actually $25,000, alleging the additional $50,000 was initially pocketed on behalf of the defendants.

The plaintiff also contends Trontz did not place the insurance with Trend until 16 days after the foal died, which she claims was not only both illegal and improper, but was done only because of the relationship her boss had with Trend.

Singer, who now works as an equine insurance manager at American Livestock near Chicago, claims she saw documents signed by Vimont in the original Bentley foal file indicating the insurance was for $25,000, while other documents were either missing or inaccurate.

“I thought it was a simple mistake,” Singer said from the witness stand Jan. 26. After later seeing the policy was in fact for $75,000, Singer testified she was “shaken,” and refused to sign-off on claim documents that typically would be sent to a Lloyd’s of London Kentucky representative located in Frankfort.

Trontz has claimed repeatedly in court documents that he possessed “binding authority” to order insurance on foals, and that he exercised that right in the case of the Bentley foal (binding authority is generally regarded as a temporary contract, which can be done verbally or in writing, that provides proof of insurance until the permanent policy is issued).

But upon questioning from Meuser Jan. 27, Trontz reversed his opinion on his binding rights with ACE Global Markets, through which the foal was ultimately insured. The admission came after Meuser displayed an affidavit Trontz signed under oath in 2003, stating he had such binding rights.

“And that’s not true is it?” Meuser asked. “No it’s not,” Trontz replied, denying it was a false statement, but rather a mistake. “It should have said ACE USA,” he said, referencing a related insurance entity in which Trontz had binding authority.

Other evidence

Among other evidence presented by the plaintiffs was depositions taken in the case. Included was one taken from Trend, who was interviewed in Lexington in 2002. A co-counsel in representing Singer, attorney Michael J. Cox, read Trend's answers aloud for the jury as Meuser recreated the questions.

Trend denied taking what Meuser called “kickbacks” from Trontz, instead claiming the $125,000 payments were loans. But Trend did say that someone at Bluegrass “messed up” in handling the Bentley foal insurance, which he called an unusual case.

“The animal should have been insured before … (it) was dead,” Cox quoted Trend from the deposition. “Given the volume of business we were doing with each other, this was a genuine case of Bluegrass screwing up and not writing the order as they should have, and we agreed to honor the claim.”

Although not mentioned yet in the trial, the Kentucky Department of Insurance in 2005 opened an investigation into some of the allegations involving Trontz, but found no fault when it closed its file in December 2007. Trontz, who also owns Hopewell Farm, has been a licensed insurance agent in Kentucky since 1981.

 

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