According to sources interviewed by National Underwriter Life & Health for our Complete ELNY Saga, there was an investigation into the shadowy mechanics of the New York Liquidation Bureau (the Bureau) albeit one with no conclusion. Indeed, the investigation results are now are under seal, according to a source. More than one person confirmed the investigation.

Sources have said that Jody Hall, former head of the Bureau ordered an investigation into the Bureau’s past dealings and estates, hiring insurance insolvency and reinsurance lawyer Paige Waters of Sonnenschein Nath & Rosenthal LLP (informally Sonnenschein and now  part of a 2010-formed SNR Denton).

The investigation began first by looking into an old computer system that did not work, that had never worked, with the exception of maybe one computer out of about 25 ancient ones, according to a source, but soon spread to other areas and those working on the Frontier Insurance estate.  

Frontier Insurance Company (Fronteir) is a property and casualty insurer domiciled in the State of New York. The company was placed in rehabilitation and the New York Superintendent of Insurance was appointed as Rehabilitator on October 2001. Frontier bounced back and forth between attempts to outsource its rehabilitation via the Lancer Group, which bought the parent company and attempted to take the enterprise in house at the Bureau under various administrations. Due to a court ruling this year on surety bonds, there was no choice but to put the company into rehabilitation people familiar with the case say, because, with the ruling on which class the surety bonds would fall into, the paper liabilities vastly outstripped the assets.

Superintendent Ben Lawsky asked this summer that Frontier be liquidated. 

Liquidation request for Frontier— http://www.nylb.org/Documents/Frontier_OTSC_20120808.pdf 

Frankie Bliss, who could not be reached by phone after numerous attempts, was in charge of the estate.  Bliss is now on the board of directors of the International Association of Insurance Receivers and is well-regarded by old hands in the industry.  

Since 1992, while at the Bureau, Bliss had also been the New York Superintendent’s representative on all working groups for the NAIC Insolvency Task Force, and chaired the NAIC Working Group responsible for the recently published Receivers’ Handbook for Insolvencies. 

The Sonnenshein investigation into the estate management is not discussed and concerns allegations against the Bureau’s dealings and potential mismanagement issues concerning improper donations of a taxi cab to the bureau from an outside organization. These allegations were never proven and some called the investigation a witch hunt that wasted Bureau money. However, the matter was sealed and the Chicago law firm sent on its way, but not without dissatisfaction on all sides and money spent to no conclusion while allegations were made and refuted as a pack of lies and colleagues who stuck with each other were left ill at ease.

According to sources, the work was unfinished, no report was made, as was said to be part of the contract and the bill to the Bureau–said to be around $700,000–was disputed and the amount later settled via negotiations by the Bureau, with the money ostensibly coming from the estates at the Bureau, as the Bureau had hired Sonnenshein.

Former New York Insurance Department Superintendent Howard Mills, now at  Deloitte, signed the engagement letter and received copies of updates, according to a source close to the investigation. Mills declined to comment. Waters, now a partner at Locke Lord in Chicago and a co-author of Chapter 14 Insurance Solvency Regulation, New Appleman on Insurance Law Edition  who frequently speaks at insurance industry events, did not respond to a reporter’s queries. 

The Sonnenshein investigation upended the Bureau and people were upset and one turned on Hall, according to a source, and reported her for her improprieties, which ultimately got her indicted and fired from the Bureau. Bliss was asked to come down from the Catskills area where she was running Frontier and take over as an interim director of the bureau.

People were not to discuss the matter, according to sources and some felt that later, when bonuses were offered as part of severance packages during a reduction in force, that this was one of the matters that was not to be discussed. At least one employee –Frankie Bliss, at one point an acting director, refused the $15,000 bonus on ethical grounds, according to sources, and held herself “beyond reproach.”