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Document and Benefit Fraud

'Insurer' of the Ethan Allen pleads guilty in insurance fraud scheme

HOUSTON — A local "insurer" pleaded guilty on Wednesday to conspiracy to commit wire fraud, announced U.S. Attorney Kenneth Magidson, Southern District of Texas. The case was investigated by the Internal Revenue Service Criminal Investigations (IRS-CI) with the assistance of U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

Christopher Purser, 50, of Houston, pleaded guilty on Oct. 5 before U.S. District Judge Sim Lake. Purser now faces a maximum of 20 years in federal prison without parole, to be followed by up to three years of supervised release, a fine of up to $250,000 and an order to pay full restitution to victims.

Purser, who was banned in 2003 by the Texas Department of Insurance from any involvement in the insurance business, admitted to selling liability insurance policies from 2004 to 2006 to apartment complexes, condominium associations, bars and restaurants, while disguising his true identity and the existence of the ban. One of the companies that purchased the insurance was Shoreline Cruises Inc., which operated a 40-foot tour boat called the Ethan Allen on Lake George, N.Y. The Ethan Allen sank on Oct. 2, 2005, in a tragic accident that claimed the lives of 20 elderly tourists.

The fraud scheme began in 2000 when Purser sold liability insurance policies to nursing homes supposedly underwritten by Maryland Casualty Company, a subsidiary of Swiss-based Zurich Insurance Company. In fact, the policies were not real. In 2001, Purser sold insurance policies supposedly underwritten by Westchester Surplus Lines Inc. and reinsured by companies in Indonesia.

Beginning in late 2002, Purser and a codefendant sold liability insurance policies to apartment complexes and condominium associations through a "benefit association" created in Belize called International Property Owners Association. The insurance was supposedly issued by Great Domestic Insurance Company of the Philippines and Commonwealth Insurance Company of Canada and reinsured by yet another Indonesian insurance company. Yet again, the policies were not real.

In April 2003, the Texas Department of Insurance revoked Purser's insurance license and ordered him to cease and desist from conducting any insurance business in Texas. In direct violation of this order, Purser spent the next several years selling liability insurance policies to apartment complexes, condominium associations, bars, restaurants and other businesses in Texas and throughout the United States through a new benefit association created in Florida called Global Property Owners Association. The insurance was supposedly issued by a series of companies located in the Caribbean island of Nevis, including Heritage Mutual Surety Limited, United Re-insurance Group Ltd., Polaris International Ltd., Commercial Acceptance Indemnity Ltd. and Brentwood Re Ltd. In fact, these companies were entirely fraudulent.

Purser first sold marine liability insurance to Shoreline Cruises Inc. in May 2004. Purser renewed the policy a year later. The sinking of the Ethan Allen on Oct. 2, 2005, gave rise to substantial claims against the policy. In response, Purser presented backdated documents to make it appear, falsely, that the policy did not cover the Ethan Allen while the boat was operating on Lake George. In fact, Shoreline Cruises Inc. had purchased exactly that type coverage. In any event, none of the purported insurance companies had any ability to pay the claims.

Judge Lake has set Purser's sentencing for Jan. 19, 2012. Purser has been held in pre-trial custody since Feb. 17, after U.S. Magistrate Judge Frances Stacy found that he presented a serious flight risk, with no fixed address and a history of pretending to be other people.

Five other defendants were charged along with Purser. Three of those defendants are set to begin trial before Judge Lake on Oct. 31, 2011. Two others are pending extradition.

The charges are the result of an intensive investigation conducted by the IRS-CI with assistance from ICE HSI and the Texas, New York and California Departments of Insurance. During this four-year investigation, the U.S. government also received extensive and valuable assistance from the governments of St. Kitts and Nevis, and also St. Vincent and the Grenadines. Investigators also received valuable assistance from the governments of the Bahamas, Nicaragua, the Philippines and Australia.

Assistant U.S. Attorneys John R. Lewis and Belinda Beek, Southern District of Texas prosecuted the case.