CIVIL RICO suit filed in Texas Federal Court reveals senior executives conspired to engage in multiple racketeering activities designed to defraud consumers using a 'single entity' fraud scheme.
Houston, TX -- (ReleaseWire) -- 06/03/2020 --Since 2011, State Farm Mutual Automobile Insurance Company has boasted in Annual Reports to Policyholders mailed to consumers and available on the company's website touting its record growth attributing it to 'good management' and the ethical business practices of the company. A civil RICO complaint (4:19-cv-119) filed in the United States District Court for the Eastern District of Texas alleges more than $200 billion in growth posted by State Farm Mutual Automobile Insurance Company was not due to the lawful efforts of the company's employees, but actually due to the company's engagement in acts of conspiracy and racketeering to defraud customers. The complaint alleges five Individual Defendants, led by State Farm Mutual Automobile Insurance Company Chairman & CEO Michael Tipsord, conspired to create an "association-in-fact" racketeering enterprise known as "the State Farm Group."
The complaint claims Mr. Tipsord and co-defendant Rand Harbert, Executive Vice President and Chief Agency Sales & Marketing Officer of State Farm Mutual Automobile Insurance Company, formulated a plan to change the trademarks owned by State Farm Mutual Automobile Insurance Company and to remove quality control measures that had been in place since the company's founding in 1922. The complaint alleges the "State Farm Group" engaged in complex patterns of racketeering activity with the common purpose to defraud consumers. The complaint alleges the racketeering enterprises conducted bait and switch sales fraud schemes to entice consumers using the false pretense "state farm" was one company. In fact, the insurance products fraudulently misrepresented and sold through the illegal use of mail and wires were from companies owned by State Farm Mutual Automobile Insurance Company.
The sales frauds were exposed when Plaintiffs complained of a $800,000 homeowners policy delivered to them by State Farm Lloyds instead of the $5 million policy sold to them by the Defendants' racketeering enterprises. For almost a year, the Defendants' racketeering enterprises made a series of fraudulent statements and false promises assuring the Plaintiffs that "state farm" knew of the mistakenly issued policy and had corrected the problem. Plaintiffs were falsely led to believe that "state farm" had issued a $5 million homeowners policy and the alleged policy was "in effect." For the Plaintiffs, the racketeering enterprises began to be exposed when they suffered a catastrophic loss of their home due to a fire event, which occurred on February 17, 2017. Plaintiffs' complaint outlines additional crimes committed by subsidiary racketeering enterprises which committed acts of fraud, engaged in crimes including extortion, robbery and intimidation in order to deny the Plaintiffs' $5 million restitution for loss of their home.
The racketeering enterprises became evident when "state farm" representatives stole evidence from the fire scene and engaged in criminal acts of extortion, robbery and trespass in order to destroy evidence to prohibit the Plaintiffs from bringing a law suit against State Farm Lloyds in Texas State Court. Shortly thereafter, State Farm Mutual Automobile Insurance Company, in support of the racketeering enterprises and despite knowing State Farm Lloyds to be responsible for claims, fraudulently reported the Plaintiffs as "high risk" in national insurance industry databases. This fraudulent reporting damaged the Plaintiffs' businesses causing a $25 million-dollar loss, and almost total collapse of the Plaintiffs' livelihood.
Plaintiffs' complaint alleges seven subsidiary association-in-fact racketeering enterprises exist within at least three companies owned by State Farm Mutual Automobile Insurance Company including State Farm Fire and Casualty Company, State Farm Lloyds, and State Farm Lloyds, Inc. The complaint shows multiple association-in-fact racketeering enterprises controlled by the Individual Defendants engaged in extortion, robbery and fraud in the claims processes conducted by the association-in-fact racketeering enterprises embedded in State Farm Fire and Casualty Company and State Farm Lloyds. The complaint shockingly alleges and supports the Defendants' usage of monies derived from illegal activities to establish, operate and manage racketeering enterprises purposefully to protect the State Farm Group's fraudulent sales schemes. Plaintiffs' complaint alleges that the racketeering enterprises engage in commingling of illegally obtained monies to establish, operate, manage and conduct fraud schemes and invest these illegally obtained monies in purposeful acts of bank fraud to purchase shares of publicly traded companies.
In support of the Plaintiffs' allegations of commingling of illegally obtained monies derived from the racketeering enterprises fraud scheme, Plaintiffs submitted two checks from two companies drafted on the same JP Morgan Chase Bank, NA account located in Columbus, Ohio. Both of these checks were signed by Defendant Tipsord and State Farm Mutual Automobile Insurance Company SVP, CFO, and Treasurer John Farney, who is also named as a Defendant. Shockingly, for more than a year, the Defendants have stated in Court that these two companies (State Farm Mutual Automobile Insurance Company and State Farm Lloyds) are not connected in any manner and are operationally separate companies despite the proof of these checks. Plaintiffs' complaint shows the five Individual Defendants are also officers and directors of every company alleged in the complaint to be harboring association-in-fact racketeering enterprises. The Defendants have repeatedly attempted, for over a year, to obtain a dismissal of the Plaintiffs' complaint and the Court is currently considering Defendants' Motions.
Recently, the Plaintiffs filed a response to the Defendants' latest motion, which makes dismissal almost an impossibility. However, whether the complaint is dismissed or not, the case is a blueprint for future regulatory investigators from the Securities and Exchange Commission, state insurance regulatory authorities and State Attorney General's offices in states in which 'State Farm' offers products for sale. It is our opinion there is a great potential for a class action lawsuit on behalf of Automobile Insurance Policy holders of State Farm Mutual Automobile Insurance Company due to the fraudulent representations made to members of the co-operative company. In support of this are regulatory filings signed by Defendant Farney misrepresenting State Farm Mutual Automobile Insurance Company to be a "holding company" which is objectively fraudulent and the profits of the "State Farm Group" never brought a benefit of reduction of premiums to auto policy holders nationwide. From review of the complaint it is clear government regulators should be engaged in multiple conversations regarding allegations made in the complaint and supported in evidence.
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