Two Plead Guilty in $18 Million Insurance Swindle
NEW YORK (AP) _ A Philadelphia arts patron and a New Jersey businessman pleaded guilty to charges of swindling one of the world’s largest insurance conglomerates of more than $18 million.
In a plea deal, conspirators Roy Hatch of Wyndmoor, Pa., and Salvatore DiTrapani of Hazlet, N.J., returned $17 million they stole from the American International Group, Manhattan District Attorney Robert Morgenthau said Wednesday.
Hatch’s live-in companion, Richard Scholl, 37, was part of the scheme and netted about $700,000, but he is dying of acute encephalitis and will not be prosecuted further, Morgenthau said.
Hatch and Scholl spent much of their money on rare books, museum-quality antiques acquired in Europe, and on the lavish $2 million estate that was their home in the Philadelphia suburb of Wyndmoor, Morgenthau said.
He said a bed in their home once belonged to Maximilian, the Austrian archduke who was emperor of Mexico from 1864 until 1867 when he was executed.
Hatch, 43, faces up to 10 1/2 years in prison when he is sentenced Oct. 2, and DiTrapani, 44, faces up to 12 years when he is sentenced Aug. 8, the district attorney said.
The insurance scam began in June 1986 when Scholl was senior underwriter at American International Underwriters Insurance Co., a subsidiary of AIG. He agreed to provide professional liability coverage for a group of major accounting and law firms.
Each firm was covered for up to $100 million, Morgenthau said. Because of the magnitude of the coverage, Scholl turned to Transatlantic Reinsurance to help cover the policy. DiTrapani was senior underwriter at Transatlantic.
DiTrapani issued a reinsurance policy, which exposed his company to claims, but he never entered the policies into Transtlantic’s records.
DiTrapani and Scholl instructed the firms to pay premiums to a shell company called International Reinsurance Brokerage Corp. They told the accounting and law firms that International was an intermediary with Transatlantic.
Between November 1986 and April 1990, the insured accounting and law firms paid more than $15.2 million to International for what they thought were premiums on its policies with Transatlantic.
In fact, Morgenthau said, the money was kept by Hatch, Scholl, DiTrapani and others who were not indicted.
The conspirators took in another $1.8 million from another reinsurer, Aegen International Inc., when DiTrapani instructed that firm to pay International the reinsurance premiums it owed to Transatlantic.
The scheme collapsed when, in the wake of the savings and loan mess, the accounting and law firms checked on their coverage with Transatlantic. When they learned they had no recorded policies, they contacted the district attorney’s office.
Two other employees of American International, Kevin O’Brien, 38, of Mountain Lakes, N.J., and Peter O’Connell, 41, of North Plainfield, N.J., pleaded guilty to criminal facilitation for helping the other three in the swindle, actions which netted more than $1 million. Each faces up to a year in jail when sentenced Oct. 16.
Scholl reportedly founded the Philadelphia Philanthropic Opera Company and hosted several fund-raising events in his 20-room house.
After Scholl and Hatch were arrested last week, investigators executed search warrants at several New Jersey and New York banks and one Florida institution, the Glendale Federal Savings and Loan, where they found most of the conspirators’ stolen money, Morgenthau said.