UPDATED: New York Court Finds Former Avalon Employee Guilty of Fraud Against Employer
A former employee of Avalon Risk Management was recently found guilty of fraud in federal court in Manhattan for issuing bonds in the name of Avalon Risk Management, but then pocketing the premiums. In a ruling issued Sept. 16 (here), the Southern New York U.S. District Court found James Rossano issued Federal Maritime Commission bonds to forwarders and transportation intermediaries he found using Avalon’s client lists, indicating Avalon as the agent but charging exorbitant amounts and keeping the proceeds for himself.
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According to the ruling, Rossano formed a fictitious company called Worldwide Consulting. Operating as Worldwide, and using the name of a recently-departed Avalon employee, Greg Taylor, Rossano communicated with the surety’s current and potential clients and offered to write bonds on their behalf. Rossano would then have the bonds issued, listing Avalon as agent but not following Avalon’s strict underwriting standards, and placed the bonds with the FMC. Rossano kept the premiums and entered the bonds in Avalon’s billing system in ways that hid their existence from the company.
Even though Avalon did not receive most of the premiums, the surety is potentially liable for claims up to $2,475,000 million on the bonds, said the District Court. It already faces actual claims totaling $602,938.21, said the court. And because the bonds list Avalon as agent, the claims hurt Avalon's rating with its surety and affect Avalon's business reputation, said Michael Brown, Avalon's executive vice president, according to the District Court decision.
Finding Rossano guilty of fraud, the District Court on Sept. 29 dismissed other claims raised and then waived by Avalon. The District Court then referred the civil suit to a magistrate judge to decide damages.
(Avalon Risk Management Insurance Agency v. Gregory Taylor, S.D.N.Y. # 12-3934, dated 09/16/15, Judge Schofield)
Correction: The original version of this story incorrectly reported that, according to the federal court ruling, another Avalon employee, Phil DiChiara, who is James Rossano’s cousin, was involved in the formation of Worldwide Consulting.