Opinion ID: 1897964
Heading Depth: 1
Heading Rank: 3

Heading: basis of conviction

Text: The allegations underlying Mr. Rosenthal's plea to two counts of wire fraud were set forth in detail in the indictment against him. Those allegations can be summarized as follows. In 1983 Rosenthal, along with Harry Caire and John B. Levy, set out to purchase a controlling interest in Continental Service Life and Health Insurance Company, a company which had at that time about $6,000,000 in reserve assets. Rosenthal, Caire and Levy formed the Continental Key Financial Group, Inc., the vehicle to be used in the purchase of control of Continental Service. Also, during this time period, Levy and Rosenthal were apparently law partners. The purchase price of the controlling interest sought to be purchased was $10,000,000 cash, a sum which Rosenthal, Levy and Caire did not have in either cash or assets. The purchasers falsely represented at a hearing before the Commissioner of Insurance on the proposed sale that they had obtained a $10,000,000 commitment from Manufacturers Hanover's Trust Bank of New York. The purchasers told the sellers and the Commission they would pay cash for control of Continental Service, despite the fact they knew they did not have the cash or a commitment. While the hearing before the Commissioner of Insurance was being conducted, the purchasers were attempting to sell some of Continental's assets so that they could use the money to purchase control of the company. Upon discovering this, the Commissioner issued an order prohibiting the purchasers from using any of Continental's assets without the permission of his office. Thereafter, the purchasers offered to substitute mortgages in the name of another corporation for the $6,000,000 in Continental's liquid assets. This was to be part of a leveraged buyout using Continental's assets to raise the purchase funds. However, the mortgages sought to be substituted were not fully marketable assets because the ownership of the underlying property involved was at issue in a lawsuit and a lis pendens had been filed. This lack of a clear title was not disclosed. Louisiana insurance companies are not permitted to invest in mortgages on property without clear title. Even so, the purchasers prepared a false title opinion showing clear title. Moreover, they misrepresented the value of the mortgages by $4,000,000. This deception was compounded by other misrepresentations to the Commissioner and the sellers, the net result being that mortgages with a face value of $5,000,000 on property without clear title were substituted for Continental's $6,000,000 in liquid assets. After gaining control of Continental Service, the purchasers began depleting the assets of that company in direct violation of an order by the Insurance Commissioner prohibiting them from doing so. They withdrew $1,500,000 from various Continental Service accounts and purchased certificates of deposit. The certificates of deposit were used as security for loans made to purchasers for personal use. The loans were not repaid and the lending banks foreclosed and seized the certificates of deposit. Also, insurance premiums were deposited into an account controlled by the purchasers, rather than to Continental Service accounts. Purchasers wrote checks for their personal use out of this account. As a result, insurance claims by policyholders were not paid properly and a three month backlog of unpaid claims was created. In addition, $100,000 in Continental Service's money was used to purchase, in Rosenthal's name, a share or shares in a limited partnership which purchased a professional football team. Also, checks were written to the law firm of Levy and Rosenthal for legal services which were never rendered. Other irregular and improper acts took place and at one point the purchasers prepared a fraudulent corporate resolution in order to conceal a violation of the Insurance Commissioner's order. With the depletion of Continental's assets, the Commissioner of Insurance took over the company. Indictments of Rosenthal, Levy and Caire followed.