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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (178949)	1/22/2009 4:23:47 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 306849

another confidence builder....at what point do investors decide that financial services co's can't be trusted and throw in the towel: Officials probing US insurance agency on heels of massive bankruptcy filing OMAHA, Nebraska (AP) -- An alleged pyramid scheme by an insurance agency that recently filed bankruptcy listing more than $100 million in debt is being investigated. Attorney General Jon Bruning on Tuesday authorized the State Patrol's investigation into First Americans Insurance Service and its three principals: James Masat, Stella Levea and Kenneth Mottin. The patrol is working with the departments of insurance and banking to piece together how more than $100 million disappeared -- with Bruning believing some of it may have been paid out to other investors. A loss of that magnitude indicates there may be criminal activity involved, Bruning said Wednesday. "This seems to have many characteristics of a Ponzi scheme," Bruning said. A Ponzi scheme, or pyramid scheme, is a scam in which people are persuaded to invest in a fraudulent operation that promises unusually high returns. The early investors are paid their returns out of money put in by later investors. Bob Craig, an attorney representing First Americans in the bankruptcy case, said it's easy to label it a Ponzi scheme, but he's not ready to call it that. "It appears to me that what it is is borrowings that got out of hand," he said. As participants' interest rates rose, it put a squeeze on cash flow and ultimately the company's ability to return the debt, he said. First Americans filed for Chapter 11 bankruptcy protection on Jan. 12, claiming between $100 million and $500 million in liabilities. Craig said the principal liabilities are closer to $104 million, but that figure could rise if claim holders seek interest. The filing lists more than 200 creditors, with the top 20 including mostly individuals and couples from Nebraska. Individual creditors from Montana and Georgia also made the list. Assets were estimated at $1 million to $10 million, according to the filing. First Americans isn't related to First American Corp., a Santa Ana, California-based provider of title and specialty insurance and business information. biz.yahoo.com.