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Gallagher Orders Sixth Unlicensed Health Insurer


Immediate Final Order

TALLAHASSEE -- Florida Treasurer and Insurance Commissioner Tom Gallagher announced today that he has ordered the shutdown of a sixth unauthorized health insurance entity in the state.

New York-based Vanguarde Asset Group, also sometimes referred to as Vanguard Assett Group, was issued an Immediate Final Order late Friday. Regulators with the Florida Department of Insurance are uncertain yet how many Floridians may have purchased Vanguarde products, but it is believed the number may be smaller than in other schemes that Gallagher has closed down.

Gallagher has taken action against five other unauthorized health insurance entities since February 2001. Last month, the department launched a media campaign warning employers and individuals to stay away from buying insurance from unlicensed entities. The campaign's slogan is "Verify Before You Buy."

Unlicensed entities do not participate in a state guaranty fund, which covers unpaid claims in the event a licensed insurer goes bankrupt. In addition to potentially being left with unpaid claims, many employers and individuals who have purchased unlicensed health plans have reported finding difficulty securing new coverage because of pre-existing conditions and the subsequent lapse in continuous coverage.

The federal Employers Retirement Income Security Act (ERISA) allows, under certain circumstances, an individual employer, union or association to establish and self-insure a health plan for its own employees or members, without state licensure. However, the department alleges Vanguarde was offering coverage to unrelated employers and consumers, more like a multiple employer welfare arrangement, which does require state licensure.

Florida's order alleges links between Vanguarde, American Financial Management Association Inc. (AFMA Group Insurance Trust) and several individuals: Dwayne Samuels of Elmont, NY.; and Anthony Williams, William McCreary, V. Di Carlo, Robert Lenore and Phil Jackson, all of Cambria Heights, NY. Vanguarde lists addresses in both Cambria Heights and Lake Success (New Hyde Park), NY. Regulators believe that AFMA is a legitimate organization.

Gallagher's order requires Vanguarde to give notice in writing to every policyholder and beneficiary that they need to secure new health insurance coverage. In addition, every agent and broker that sold its products must offer to place every policyholder in a substantially comparable plan from a Florida-licensed insurer or health maintenance organization. Vanguarde is required to continue paying claims.

Neither Vanguarde nor any of these individuals have ever been licensed to sell insurance in Florida. In February 2001, Samuels was barred for life by the United States Department of Labor from having any dealings with or receiving compensation from employee benefit plans. That action resulted from his direct involvement with the operation of "a sham health plan for a sham union (International Worker's Guild) that operated under fake collective bargaining agreements to circumvent state insurance licensure requirements," the order alleges. The union operated in conjunction with a phony employer association, the National Association of Business Owners and Professions.

Samuels was vice-president of the Fidelity Group, which administered the phony health plan. In September 2000, he pleaded guilty to healthcare fraud in connection with the embezzlement of some $8 million from the health fund.

The Legislature this year passed a law increasing the penalty for a licensed agent selling unauthorized insurance from a first-degree misdemeanor to a third-degree felony, punishable by up to five years in jail. Under Florida law, if an unlicensed insurer fails to pay claims, agents who sold the unlicensed coverage may be held responsible for unpaid claims. The vast majority of Florida agents do not sell these unlicensed products.

Employers and individuals shopping for health insurance coverage are urged to check with the Department of Insurance to be sure they are dealing not only with a Florida-licensed insurance company but also with a Florida-licensed insurance agent.

The department's Consumer Helpline, at 1-800-342-2762, is staffed Monday through Friday from 8 a.m. to 7 p.m. A copy of the Immediate Final Order and additional attachments can be found at