On February 1, 2017, a Division of Insurance hearing officer revoked the Massachusetts producer’s license of Mr. Steve Stokeling of Augusta, Georgia and fined him $3,500.
Revoked and fined for failing to report loss of licenses in other states not for involvement in selling fraudulent bonds
Besides the final order revoking his license, the Division of Insurance’s hearing officer also ordered him to cease transacting any insurance business in the state and to divest himself of any insurance businesses operating in the Commonwealth.
The hearing officer’s decision mentioned that two insurance companies had filed a civil complaint against Mr. Stokeling alleging that he had sold forged surety bonds bearing the names of [Chubb] companies.” The decision itself, however, did not elaborate on the details of the insurance company’s allegations.
The hearing officer’s fine resulted from Mr. Stokeling failing to report administrative actions from seven states as required by G.L. c. 175, § 162V(a) and not because of the forged surety bonds he sold.
Mr. Stokeling’s bond business was brisk but short-lived
In 2012, Mr. Stokeling set up a Wyoming corporation, First Fidelity Asurety, that placed bid, payment, and performance bonds for contractors. The bonds were to be issued by a Louisiana LLC, The Individual Surety Group, a company owned and operated by one Mr. Eric Campbell. The bonds Mr. Stokeling sold purported to be issued by Federal Insurance and Pacific Indemnity, subsidiaries of Chubb.
Business was brisk in late 2012 and early 2013. Those contractors who could not be bonded, found First Fidelity Asurety could issue them Chubb bonds because of its connection with The Individual Surety Group. All the bonds issued were bid, payment, and performance bonds on public contracts.
Before they were stopped in early 2013, the two companies placed well over a $100 million worth of various construction contracts through the ‘program’ and collected over $2.2 million in ‘premiums.’
A sampling of some of the bonds issued to government entities obtained from First Fidelity Asurety or The Individual Surety Group included:
- A $41,560,093 project bond for the U.S. Army Corps of Engineers in New Orleans, Louisiana.
- A $12,288,932.00 project bond for the U.S. Marine Corps at Twenty-nine Palms, California.
- A $12,301,127.00 project bond for the U.S. Navy at Naval Air Station Point Mugu, California.
- A $7,997,885.00 project bond for an airport road in Pago Pago, American Samoa for the American Samoa government.
- A $7,686,264.00 project bond for the Dekalb County government in Georgia.
- A $3,528,110.74 project bond for the Washington State Department of Parks and Recreation in Washington.
- A $3,000,000.00 project bond for the U.S. Army Corps of Engineers in Nogales Arizona.
- A $3,000,000.00 project bond for the U.S. Veterans Administration in Fort Hunter California.
- A $2,855,419.00 project bond for the U.S. Marine Corps at Camp Pendleton, California.
- $2,192,450.00 in project bonds for landscape and facility maintenance projects for the City of Mission Viejo, California.
Bonds had every signature forged, while the bond verification number went to cell phone
The only problem for the construction companies paying for these bonds was there was no program and the bonds were bogus. Neither Mr. Stokeling nor Mr. Campbell, nor their agencies, First Fidelity Asurety and The Individual Surety Group, had any connection to Chubb or authority to issue Chubb bonds.
- The bonds had signatures purporting to be that of an attorney-in-fact of Chubb’s subsidiaries, but the signatures were forgeries.
- The bonds also contained a notary stamp and signature purporting to be that of a State of New Jersey notary. These notary stamps and signatures were forgeries.
- The bonds contained a power of attorney but the signatures on the power of attorney purporting to be those of a former Chubb employee were forgeries and the employee’s name was misspelled to boot.
Finally, the bonds contained a legend that stated:
IN THE EVENT YOU WISH TO NOTIFY US [a Chubb’s subsidiary] OF A CLAIM, VERIFY THE AUTHENTICITY OF THIS BOND OR NOTIFY US OF ANY OTHER MATTER, PLEASE CONTACT US BY [calling or faxing] … (904) 477-8685 Fax (904) 903-3384.
Anyone relying on the telephone number (904) 477-8685 to verify the bond would reach the cell phone of Mr. Campbell. Likewise, the fax number reached a fax controlled by the conspirators.
Chubb sues Mr. Stokeling, Mr. Campbell, First Fidelity Asurety, and The Individual Surety Group
In early 2013, Chubb learned of the fraudulent bonds being issued. On July 30, 2013, Chubb sued Mr. Stokeling, Mr. Campbell and their companies, First Fidelity Asurety and The Individual Surety Group in the United States District Court for the Northern District of Florida for a permanent injunction against issuing bonds in Chubb’s name and for attorney fees.
Mr. Stokeling, Mr. Campbell and their companies did not answer the suit and a default judgment was entered against them. Steve Stokeling, his company First Fidelity Asurety, and a codefendant Eric Campbell and his company, The Individual Surety Group, were permanently enjoined from fraudulently representing they had any authority or permission from the Chubb Group to issue bonds. Subsequently, they were ordered to pay the Chubb Group’s legal fees and costs of $84,000.00.
Chubb did not seek damages because it suffered no losses. The construction companies that had purchased the bonds suffered all the monetary losses from their payment of premiums for a nonexistent bond. Some government agencies also suffered losses when they learned that they had awarded contracts to unqualified companies, who had won those contracts using the fraudulent bonds.
Mr. Campbell convicted but ‘associates’ not charged
On May 29, 2014, a federal grand jury in Atlanta indicted Mr. Campbell on six-counts: three counts of wire fraud; two counts of aggravated identity theft and one count of conspiracy to commit money laundering.
Mr. Campbell pleaded guilty on October 20, 2014, and was sentenced on March 25, 2015 to a 4-year, 9-month prison sentence followed by 3 years of supervised release. He was also ordered to pay restitution of $1,904,376.67.
How or why Mr. Stokeling avoided indictment is not clear from the filings on the federal docket. As alleged in Mr. Campbell’s indictment, First Fidelity Asurety, Mr. Stokeling’s company, wired almost $700,000.00 in fraudulent surety bond premiums to Mr. Campbell for the fraudulent bonds issued to contractors.
And the indictment against Mr. Campbell is replete with allegations that Mr. Campbell’s various actions were “with the assistance of others,” “aided and abetted by others known…to the Grand Jury,” and that Mr. Campbell did, “conspire, and agree with others known … to the Grand Jury.” However, whether, for lack of evidence, or cooperation with the prosecution, Mr. Stokeling appeared to have avoided becoming a defendant in any criminal proceeding for his role in the fraudulent scheme.
Mr. Stokeling surrenders his Georgia resident license but does not report the surrender
Regarding his insurance licenses, however, Mr. Stokeling was less fortunate. As the fraud scheme unwound with the suit from Chubb and Mr. Campbell’s indictment, Mr. Stokeling entered into a consent decree with the Georgia Insurance Department and surrendered his resident insurance license.
Following the surrender of his resident producer license, however, Mr. Stokeling failed to report the action to the other states where he held nonresident producer licenses.
As a result of his failure to report his license surrender in Georgia or his involvement in the fraudulent bond scheme, these states either revoked his license or in one case negotiated a second voluntary surrender. Massachusetts eventually elected to file an Order to Show Cause.
Massachusetts revocation action based on seven failures to report
Massachusetts commenced its proceedings against Mr. Stokeling on April 29, 2016. The Division of Insurance sought the revocation of Mr. Stokeling’s Massachusetts nonresident producer license on his failure to report to the Division that seven other jurisdictions had either revoked his insurance licenses or accepted a voluntary license surrender.
The hearing officer defaulted Mr. Stokeling although all the mail addressed to him had been returned with the postal notation, “Return to Sender, Unable to Forward.” Under G.L. c. 175, §174A, service is sufficient when sent to, “the last business or residence of the licensee appearing on the records of the commissioner.” In Mr. Stokeling’s case neither address was valid. Mr. Stokeling had moved and simply left no forwarding addresses.
Based on the evidence of Chubb’s complaint and the unreported administrative proceedings in the states of Georgia, Kentucky, Colorado, Idaho, Vermont, Wyoming, and Mississippi the hearing officer made her findings and imposed these orders:
ORDERED: That any and all insurance producer licenses issued to Steve Stokeling by the Division are hereby revoked; and it is
FURTHER ORDERED: that Steve Stokeling shall return to the Division any licenses in his possession, custody or control; and it is
FURTHER ORDERED: that Steve Stokeling is, from the date of this order, prohibited from directly or indirectly transacting any insurance business or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and it is
FURTHER ORDERED: that Steve Stokeling shall comply with the provisions of G.L. c. 175, §166B and dispose of any and all interests in Massachusetts as a proprietor, partner, stockholder, officer or employee of any licensed insurance producer; and it is
FURTHER ORDERED: that Steve Stokeling shall pay a fine of Three Thousand Five Hundred Dollars ($3,500) to the Division within 30 days of the entry of this order.