The Rapo & Jepsen Insurance Service’s (“Rapo & Jepsen”) appeal of Arbella Mutual’s (“Arbella”) cancellation of that agency’s commercial exclusive representative producer contract is scheduled to continue before the Market Review Committee on Wednesday, June 22, 2016 at 10:30 a.m. A filing by Arbella, published by Commonwealth Automobile Reinsurers on June 18, has added a new twist to the hearing with allegations that the rogue employee that Rapo & Jepsen claims acted without authority allegedly contacted Arbella claiming to have been “duped” by Rapo & Jepsen into leaving Massachusetts and returning to Brazil.
The ongoing contract cancellation hearing at CAR’s Market Review Committee involving Arbella Mutual and Rapo & Jepsen Financial Services has been the subject of Agency Checklists’ articles on May 3, 2016, “Mass. Agency Appeals Arbella Cancellation For Alleged Premium Fraud Scheme;” May 10, 2016, “Arbella Filing Seeks To Prove Its Claim Of Premium Fraud Against Rapo & Jepsen;” and May 17, 2016, “Arbella Presents Its Fraud Claims At CAR Against The Rapo & Jepsen Agency.”
New Arbella filing questions legitimacy of Rapo & Jepsen “rogue employee” defense
The basic claim by Arbella for cancelling Rapo & Jepsen’s commercial exclusive representative producer contract arises from Arbella’s assertions that Rapo & Jepsen has set up thousands of sham companies as individual proprietorships, trusts, and corporations. These companies have then been used, according to Arbella, as fronts for individuals who actually have no such business to register vehicles as commercial insureds.
A major defense of Rapo & Jepsen has been that one particular employee, one Daniel Bertolazzi, had been responsible for almost 70 percent of the questionable placements and that Mr. Bertolazzi had left the country and returned to Brazil just as his activities were to be audited by Rapo & Jepsen.
In a new filing with CAR, Arbella has claimed that Mr. Bertolazzi went to Brazil at the behest of Rapo & Jepsen’s owner, John Rapo. Mr. Rapo and Rapo & Jepsen have denied Mr. Bertolazzi’s alleged accusations.
Arbella says Rapo & Jepsen’s supposedly responsible employee claims he was sent to Brazil and fired
As indicated in Agency Checklists’ May 17 article, after the Market Review Committee denied Rapo & Jepsen’s request to invalidate Arbella’s cancellation notice, the committee allowed Rapo & Jepsen additional time to file documents in response to Arbella’s original filings and to allow Arbella additional time to respond to any of Rapo & Jepsen’s new filings.
Rapo & Jepsen was supposed to file first, but Arbella jumped the gun with its own filing on May 30, 2016.
On that date, Frances L. Robinson, special fraud counsel to Arbella notified CAR that “…evidence has come to light which indicates that Mr. Rapo’s assertions in his April 12th letter were intended to deceive and perpetrate a fraud.”
The April 12 letter in question had been sent to CAR and the Division of Insurance by John Rapo, the owner of Rapo & Jepsen. In the letter he claimed that the conduct of which Arbella complained seemed to have primarily stemmed from the unauthorized actions of a single employee named Daniel Bertolazzi. Mr. Rapo further claimed in the letter when he advised that there would be an audit of Mr. Bertolazzi’s records, that Mr. Bertolazzi had disappeared and was “rumored” to be in Brazil.
Attorney Robinson’s letter went on to state that on May 13, 2016 Mr. Bertolazzi had contacted Arbella and informed Arbella’s Special Investigation Unit Investigator Edward Spellman that he was actually sent to Brazil by Mr. Rapo. He stated, according to Attorney Robinson, “He was duped into going and then, upon arrival he was told he was ‘done’.”
Mr. Bertolazzi also supposedly informed Arbella that “Mr. Rapo had complete control over the formation of ‘fake businesses.’”
Five minute unrecorded conversation related by Arbella’s investigator
Attorney Robinson submitted a memo from Arbella’s Investigator Edward Spellman regarding an unrecorded May 13 interview with a person identifying himself as Daniel Bertolazzi.
The communication was initiated by a call by Mr. Bertolazzi to the Underwriting Department of the Arbella and was referred through Arbella counsel to Mr. Spellman to follow up. The caller had given an email address that investigator Spellman used to establish a call with Mr. Bertolazzi.
The call lasted only five minutes because Mr. Bertolazzi stated he only had enough money to pay for an international call of that duration.
Some of the statements in Mr. Spellman’s memo beyond those related by Attorney Robinson in her letter were that Mr. Bertolazzi, “…had heard through some friends and family in Massachusetts that the Brazilian newspapers are indicating that John Rapo is claiming Daniel [Mr. Bertolazzi] was the one behind the fraudulent activity at the Rapo & Jepsen Insurance Agency.” Mr. Bertolazzi characterized that statement as [expletives deleted].” Mr. Bertolazzi supposedly then said “It’s only him, he is the one.” “I have a 1st grade education…I only do what he told me to do, we all do.” According to investigator Spellman Mr. Bertolazzi went on to say “Everyone who works there do [sic] only what John Rapo tells you to do, he is in charge of everything and in control of everything, no one else.”
Mr. Bertolazzi then stated he had worked for Mr. Rapo for 14 years and then restated in unprintable language that he felt that Mr. Rapo had treated him unfairly. He then supposedly stated “He sent me down to Brazil to do some work for him like he did back in 2014. I arrived [sic] here with my family I have two little girls and then he tells me you’re done.”
The conversation ended when Mr. Bertolazzi said that he was running out of time and had no more money to add on to the calling card.
The letter from Attorney Robinson indicated that Mr. Spellman had no further communications with Mr. Bertolazzi “because Mr. Bertolazzi has demanded a letter or written guarantee by Arbella that he is not under investigation and will not be” and “Arbella has declined to provide such a letter.”
Rapo & Jepsen through counsel states Mr. Bertolazzi’s alleged claims are false
On June 9, 2016, Attorney Joshua Lewin responded to Attorney Robinson’s May 30th letter and the charge that Mr. Bertolazzi’s supposed statement had any credibility.
First, he reiterated that Mr. Rapo and Rapo & Jepsen, “State emphatically that there is absolutely no truth to Mr. Bertolazzi’s allegations.” Attorney Lewin denied that:
(1) Mr. Rapo or any other employee of Rapo & Jepsen was aware that Mr. Bertolazzi was not complying with company policies governing the submission of commercial insurance applications;
(2) Mr. Rapo sent or “duped” Mr. Bertolazzi into leaving for Brazil;
(3) any employee other than Mr. Bertolazzi knowingly or intentionally facilitated any fraudulent conduct in connection with the business of insurance; or
(4) Mr. Rapo’s letter of April 12, 2016, contained falsehoods or was intended to deceive or perpetrate a fraud.
Attorney Lewin’s letter detailed the procedures at Rapo & Jepsen that Mr. Bertolazzi was allegedly found not to be following by Rapo & Jepsen after Arbella had issued a notice of termination to Rapo & Jepsen and Mr. Bertolazzi left the country. Also, Rapo & Jepsen submitted affidavits by nineteen employees detailing their procedures and their instructions that Attorney Lewin argued showed the agency’s “policy and practice was to assist customers in forming business entities and applying for commercial insurance only when the customer had a legitimate business purpose.”
Also, the person identifying himself as Mr. Bertolazzi in the conversation with Arbella’s investigator had indicated that he was basically in Brazil without any means of support or as put by the investigator, Mr. Spellman, “Daniel was upset at the fact that he had no money and that ‘my wife’s mother has to send us money to live because he [Mr. Rapo] ruined my life.’”
Attorney Lewin countered with some denials and verifiable facts stating neither Mr. Rapo nor Rapo & Jepsen:
- sent Mr. Bertolazzi to Brazil
- otherwise purchased a plane ticket for him,
- funded his travel,
- directed him or “duped” him into traveling to Brazil.
Instead Attorney Lewin stated that Mr. Bertolazzi:
- owns real estate in Brazil, including condominiums and beach front property.
- traveled there occasionally to visit family and friends and oversee his real estate holdings.
- Around the time Rapo & Jepsen received the notice of termination from Arbella, Mr. Bertolazzi asked Mr. Rapo for an advance of funds to travel to Brazil, but Mr. Rapo declined.
Attorney Lewin attached to his letter local Portuguese language newspaper reports and references to social media postings that stated that Mr. Bertolazzi had listed a residential property for sale at Rincao Beach for 350,000 Brazilian Reals. Rincao Beach is located in the Southern Brazilian coast towards Uruguay while the supposed asking price of 350,000 Reals for the beachfront property identified in the newspaper article would be worth approximately $102,500.00 US.
Another 768 pages filed by parties including affidavits, business records, demand CAR Counsel withdraw and request for continuance of June 22 hearing
Including Attorney Robinson’s letter, Mr. Spellman’s statement, and Attorney Lewin’s response, Rapo & Jepsen’s and Arbella’s additional filings released on June 18, contained a total of 768 pages for the Market Review Committee to ponder.
These filings consisted of:
- Arbella’s fraud counsel’s letter dated May 30, 2016 (Attorney Robinson’s letter)
- Rapo and Jepsen response to Arbella’s May 30, 2016 letter (Attorney Lewin’s letter).
- Rapo and Jepsen response to case files referenced by Arbella at the May 11, 2016 meeting
- Rapo and Jepsen employee affidavits approximately 19 employees
- Arbella supplemental submission of recorded statements (Docket #MR16.04, Exhibit #11)
- Rapo and Jepsen letter to Morrison Mahoney LLP dated June 15, 2016, Morrison Mahoney
Rapo & Jepsen’s demand that CAR Counsel withdraw because of a claimed conflict of interest
Also on June 15, Rapo & Jepsen, through Attorney Lewin, made demand on CAR’s counsel, Morrison Mahoney, to “Please confirm by the close of business on Thursday, June 16, 2016, that Morrison Mahoney has withdrawn from its representation of CAR in connection with the appeal by [Rapo & Jepsen] of a Notice of Termination by Arbella.”
Attorney Lewin’s three-page letter objecting to Morrison, Mahoney’s representation of CAR in Rapo & Jepsen’s Market Review Committee hearing with Arbella and demanding that the firm withdraw. Attorney Lewin stated among grounds compelling Morrison, Mahoney’s withdrawal that, “Currently, Morrison Mahoney serves as business counsel to [Rapo & Jepsen] and Mr. Rapo, and is representing [Rapo & Jepsen] and Mr. Rapo in ongoing litigation. Importantly, Morrison Mahoney advised [Rapo & Jepsen] on issues which are the subject of the notice of termination and the Appeal before CAR.”
On June 16, Attorney Matthew Henning of Morrison, Mahoney, the partner who appears for the firm as CAR’s counsel, denied that the firm had any conflict of interest stating, “the ongoing litigation in which other lawyers at Morrison Mahoney represent [Rapo & Jepsen] has no relationship to the matter before the Committee.” Attorney Henning also stated that he had confirmed, “that no one at Morrison Mahoney provided any advice to [Rapo & Jepsen] regarding the Arbella Notice of Termination.” Attorney Henning ended by stating that if Rapo & Jepsen had any evidence contrary to his assertions that Rapo & Jepsen should produce it.
However, Attorney Henning also advised that Morrison, Mahoney would, in any event, not be serving as Outside Legal Counsel for CAR after July, 1, 2016.
Although not stated in Attorney Henning’s letter, the July 1 date for Morrison, Mahoney to cease representing CAR resulted from a June 15, 2016 meeting of CAR’s Legal Contract Review Subcommittee. In a morning meeting, that subcommittee voted to award CAR’s legal services contract to another law firm. The same day, at its scheduled meeting, CAR’s Governing Committee accepted the subcommittee’s recommendation. As a result, Morrison, Mahoney representation of CAR will terminate on June 30, 2016, eight days after Rapo & Jepsen’s June 22 hearing.
The Legal Contract Review Subcommittee’s firm review process had begun before the Rapo & Jepsen appeal had been filed but the sub committee only made its final selection decision on June 15, 2016.
Request for continuance denied
Also, on June 15, 2016, Attorney Lewin made a request on behalf of Rapo & Jepsen to have CAR postpone the hearing before CAR’s Market Review Committee scheduled for June 22, 2016.
On Friday, June 17, 2016, John D. Metcalfe, CAR’s Administrator of Residual Market Services, advised Attorney Lewin that the hearing would go forward stating:
Please be advised that it is CAR intention that the meeting will go forward as scheduled and noticed. In addition, Morrison Mahoney has notified you by letter that they have not withdrawn or been disqualified from representing CAR in this matter.”
