Griffin concedes ties to failed firm
Oct 16, 2009
INSURANCE: Barred for life from industry, he says he avoided playing direct role
Published: Friday, October 16, 2009 at 1:00 a.m.
Last Modified: Thursday, October 15, 2009 at 10:28 p.m.
Former Riscorp founder and convicted felon Bill Griffin was closer to American Keystone Insurance than state regulators ever knew.
Though official records and papers say the failed property insurer is owned by a string of trusts and holding companies, Griffin on Thursday told the Herald-Tribune that Keystone is largely his own creation.
He initiated the property insurance company, and arranged its financing. When it fell on hard times, he said, he helped raise money to keep it going.
The Sarasota entrepreneur — barred from insurance for life because of his felony conspiracy conviction — puts his current ownership of Keystone at 80 percent.
“I think I paid my time. … At least, I thought I could prove to them I was a good guy,” Griffin told the newspaper.
In the early 1990s, Griffin, now 60, created a national workers compensation insurer, Riscorp, and took it public with a $200 million stock offering.
Just as quickly he saw it collapse under the order of state regulators, while he and other executives were indicted for arranging more than $300,000 in illegal campaign contributions, many to political figures with ties to insurance regulation.
The wealthy businessman spent five months in a federal prison camp following his guilty plea. Since then he has launched several Sarasota development and business projects, with varying success.
Creating an insurance company again, he said, “was a legacy I wanted to leave for my children.”
He said he stopped short of any direct involvement in Keystone’s affairs.
“I felt like doing it that way versus not doing it at all was, well, this is what I know how to do,” he said.
The Florida Office of Insurance Regulation, which approved the creation of American Keystone, responded to Griffin’s revelations Thursday.
“There would be no acceptable way to allow his participation in a company,” said Robin Westcott, who as an agency lawyer scrutinized Keystone’s original application paperwork in 2006 and 2007. “If he did so, then there was a gross misrepresentation in this application.”
Westcott said the insurer was started with a loan from a former Riscorp company, Greenstreet of Florida, and “there would have been no indication that it was Mr. Griffin’s money or that he would be involved with the control or management of this company.”
Comments from Griffin and documents from state records, however, show that OIR was concerned that American Keystone — officially funded and controlled by Griffin family members and business associates — might contain ties to Griffin himself.
But officials were satisfied Griffin was far enough removed from the company’s financing and operations when Griffin’s Tallahassee lawyer prepared documents that moved majority control of the insurer from Griffin’s son-in-law into a trust in his name. The son-in-law, Randal Salser, also was required to resign from Keystone’s board.
Griffin said his lawyer worked with OIR attorneys to find a legal structure that would stay within a federal law that bars convicted felons from operating or owning an insurer.
Florida insurance regulators typically are “very, very strenuous” about screening the applicants behind new insurance companies, said Sandy Safley, a former Hillsborough County lawmaker and insurance regulation consultant in Tallahassee.
“I’ve had applications that an applicant inadvertently failed to record an event that occurred when they were in college 40 years prior and it was picked up by the department,” Safley said.
He called Griffin’s admission that he owns 80 percent of Keystone “so bizarre it’s almost bizarre.”
“How does something like that slip through?” asked Jeff Grady, president of the Florida Association of Independent Agents.
Two state agencies are now vowing to find out more about Griffin’s ties to Keystone, but neither is clear what can be done about it.
“I don’t know,” said Westcott, the OIR division director who ultimately declared American Keystone insolvent.
Regulators say the criminal screening is designed primarily to keep felons from operating an insurance company. State law allows regulators to revoke a license or deny an application if an insurer violates the ban. For Keystone, that option is moot because the state has already moved to shut it down because of insolvency.
Nevertheless, Westcott on Wednesday asked the Florida Department of Financial Services to investigate Griffin’s ties, pledging to assist “in any referral to law enforcement that may be deemed necessary as a result of this review.”
The DFS is now responsible for liquidating Keystone, including tracing its assets, and ascertaining why the insurer failed. Department spokeswoman Kyra Jennings said the agency did not yet know what action it might be able to take even if it did find Griffin involved in the failed company.
An agency official arrived at Keystone’s offices in Ponte Vedra Beach on Tuesday, and changed the locks on the doors. State staffers are now working alongside Keystone’s remaining employees to close by Nov. 8.
Outstanding policyholder claims with the insurer will be directed to the Florida Insurance Guarantee Association for handling and payment. What remains of Keystone’s assets will reimburse the state for those charges. If that is not enough, Florida consumers will have to make up the difference.
Griffin, for his part, believes Keystone would not have failed if he had been allowed a more direct role.
“I don’t think this would have happened if I had been involved,” he said.
This story appeared in print on page A1 of the Sarasota Herald-Tribune