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Insurer Serving Indians Being Investigated

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The Associated Press

The Tampa Tribune

Published: January 22, 2009

OMAHA, Neb. - An alleged Ponzi scheme by an insurance agency in Grand Island 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 thinking 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," he said.

First Americans Insurance Service has been serving exclusively Native American tribal governments, businesses and gaming establishments since 1977, according to its Web site.

A Ponzi 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 is 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, Craig said.

First Americans filed for Chapter 11 bankruptcy protection 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 consisting mostly of Nebraska individuals and couples.

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