Jeffrey Cohen (Algerina Perna)
The law firm of Trendowski & Allen in Centerbrook is well known for defending high-profile lawsuits involving bars, restaurants or nightclubs. Until recently, the practice supported a staff of 17 people, including six lawyers.
But the firm recently had to downsize drastically. The only lawyers left are the two name partners: Jan Trendowski handles the bulk of the restaurant and bar defense work, while Gregory Allen focuses on arbitration, mediation and family law work. There are only three non-attorney staff members.
But this isn’t a story of cutbacks in a tough economy. Rather, it stems from the alleged frauds perpetrated by the president of a Maryland insurance company that were discovered by investigators in Delaware, where the company is incorporated.
Jeffrey Cohen, former president of Indemnity Insurance, is accused of fabricating a $35 million insurance policy to a group of nightclubs in Las Vegas; forging a $47 million line of credit that led to his company getting an A-minus rating from AM Best; and interfering with various court seizure orders.
Cohen eventually stepped down from the company but not without a fight. He allegedly hacked into Indemnity’s computer system after leaving his job. Ordered to turn over the company’s luxury cars, he parked a Mustang so that it blocked the company’s main entrance and an Aston Martin so it blocked the parking lot entrance.
“He’s a feisty kind of guy,” said one person with knowledge of the case.
Indemnity Insurance’s niche is to provide coverage for bars, nightclubs and restaurants. That’s where the Centerbrook firm came in. If any establishment with Indemnity Insurance was hauled into a Connecticut court, Trendowski handled the case. He also often handled cases for the insurer in other jurisdictions, including Washington, D.C.
With the allegations pending against Cohen, Trendowski isn’t getting paid. He said the company owes him more than $100,000 for legal work. “I worked for them some 14 years without any bumps in the road,” said Trendowski. “It’s a unique circumstance. I’m just watching it happen. I don’t know what to do.”
Last year, Delaware’s insurance commissioner seized Indemnity and ordered its to be liquidated. It has laid off 100 people and is down to about 20 employees. The entire board of directors has resigned. Even the office furniture is getting auctioned off.
In the fall, Trendowski received an e-mail from company lawyers telling him all legal fee payments had ceased. What hasn’t stopped is legal action brought against Indemnity policy holders.
“This affects 68 cases in Connecticut, and who knows how many cases not in suit yet,” said Trendowski.
The insurer had policy holders across the country. The owner of Max’s Taphouse in Maryland, told the Baltimore Sun that he’s fighting a lawsuit and has been unable to reach anyone with Indemnity Insurance for help. Another nightclub owner said he needed to find coverage elsewhere and ended up paying 50 percent higher premiums.
Trendowski said his firm’s business has bounced back better than he thought it might initially, as he has arranged to represent other insurance carriers. He’s also doing some plaintiff’s work now. He believes the financial hit to his practice will be short term, not long term.
Trendowski said the Indemnity income accounted for about 30 percent of his business. “This was what we were paying the week-to-week staff [payroll] with,” said Trendowski. The layoffs were due to “more of a lack of weekly income than a lack of [overall] income.”
Because so many businesses are domiciled in Delaware, the state has a special Court of Chancery to rule on corporate law disputes without jury trials. Cases are scheduled on the docket quickly and judges are experts in corporate law.
Cohen’s problems apparently started when he announced that he was going to take the insurance company public in Delaware. When he had trouble answering questions about the company’s overall worth, state investigators began looking at Indemnity’s records.
In Chancery Court documents, Cohen claimed Indemnity had an unencumbered $5.1 million in an account in Susquehanna Bank. In order to confirm the account, investigators wanted a contact for the bank. Cohen reportedly gave them a post office box address that turned out to belong to Cohen, as well as a phony e-mail address.
Investigators ultimately discovered that the money in the account originated from the bank itself. Susquehanna reportedly loaned it to Cohen for another company Cohen controlled, RB Entertainment Ventures. Indemnity had no control over the funds.
In another alleged fraud, Indemnity, which wasn’t allowed to issue policies larger than $6 million, issued a $35 million policy to The Light Group LLC – the ownership group of a slew of nightclubs in Las Vegas. According to court documents, Cohen claimed he had a formal agreement with a reinsurer to cover the policy, but investigators determined that Indemnity has never paid a premium to the reinsurer. Indemnity’s Board of Directors concluded the reinsurance documents were forged.
The Delaware Insurance Commissioner’s “investigation revealed other material misstatements on Indemnity’s financial statements, including overstated account balances and unsubstantiated reinsurance claims,” a Chancery Court judge wrote.
Court documents indicate that investigators are still tracking down other alleged frauds involving millions of dollars, including those that misrepresented Indemnity’s worth. For example, W. Harding Drane Jr., Delaware’s deputy attorney general, alleges in a liquidation order that Cohen forged a $47 million line of credit that influenced Indemnity’s ranking in A.M. Best. Drane, who has been handling the matter for the state of Delaware, did not respond to an interview request.
At Indemnity’s headquarters in Maryland, the walls were lined with toys and action figures, a collection Cohen had amassed that was worth around $20,000. Cohen had protested when the Chancery Court wanted to sell off the collection as part of the bankruptcy proceedings, saying such a sale would constitute irreparable harm.
The court ruled against him.
‘Over The Top’
The only allegations thus far that Cohen has admitted to is the manner in which he returned the luxury vehicles.
“If [everything else] they claimed was true, why hasn’t anything been done about it? They know it is not true,” Cohen said in an email to the Law Tribune.
Cohen says he’s the victim of a personal vendetta being carried out by Delaware officials, and that Drane has threatened to put him behind bars for contempt. Cohen insists the state attorney general’s office has yet to turn over their evidence against him as part of a discovery process.
“This is over the top and violates the core essentials of due process rights,” said Cohen. “They have lost their mind in this action. They are terrified of my ability to get discovery.”
A lawyer for Cohen and his business entities, Theodore Kittila, of the Greenhill Law Group in Delaware, said the entire process has been frustrating, as Cohen has never gotten his day in court. Kittila has brought a claim that has made its way to the Delaware Supreme Court alleging that the Court of Chancery violated Cohen’s due process rights by not informing him of an initial hearing that took place involving the allegations.
Kittila said Cohen stepped down from his post at Indemnity in August, and that the company has been mismanaged ever since.
“One, we don’t believe [Indemnity] is insolvent. Two, the allegations of fraud, even if they were true and [officials] haven’t proved them, we think that those have been solved because Mr. Cohen has left the company,” said Kittila. “My whole drum that I’ve been beating through this whole case is let Mr. Cohen have his day in court.”
Kittila is well aware that many people other than his client have been affected by the proceedings. He said the state of Delaware acted far too hastily when it decided to liquidate Indemnity. “Look hard enough at any company and you’ll find something to raise an eyebrow,” said Kittila. “If the state can go in and liquidate on [unfound allegations], that’s a real ability to abuse discretion. There are thousands and thousands of policyholders that are going to be impacted by this.”
As for Trendowski, the attorney has filed motions to delay Connecticut cases involving nightclubs and other establishments covered by Indemnity. All of the motions were granted except one, he said. In the meantime, Trendowski is seeking permission from the courts to be removed as counsel. “The insured have no coverage,” said Trendowski. “They are left in a lurch.”