Federal prosecutors say Bradley Reifler, a New York-based investment manager, was instrumental in the demise of North Carolina Mutual Life Insurance Co., the oldest black-owned insurance company in the United States.
Last week, a judge sentenced Reifler to five years in prison for his role in defrauding the insurer of an estimated $34 million.
U.S. District Judge Catherine Eagles said Reifler abused the trust NC Mutual had placed in him, embezzling funds intended for reinsurance from the 125-year-old insurer, according to court records and local news reports. As a result of Reifler’s schemes, prosecutors said, NC Mutual was only able to recover some of the lost money and was unable to pay some of its claims.
Reifler signed a plea deal in 2021, pleading guilty to one count of wire fraud. He could have been sentenced to more than 20 years in prison under federal sentencing guidelines, according to the plea agreement.
The sentencing is the latest in the saga of NC Mutual, which in October went into receivership and will soon be liquidated. The company started in 1898, providing funeral insurance to African Americans. It went on to become one of the largest black-owned life insurance companies and a flagship business in the region. The company and its high-rise office building became iconic on what was known as Black Wall Street, Durham, North Carolina.
The company was largely a life insurance company, but it also owned a regional insurance agency and brokerage that sold property and casualty, health and other insurance products, according to the company’s website.
By the late 2010s, the company had run into problems. Reports said the company failed to keep up with technology, customer service, and growth opportunities, and was subsequently crippled by hijacking. The North Carolina Insurance Commissioner requested that the company be placed in rehabilitation in 2018, but the financial situation has not improved.
Reifler and his investment companies were spoilers, North Carolina Insurance Commissioner Mike Causey said.
“For more than 125 years, NC Mutual has weathered countless storms, but it could not survive Mr. Reifler’s fraud,” Causey said in a statement Friday. “His crimes left the company in dire financial straits and proved to be the nail in the bud for NC Mutual.”
The 2020 indictment de Reifler described the alleged fraud. In 2015, NC Mutual ceded some $34 million in premiums to a reinsurance company, not named in the indictment. Around the same time, Reifler’s Stamford Brook Capital entered into an agreement to be the reinsurance company’s investment adviser. The court document did not explain how Reifler’s firm became the adviser.
To protect the assets of the mutual company, restrictions were imposed on investments, requiring them to comply with North Carolina insurance laws and obtain a favorable rating from the National Association of Insurance Commissioners. Instead of following the guidelines, Reifler used the millions to pay off other investors, to pay overhead for his other company, Forefront Capital Holdings, and to invest in high-risk “junk” stocks and equity investments. auto-transaction, according to the indictment.
In 2016, the State Insurance Department performed a routine audit of NC Mutual’s finances and discovered some issues. To cover his tracks, Reifler provided falsified documents to give the impression that his investments complied with the restrictions, prosecutors said.
Due to Reifler’s fraudulent scheme, NC Mutual “was unable to recover most of the assets of the trust; instead ended up with lower quality illiquid securities in their investment portfolio; suffered substantial financial losses; and was placed in rehabilitation,” a court document read.
Reifler said he was not fully aware of the investment restrictions and felt he was making good investments with the insurance money, according the Triangle Business Journal. His lawyer said the man had no intention of getting rich but was using the money in part to buy time to save his businesses.
The implosion of NC Mutual and Reifler stocks will be felt for some time to come, said Causey, who submitted a statement to the court before sentencing, regarding the impact on victims.
“The economic consequences of his actions will be felt by state guarantee associations, other insurance companies and ultimately taxpayers,” Causey said. “Innocent people have to foot the bill, but we will work to ensure the claims of NC Mutual policyholders are settled appropriately.”
Topics
Fraud
North Carolina
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