Segal’s Fraud Trial Finally Takes Center Court

Michael Segal, politically connected Chicago insurance broker, was either the victim of scheming underlings or the mastermind of a fraud plot that left his Near North Insurance Brokerage facing a deficit of more than $20 million in a fund it was required to leave alone.

Opening statements in Segal’s federal racketeering and fraud trial, which began April 20 after more than three years after the government’s initial indictment, focused on Near North Insurance Brokerage’s premium fund trust account, which insurance companies are required to keep.

Assistant U.S. Attorney Virginia Kendall told jurors Segal looted the fund of more than $20 million. She said he took as much as $100,000 a year in the 1990s from the company’s petty cash and had it listed in the books as postage.

“Where was the money coming from? It was coming from an account that Mr. Segal was required by law to hold in trust for others. Instead, he was stealing it,” Kendall said.

Defense attorney Daniel Reidy said Segal was the victim of shoddy accounting practices and scheming underlings at his fast-growing Near North Insurance Brokerage. Reidy acknowledged problems in the account’s books, but he repeatedly told jurors that no customer of Near North, which is also charged in the case, was hurt.

“No Near North customer went uncovered for insurance. No insurance companies went unpaid,” Reidy said. He described Near North as “a big business with very, very bad books.”

Kendall described a pattern of Near North employees questioning the balance of the trust account, only to be either reassured by Segal that he would fix any problems or browbeaten and threatened by him. She said Segal was repeatedly warned by employees and outside auditors that the trust account was seriously in the red and could cause legal problems for him and the company.

But Reidy said the politically connected insurance mogul was the victim of shoddy accounting practices and scheming underlings who were motivated by greed and vengeance. He said a group of executives tried to wrest control of the company from Segal and when they failed, went to the FBI to try to destroy the business.

Reidy said they got the government’s attention by claiming that the politically connected Segal could lead them to other criminal cases. The case has received much attention in Chicago partly because Segal is known for having close ties to powerful politicians in both parties.

Kendall said Segal kept a VIP list of customers who would receive discounts on their insurance— some of 100 percent. She said powerful Chicago Alderman Edward Burke was among those who received their insurance for free.

Kendall also said that then-Gov. George Ryan, now under federal indictment on corruption charges, called the Illinois Department of Insurance when it was looking into Segal’s business and expressed his hope that Segal would be OK.

Insurance Journal Midwest featured an exclusive interview with Segal in its Jan. 12 issue.

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