Two Plead Guilty in Houston in New York Tour Boat Insurance Case

Two men have entered guilty pleas in a case involving the sale of bogus insurance to a New York tour operator whose boat capsized in 2005 killing 20 elderly tourists.

Edmund Hugh Benton, 63, of Scottsdale, Ariz., pleaded guilty to conspiracy to launder money before U.S. District Judge Sim Lake in Houston, U.S. Attorney Kenneth Magidson and Internal Revenue Service Criminal Investigations Special Agent in Charge Rodney E. Clarke announced.

Benton’s Oct. 7 plea followed a similar one in the case two days earlier by Houstonian Christopher Purser, 50.

Benton admitted to conspiring to launder the proceeds of a fraud scheme that sold fake liability insurance policies to a “benefit association” operated from Texas called Global Property Owners Association Inc. (GPOA), the U.S. Attorney’s Office for the Southern District of Texas said.

Benton obtained liability insurance for GPOA members in 2003 from Heritage Mutual Surety Limited (Heritage), a company in the Caribbean island of St. Vincent. Heritage was controlled by a fugitive in Barbados through another St. Vincent entity, Tri-Continental Exchange Ltd.

Benton admitted knowing that GPOA was not licensed or authorized to sell insurance in Texas, that Heritage did not have the ability to pay claims, that Tri-Continental Exchange Ltd. was subject to cease and desist orders from insurance regulators and that the fugitive, “Robert Lewis Brown,” was not using his real name. He also acknowledged receiving fraud proceeds in an account he maintained in The Bahamas.

The insurance was purchased by apartment complexes, condominium associations, bars, and restaurants.

Shoreline Cruises Inc., which operated a 40-foot tour boat called the Ethan Allen on Lake George, N.Y., discovered its policy was fictitious after the Ethan Allen sank on Oct. 2, 2005, in a tragic accident that claimed the lives of 20 elderly tourists.

Purser, who was banned from the insurance business in 2003 by the Texas Department of Insurance, admitted to selling liability insurance policies through GPOA from 2004 to 2006 while disguising his true identity and the existence of the ban. He first sold marine liability insurance to Shoreline Cruises in May 2004, authorities said. The policy was renewed a year later.

Substantial claims were made against the policy after the Ethan Allen sank. Purser presented backdated documents to make it appear that the policy did not cover the Ethan Allen while the boat was operating on Lake George. In fact, Shoreline Cruises Inc. had purchased such coverage but none of the purported insurance companies could pay the claims, authorities said.

Benton faces a maximum of 10 years in federal prison without parole to be followed by a maximum three years of supervised release, a fine of up to $250,000 and an order to pay full restitution to victims.

Purser faces a maximum of 20 years in federal prison without parole to be followed by a maximum three years of supervised release, a fine of up to $250,000 and an order to pay full restitution to victims.

Sentencing for Benton and Purser is set for Jan. 19, 2012. Both are thought to be flight risks and have been held in custody since February in Purser’s case and March in Benton’s case.

Four other defendants were charged along with Benton and Purser, the U.S. Attorney’s Office said. Two are to go to trial on Oct. 31; the remaining two are pending extradition.

The IRS, U.S. Immigration and Customs Enforcement — Homeland Security Investigations, and the Texas, New York and California Departments of Insurance were involved in the investigation. The governments of St. Kitts and Nevis, St. Vincent and the Grenadines, The Bahamas, Nicaragua, The Philippines and Australia also aided in the investigation.