Sunday, April 17, 2016

Los Angeles Area Insurance Company Owner Pleads Guilty to Misdemeanor for Allowing Unlicensed Employee to Advise Clients About and Sell Insurance

Insurance agents are required to be licensed. In an unusual case for criminal prosecution, an owner of an insurance agency and two of his employees were prosecuted for allegations arising from the alleged the unlicensed selling of insurance. 

This is a case where some of the charges alleged arose out of the response to the investigation (providing false information and hiding unlicensed activity). Another teachable moment in this case.

The case began in response to a complaint to the Department of Insurance (DOI). DOI investigators investigted whether Lindhl Lucas, owner of Lucas Insurance Services, allowed and encouraged employees to advise clients about insurance and sell insurance products without proper licenses. At this point, it appears that Mr. Lucas and Kelly Ann Lucas were interviewed and provided information to the DOI agents.

One employee Elaine Edey was previously licensed, but her licensed expired in 2008. DOI alleged that Ms. Edey continued to sell insurance despite her expired license status, which is unprofessional conduct and a misdemeanor (technically illegal). This was not an insurance fraud case, just a licensing issue that blew up.

DOI further alleged that during the investigation Mr. Lucas and Kelly Lucas knowingly provided false information and concealing material facts, in attempts to hide Ms. Edey's unlicensed agent activity. 

DOI referred the case to the Los Angeles District Attorney's for prosecution. Lindhl and Kelly Lucas were each charged with knowingly providing false information and concealing material facts, in attempts to hide the unlicensed agent activity. Ms. Edey was charged with transacting without an insurance license. 

In order to resolve the case, a plea agreement was reached. On April 5, 2016, Mr. Lucas, Kelly Ann Lucas, and Elaine Edey pleaded guilty in Los Angeles Superior Court to various misdemeanor charges and were sentenced to serve three years probation and ordered to pay $500 in fines. The charges here are small but they have consequences on the insurance licenses that are more severe than the criminal charges.

Attorney Commentary: Mistakes happen in running businesses. When investigations occur, it is important to not panic and to seek independent advice before undertaking a strategy that can backfire. With the Boards as well as prosecuting criminal agencies, any misrepresentation or falsification can create evidence of scienter (intent) and demonstrate a lack of credibility and honesty. 

Posted by Tracy Green, Esq.


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