N.M. Tribe Sues Regulator Over Leavitt’s Corp. Status Reinstatement

February 21, 2008

The Mescalero Apache Tribe in Santa Fe, N.M., contends it overpaid millions of dollars for insurance, alleging the state let an insurance agent operate after the agent was accused of submitting fraudulent documents to sell policies.

The tribe has sued the state Public Regulation Commission over its reinstatement of the corporate status of the Leavitt Group of Albuquerque.

Dane Leavitt said he could not comment on the lawsuit against the PRC because he hadn’t seen it. However, he said that while the tribe’s main lawsuit questions what it paid for the policies, the validity of the insurance policies is not at issue.

He said in a lengthy statement Tuesday that the parent company began an internal investigation after the Mescaleros contacted it on Sept. 15, 2005, alleging irregularities in a renewal quote by the Albuquerque agency.

The 11-day investigation found that misrepresentations were made in annual renewal proposals to 20 clients, including the Mescalero tribe, in which a recommended legitimate insurance quote was contrasted with at least one higher-priced falsified comparison, Leavitt said.

That created a false appearance of competition, and unfairly guided client choice, Leavitt said.

The tribe is not seeking damages in the Feb. 11 petition in state district court here. Rather, it wants a judge to revoke the firm’s corporate status and declare that the PRC had no authority to reinstate Leavitt’s corporate status.

Such a ruling would allow the tribe to recover damages in a separate lawsuit filed in 2005 in state district court in Albuquerque, alleging racketeering, unfair trade practices, fraud and breach of contract by the Leavitt Group of Albuquerque and its owners.

“We believe the damages are quite significant here, and we want to make sure that the Mescaleros are not left in a position where they could not be made whole,” said David Freeman of Albuquerque, the tribe’s lead attorney in the case.

The Feb. 11 petition contends the company’s parent firm, Leavitt Group Enterprises of Cedar City, Utah, and two of its officers, Kelly Russell and Leavitt, are using the Leavitt Group of Albuquerque’s reinstatement as “an absolute defense against its vicarious liability for the fraudulent acts.”

Ann Echols, corporations bureau chief for the PRC, declined comment.

The complaint names her along with PRC Chairman Jason Marks, the Leavitt Group of Albuquerque, Leavitt Group Enterprises, Russell and Leavitt.

According to this month’s petition, agents of the Albuquerque office sold policies to the Mescaleros while the firm was without legal corporate status. As a result, it said, the southern New Mexico tribe overpaid for insurance.

The tribe said Leavitt Group of Albuquerque was incorporated in 1995 but its corporate status was canceled in 2002 because it did not file annual reports. The complaint said the firm was reinstated for two years, ending in 2004, but that the PRC reinstated its corporate status in 2006, after the tribe’s original lawsuit was filed.

Leavitt said a PRC clerical error was in part responsible for the cancellation. He said the Albuquerque agent’s corporate charter was reinstated in part because the PRC failed to note an address change the firm submitted, and therefore the company did not receive a report form.

The Mescalero Apaches allege that in 2005, while the Leavitt Group of Albuquerque lacked corporate status in New Mexico, managing co-owner Kenneth Woodley submitted “fraudulent documents … in the course of providing Mescalero with bids for insurance coverage.”

Leavitt said the company in September 2005 terminated the “culpable employee,” whom he did not name. The Albuquerque operations were later sold.

The Leavitt Group acknowledged liability and paid the Mescalero Apaches $83,647– the 6.57 percent difference between the policy and one that might have been purchased had accurate representations been made, his statement said.

The tribe accepted the payment without an agreement over an ultimate figure, and later sued.

“I feel satisfied by our response to the problem. We informed all affected of the harm. We cleaned up the mess in the light of day,” said Leavitt, who said his company settled with the other clients.

Leavitt is the brother of Mike Leavitt, former Republican governor of Utah and Environmental Protection Agency administrator and current U.S. Health and Human Services secretary. Both Leavitts have been executives in their family’s insurance empire, which has 115 nationwide affiliates and was majority owner of the Leavitt Group of Albuquerque.

The lawsuit does not allege wrongdoing by Mike Leavitt, Freedman said.


Information from: The Santa Fe New Mexican,

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