ParfumGigi@aol.com

Brenda Sapino Jeffreys

Texas Lawyer

07-03-2007

Warren Todd Hoeffner, a partner in Houston plaintiffs firm Hoeffner & Bilek, was named in a federal indictment that alleges he paid more than $3 million in "bribes and kickbacks" to two former claims adjusters for The Hartford Insurance Co. in connection with $34 million in settlements of Hoeffner's silica-related suits.

Hoeffner and his co-defendants, Rachel Rossow and John Prestage, the former claims adjusters for The Hartford, each faces one count of conspiracy, one count of conspiracy to money launder, two counts of wire fraud, four counts of mail fraud and six counts of monetary transactions with criminally derived property.

The grand jury indictment, which was made public on June 27, alleges Rossow received approximately $2,681,874 in "bribes and kickbacks" and Prestage received about $764,476 in "bribes and kickbacks." The indictment also notes that Hoeffner received about $5,366,839 in attorney fees from the settlement.

Hoeffner, 42, pleaded not guilty to the charges at an arraignment on June 27 before U.S. Magistrate Judge Frances H. Stacy of the Southern District of Texas. He was released after posting a $100,000 deposit on a $250,000 bond, according to records in United States of America v. Warren Todd Hoeffner, et al.

Hoeffner's office referred questions to his criminal defense attorney, Chris Flood of Flood & Flood in Houston.

Flood says his client is not guilty of the charges in the indictment, and he says the litigation settlements were "valid" and "had to go through a lot of approval" at The Hartford.

"They will withstand scrutiny and are just and fair settlements -- fair and reasonable," Flood says. "As to the other allegations in the indictment, I'm not able to comment. However, I thought that this matter had been resolved internally at The Hartford."

Prestage, 36, of Newington, Conn., made an initial appearance on June 27 before U.S. Magistrate Judge Donna F. Martinez of the District of Connecticut, where he was released on a $250,000 personal recognizance bond. His arraignment is scheduled for July 9 before Stacy.

Prestage's attorney, Deidre A. Murray, who works for the Federal Public Defender's Office in Hartford, Conn., did not return a telephone message before press time.

According to a press release issued by the U.S. Attorney's Office for the Southern District of Texas, Rossow, 41, of Redding, Conn., was expected to make an initial appearance in federal court in Bridgeport, Conn., on June 27, but information about her appearance was not available on online docket sheets. Nancy Herrera, a spokeswoman for U.S. Attorney Donald J. DeGabrielle Jr., said Rossow's arraignment in the Southern District of Texas had not been scheduled.

An online search for a telephone number for Rossow in Redding, Conn., was unsuccessful.

Shannon Lapierra, media relations director for The Hartford, confirms that both Prestage and Rossow no longer work for the company, but she declines to comment on the circumstances of their departure.

She declines to comment on the indictment, except to say, "The company took quick and decisive action upon learning of the alleged conduct. We contacted federal authorities and have been providing them with assistance every step of the way."

The indictment alleges that Hoeffner, Rossow and Prestage conspired to meet in various places, including Laguna Beach, Calif.; New York; Palm Beach, Fla.; and Nashville, Tenn., while negotiating a settlement of the claims of Hoeffner's clients, and "Hoeffner would and did make payments to defendants Rossow and Prestage, through bribes and kickbacks, for recommending to The Hartford that The Hartford pay certain amounts to settle the claims of his clients against The Hartford's Insureds and The Hartford."

The indictment alleges the conspiracy occurred between February 2002 and November 2004.

The government alleges in the indictment that the defendants induced The Hartford to pay more than $34 million in settlement funds, knowing that more than $3 million would be used to pay "bribes and kickbacks" to Rossow and Prestage.

Among the allegations in the indictment, the government claims Hoeffner transferred $97,000 by wire from a personal account to a bank in Hartford that went to a car dealership to fund the purchase of two BMW automobiles: a 2002 BMW 530ia valued at about $46,876 for Prestage and a 2003 BMW 530ia valued at about $50,124 for Rossow.

The government also seeks criminal forfeiture from the defendants of about $8,813,189 and the two BMWs.

Assistant U.S. Attorney John Braddock, who is the lead prosecutor on the case, referred questions to Herrera, who says Braddock cannot comment.

Flood does add that he and Hoeffner were surprised by the indictment.

"Nobody was hurt by the alleged activity, if in fact it occurred," Flood says.

Flood says he does not know the number of claims Hoeffner settled with the $34 million payment from Hartford, but the indictment says Hoeffner's firm represented hundreds of individuals who claimed they had silicosis and/or other silica-related diseases and brought claims against eight businesses insured by The Hartford and other insurance companies. Hoeffner's partner Thomas Bilek did not respond to an e-mail message requesting comment.

Silicosis is a lung disease caused by overexposure to breathable silica, according to a National Institute for Occupational Safety and Health fact sheet.

The maximum sentence for conspiracy to commit wire fraud and mail fraud is five years in prison, without parole, plus a fine of up to $250,000, according to the U.S. Attorney's Office press release. Each of the four counts of wire fraud and two counts of mail fraud carries a maximum penalty of 20 years in prison, plus a fine of up to $250,000.

The charge of conspiracy to commit money laundering carries a maximum penalty of 20 years in prison and a fine of $500,000. The maximum sentence for each of the six monetary-transactions-with-criminally-derived-property charges is 10 years in prison and a maximum fine of $250,000.

In a written statement on June 27, DeGabrielle said, "There is a presumption of regularity and legality in the business of insurance litigation, which when corrupted, damages our confidence in the integrity of the system. These allegations will be addressed by today's indictment and if proven, represent a serious affront to the lawfulness we expect during the settlement of insurance claims."