The Challenges of Prosecuting Insurance Fraud: A Conversation with Butler Snow’s Benjamin Whitehouse

On February 18, 2022, the insolvency proceedings regarding Spirit Commercial Auto Risk Retention Group (Spirit) moved to arbitration after an appeal to the Nevada Supreme Court by Nevada Insurance Commissioner Barbara Richardson was denied. Nevada regulators allege that over $40 million is missing from Spirit.

In the appeal, Richardson argued that arbitration agreements that Spirit made with its service providers CTC Transportation Services and Criterion Claims Services of Omaha—two of the principal defendants in the Spirit receivership hearings—should be rejected as they were “instruments of a criminal enterprise.”

The Nevada Supreme Court was not convinced by this argument as no criminal charges have been raised regarding the Spirit insolvency.

Prosecutions of white-collar crimes hit an all-time low in 2020 according to TRAC Reports, a non-partisan research organization at Syracuse University. Prosecutions picked up in the Biden administration but are still down nearly 25% over a five period and down over 50% from a decade ago.

The Risk Retention Reporter spoke with Benjamin Whitehouse, senior counsel at Butler Snow LLP, where he focuses on captive insurance, government relations, and tax issues, on the challenges in prosecuting white-collar crime.

“Under Ben’s leadership, Butler Snow was recognized by Captive Review as the legal services firm of the year at the 2021 US Captive Service Awards. Ben serves as the chairperson of the American Bar Association Business Law Section’s Captive Insurance Committee. He serves as the board President and is a course instructor for the International Center for Captive Insurance Education,” as per the Butler Snow website.

Whitehouse joined the captive industry in 2013, where prior to joining Butler Snow, Whitehouse served the Tennessee Department of Commerce & Insurance as the Supervising Attorney.

Whitehouse is also a former prosecutor. He began his career as a Judge Advocate (JAG) in the United States Navy. After his service, Whitehouse served in the Office of the Attorney General for the State of Tennessee with a focus on complex white-collar crime. Whitehouse graduated from the University of Tennessee College of Law.

Risk Retention Reporter: As a journalist I’m on the wires for the Department of Justice and the AG Offices for a few states. What I’m seeing is a lot of COVID fraud, some drugs convictions—particularly opioids—gangs, and then any financial crimes that touch on politics.  Occasionally a regular white-collar crime like securities fraud will come through, but such cases are in the minority.  Why is there this narrow band of activity, when obviously, there’s a lot of other types of fraud that are going on?

Benjamin Whitehouse: First let me say, that I do not want to speak ill of any of my former colleagues who work at a district attorney’s offices either across Tennessee or in other states. There are enforcement priorities that get set at all levels. For your typical local prosecutor, their primary mission is dealing with violent crime, and they are typically not staffed to handle complex financial fraud cases. There are sometimes prosecutors who focus on fraud cases—there were in Tennessee—but there is an incredible amount of resources that go into making a white-collar case of any stripe.

It starts with the quality of the investigator and the investigations—and this is going to be a long answer to your question—because it all feeds into why we don’t see these sorts of cases happening. It is hard to get an investigation and investigator focused on doing a white-collar case. There are not very many forensic accountants out there, especially ones that work in government and can really take apart a white-collar case. These cases are not easy to investigate, and they are difficult to understand.

Furthermore, for a lot of these cases you have victims located in multiple jurisdictions either across state lines or within multiple federal districts in a single state.

So, strike one is finding an investigator or law enforcement agency that’s willing to do the work up. These departments have limited resources. Even the departments that are actively pursuing white-collar crime are going to hit on the priorities of the day. For most complex financial fraud cases, it most often makes sense to take the case federal.

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