On June 17, the U.S. Securities and Exchange Commission (SEC) charged international insurance company AmTrust Financial Services, Inc. (AmTrust) and its former CFO Ronald E. Pipoly Jr. with faulty loss reserve disclosures. AmTrust and Pipoly have agreed to pay a combined $10.5 million to settle the charges.
The SEC alleges that AmTrust and Pipoly did not properly disclose the company’s process for reporting management’s best estimate of loss reserves to the SEC. According to the SEC’s complaint, Pipoly made consolidated accounting adjustments that did not properly consider the actuarial analyses and diverged from the company’s actuarial estimates. In addition, AmTrust allegedly failed to reveal the specific factors which supported Pipoly’s adjustments and did not maintain sufficient supporting documentation for management’s best estimate. In a settlement, AmTrust and Pipoly agreed to pay civil penalties of $10.3 million and $75,000, respectively. Pipoly also has agreed to disgorge $140,000 and pay $22,499 in prejudgment interest. Amtrust and Pipoly neither admitted nor denied the SEC’s allegations.
On July 31, the SEC posted a Notice of Covered Action in reference to the case. The Notice serves as an announcement to individuals, who may have alerted the government to the violations in this case, to file a whistleblower award claim. Through the SEC Whistleblower Program, whistleblowers who willingly provided original information that led to this enforcement action are entitled to an award ranging from 10-30% of the collected $10.5 million.
Whistleblowers are vital to the SEC’s efforts to combat corporate fraud and to protect investors. Since the SEC Whistleblower Program was established in 2010 with the passage of the Dodd-Frank Act, the information provided by SEC whistleblowers has led to numerous enforcement actions. Correspondingly, SEC whistleblowers have earned over $500 million in awards for their disclosures.
Read the SEC press release: AmTrust Financial Services, Inc. and Ronald E. Pipoly, Jr. (Release No. LR-24838; Jun. 17, 2020).
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