State orders full audit of People’s Trust

Partner claims financial crimes

Allegations that the cofounder and former CEO of People’s Trust Insurance Co. committed crimes and mismanaged company funds are under investigation by order of state insurance regulators.

Deerfield Beach-based People’s Trust has been directed by the state Office of Insurance Regulation to audit all payments made by the company to Mike Gold from its founding in 2008 until Gold’s death in January 2014.

Claims by the company’s current CEO George Schaeffer that Gold illegally spent company money at casinos and massage parlors were first reported by the Sun Sentinel on April 20.

They surfaced in a memo Schaeffer sent last December to Mike Gold’s widow, Eileen Gold, demanding that she agree to reduce the purchase price negotiated after Mike Gold’s death for the couple’s half of the company. Schaeffer and Eileen Gold are suing each other over the matter in Palm Beach County Circuit Court.

In a May 9 letter to People’s Trust, the state agency said it directed the company’s independent external auditor, Thomas, Howell, Ferguson, “to document and audit any payments made by People’s Trust or its [managing general agent]” to Mike Gold from the inception of the company until his death.

The auditor’s report shall include, “at a minimum,” a list of all payments to Mike Gold, supporting documentations, reasons for the payments, and who approved the payments, the letter stated.

The letter from Virginia Christy, the office’s director of property and casualty financial oversight, directed the company to submit the audit by June 1. The company has since asked for and received a two-week extension and is now expected to deliver the report by June 15, a spokeswoman for the state office said Tuesday.

The letter specified that Schaeffer’s allegations were “unsubstantiated” but pointed out that state law allows the office to conduct “investigations as it may deem proper to determine whether any person has violated any provision of the [Florida Insurance] Code or to secure information useful in the administration of any such provision.”

When asked about the status of the audit, Amy Rosen, chief marketing officer at People’s Trust, said she could not comment “on

an investigation regarding the company or any of its employees.”

Schaeffer included the allegations in his memo to Eileen Gold to convince her to release him from his obligation to pay her an outstanding debt of $9 million, plus a percentage of any possible sale of the company through 2024. Schaeffer had already paid her $21 million and told her in the memo, “to put it simply I am not paying anything else to you.”

Schaeffer’s memo said his late partner “mismanaged the company very badly, and that he hid it from me” before his death. Mike Gold, the memo said, “spent almost every day of the week at a casino and at a massage parlor. And it appears that he was using cash from the company to finance these activities.”

A review of financial records of the company, Schaeffer said, revealed that Mike Gold “had apparently engaged in CRIMINAL activity with the company, including the borrowing of funds from the insurance company.”

If Eileen Gold failed to release him from the remaining debt, Schaeffer said he would file suit to collect from the widow at least $4 million he said he overpaid, adding, “I don’t want to go that route, especially since it will require me to share publicly information about Mike that will be embarrassing. But I will do it if I have to.”

Schaeffer, a 50-percent partner since 2008, agreed in 2014 to pay Eileen Gold $30 million, Schaeffer’s memo stated. The purchase price was based on a Chicago firm’s estimate in early 2014 that People’s Trust was worth $88 million.

But Schaeffer said he hired another firm after taking over as CEO following Mike Gold’s death that determined the actual value of the company in 2014 was $34 million.

Eileen Gold did not acquiesce to the demands in Schaeffer’s memo and the pair sued each other over successive days in mid-December. Schaeffer’s suit seeks to rescind and reform the sales contract, while Eileen Gold’s suit demands payment of the outstanding $9 million she says Schaeffer owes. Five entities, including People’s Trust Insurance Co., identified as parties to the sale transaction, are also listed as parties to the suits.

Asked about the state’s decision to order an audit into Mike Gold’s financial payments, an official for a Fort Lauderdale-based insurance industry watchdog group said the inquiry was welcome.

Paul Handerhan, senior vice president for public policy at the Florida Association for Insurance Reform, called for a state investigation when Schaeffer’s allegations about Mike Gold first surfaced in April.

On Wednesday, Handhan said “FAIR applauds the Office of Insurance Regulation for investigating the validity” of the allegations.