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‘Victims everywhere’ in $100 million Certified Services worker’s compensation fraud

sec_us-securities-and-exchange-commissionBy Dan Christensen, BrowardBulldog.org

The $100 million-plus scam behind the collapse of Fort Lauderdale’s Certified Services is a classic South Florida courtroom tale of greed and woe.

Hundreds of investors who bought Certified’s publicly traded stock were wiped out as insiders looted the company, buying luxury cars and diamonds. Insurance companies who did business with Certified got stiffed for tens of millions of dollars in claims. And injured low- and middle-income employees across the country who counted on Certified to provide worker’s compensation insurance learned too late that their coverage was actually a mirage.

“There are victims everywhere,” U.S. Securities and Exchange Commission attorney Christopher Martin said in an interview.

Certified, headquartered next to Executive Airport, was a professional employer organization (PEO) with 1,900 corporate clients that have approximately 53,000 employees in 32 states. It made money by handling personnel services for small- and medium-sized companies – including payroll and workers’ compensation coverage supposedly to be purchased through licensed insurance providers.

Former Certified President and Chief Executive Officer Danny Pixler, who once owned a million dollar home on Bayview Drive, is now serving a 60-month sentence after pleading guilty last year to a federal conspiracy charge in the scheme. Two others involved with the company also went to prison.

But the man a federal judge now says was the puppet master, W. Anthony Huff, has not been charged with a crime, though he has been pursued under civil law. In fact, according to the judge, Huff is back in the lightly regulated PEO business with a new company – Tampa-based 02HR – “where he continues his less-than-aboveboard ways.”

Huff, a convicted felon and Kentucky resident, was hit with civil fraud charges by the SEC in 2008 as a result of the Certified debacle. Fort Lauderdale U.S. Magistrate Judge Robin Rosenbaum held a week-long bench trial last February.

In a final judgment issued Friday, the judge held Huff liable for federal securities law violations and ordered him to cough up more than $13 million in ill-gotten gains, including interest. He also was fined $600,000, and enjoined from further violations of federal law, and barred from serving as an officer or director of any publicly traded company.

Huff, who the judge noted once kept “stacks of cash” in his office safe for “business emergencies,” has 15 days to pay.

No decision has been made on whether Huff will appeal.

“Mr. Huff is evaluating his options,” said his Miami attorney, Russell C. Weigel III.

In a 122-page ruling issued Sept. 30, Rosenbaum recounted Huff’s bold-yet-hidden scheme that ultimately duped the investing public and secretly transformed Certified into his “personal piggy bank” between 2001 and 2004.certifiedlogo

“Huff deliberately decided to control Certified from the background and not to take a named official position with Certified so he would not have to disclose his prior criminal insurance dealings,” the ruling says.

Huff pleaded guilty in May 2003 to federal mail fraud charges in Kentucky regarding his association with a wholesale trucker’s insurance brokerage, All Risk Services Ltd.

Working in the shadows at Certified, the court said, Huff enticed investors by overstating the company’s financial condition by approximately $110 million. To do that, he booked $47 million in bogus letters of credit and veiled $65 million in liabilities.

Huff also diverted more than $130 million from Certified to a company he controlled called Midwest Merger Management LLC.

Not all that money went into Huff’s pocket, the court said. Millions were spent to keep Certified going, but Huff also siphoned millions to himself and his spouse, Sheri, to buy a jet, boats, diamonds, homes and a farm in Kentucky. Sheri Huff was ordered to give back $3.8 million.

Certified was a shell corporation with no business operations when Midwest acquired a controlling interest in November 2001. Soon, it began to acquire other PEO businesses, including its Cura Group subsidiary.

A key part of Certified’s business was to provide its clients with required workers’ compensation coverage through authorized insurance companies. One company it worked with was Continental Casualty Company, the large commercial insurer known as CNA.

At one point, Certified had purchased policies from CNA to cover its clients’ workers. But when CNA announced it would hike Certified’s deductible, it required Certified to post collateral to maintain coverage needed to continue in business

In response, Certified produced more than $40 million in fake letters of credit. CNA didn’t find out until it went to draw on them. The scheme led to more than $60 million in losses for CNA, the court said.

Insurance companies in Oklahoma and Washington were also hit hard by the scheme.

Certified landed in bankruptcy court in 2006 with its subsidiary, Certified HR Services. Its debts were discharged in 2008 as part of a liquidation plan.

In an ironic twist, the company Huff now controls, 02HR, purchased the bankruptcy estate of Certified/Cura – “a turnkey PEO business,” as the judge put it – for about $11 million.

“Huff reacquired the benefits of controlling Certified without having to continue to be responsible for significant debts that Certified, when Huff previously controlled it, had incurred,” Rosenbaum said.

In contrast, the judge said, Certified’s unsecured creditors, including CNA, will recover between 15 and 30 cents on the dollar and the bankrupcty estate will be left “approximately $40 to $50 million under water.”

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  • Nice work Dan. You are filling the void, providing high quality investigative journalism in a market that has lost reporting resources.

    We have always respected your work and look forward to you raising the bar in South Florida.

    It is simply amazing that South Florida houses so many dirtbag crooks promoting themselves as sophisticated, successful entrepreneurs, but instead leaving their investors, employees and community in flames. What on earth were they thinking?

  • Dan, another great piece of work. Its sad to see so many of the “little people” get hurt, while others walk away with millions. And a 60 month sentence? Dummy to the puppet master or not, 5 years doesn’t sound like a lot when such a large fraud has been committed.

  • I’m no economist, but it seems to me that the entire financial industry, the whole house-of-cards structure of credit, securities, investments, and other non-tangible transactions is inherently phony, a colossal Ponzi scheme and shell game that is intrinsically bogus, even if its practitioners are scrupulously honest and follow the law (which they frequently do not). I don’t see how lending money that doesn’t exist is any different from cavalierly printing currency without any backing. For example, the fact that banks and companies (through stock) loan money they don’t have, on the promise they will get it back with interest from profits that do not exist yet, and then use that promise as collateral for additional borrowing so they can lend some more, is, in my opinion, the main cause of inflation.

    Don’t get me wrong, there is nothing wrong with the concept of credit. It is perfectly legitimate to finance our current economic activity with future profits. It is a way to bootstrap our labor, manufacture productive capacity with its anticipated returns. Credit allows us to release capital for productive use, to build the means of production now, when they are needed, as well as an opportunity to take advantage of bargains, handle catastrophic emergencies, and so on. Credit is like a flywheel, it allows the economic machinery to operate smoothly instead of jumping in fits and starts between massive income and outlay. And the people and companies who provide this service and risk their own capital in doing so deserve to make a decent return on their investment; they provide a useful service.

    But when finance becomes AN END IN ITSELF, an industry with its own infrastructure of bettors and players, insurors, investors, regulators, marketers, lobbyists, lawyers, journalists, critics, academics and other assorted camp followers and carpetbaggers, it becomes too abstract and unwieldy, and too vulnerable to crime. Wall Street and the entire banking system are utilities that should serve the economy, we tend to treat them as the real world of commerce, and all those factories and offices and businesses out there as some sort of greasy, sordid little sweatshop activity which we can outsource to the Third World.

    Capitalism periodically undergoes financial panics where an enormous amount of pain and suffering occur when this artificial and top heavy system trips over its own contradictions. We suffer recessions, depressions, bubbles, crashes, and untold calamity when the real productive capacity is actually intact. The factories and workers are there, the mines and farms are there, the transportation, energy and communication networks are there, all untouched. Why are we undergoing economic distress solely due to the excesses and grotesque financial fantasies of this parasitic class of do-nothings and paper-shufflers, who have the audacity to call themselves “entrepreneurs”? How can we lavish so much money and prestige on industries and individuals whose function is so arbitrary and artificial and whose services are so self-serving? The financial industry does not even perform a useful administrative or regulatory function, it exists solely to promote its own prosperity by skimming its vig off the top of the economy. We have become a nation of real estate investment counselors and practitioners of similar lunatic disciplines. We don’t make anything worthwhile any more, everybody wants to work in the office. We can’t run an economy by selling each other pizza and doing each other’s laundry, and you can’t get a haircut on the internet.

    The source and origin of all wealth is human labor and the raw materials of the earth, and those facilities and institutions we build to manage them. Everything else is, to use a legitimate business term, just overhead.

  • Was Anthony Huff convicted of the fraud and will he do time in prison? He and his wife Sheri should both have to do time for what they did, but it seems that Anthony Huff has always been able to get out of his wrongdoings and schemes.

  • It is so sad to see what this scum bag, Anthony Huff, is capable of. I hope this conceited red head scum bag rots in prison. This world would be better off with scum bags like this!!!!!

  • Dan, another great piece of work. Its sad to see so many of the “little people” get hurt, while others walk away with millions. And a 60 month sentence? Dummy to the puppet master or not, 5 years doesn’t sound like a lot when such a large fraud has been committed.

  • those people are living here in kentucky and the son has a 15 million trust fund. guess the felon knew where to hide the money.

  • so sorry people steal.

  • EXPLAIN NOTHING PUT THEN IN JAIL.

    At least a dozen US firms have been told by the US Securities and Exchange Commission that they must disclose and explain their business dealings with and within Syria, Iran and other sanctioned states.

    They have sold their soul to the Devil.

    United We Stand In GOD We Trust
    True Patriots

    The Lord’s Little Helper
    Paul Felix Schott

  • Update:
    Sheri Huff’s million dollar home burned down yesterday in Louisville, KY. The fire inspectors will use a microscope to investigate the cause.

  • I was recruited from Washington DC by Anthony in 1995 to run the IT Dept for his “Insurance Brokerage”, the first day I showed up for work there were news cameras all over the place trying to get a story about that basketball player. That’s should have been my first clue to turn around and go straight back home, for the next 4 years to follow I worked there…you can’t even begin to imagine the crap that went on, it’s literally the kind of stuff you see on lifetime movies.

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