Chapter 7 Filings Come in Wake of Fraud Probe
Two companies owned by Henry W. Hay, a Huntington Beach businessman accused by the state Department of Insurance of operating illegal health insurance companies that defrauded small-business owners of about $9 million, have filed for a Chapter 7 bankruptcy liquidation.
In a Dec. 5 filing in federal bankruptcy court in Santa Ana, Health Data Processing Insurance Administrators Inc. lists debts of $119,712 and California Development Maintenance Assn. Inc. lists debts of $1,477.
The filings come nearly six months after state and federal authorities seized records of six Huntington Beach-based companies operated by Hay. A short time later, the state insurance agency filed administrative charges against Hay and two of his companies--Hay & Gillespie Inc. Insurance Agents and Brokers and his Health Data Processing--and moved to revoke his insurance license.
Hay, 59, is also under investigation by federal and state investigators for possible mail fraud and bankruptcy fraud. No criminal charges have been filed. An affidavit filed by the U.S. postal inspector’s office in federal court in Santa Ana accuses Hay of defrauding about 1,900 small-business owners throughout the nation.
Paul Seave, an assistant U.S. attorney in Santa Ana, said the investigations are continuing and that the bankruptcy filings “will not affect the criminal investigations.”
Court records in Santa Ana show that 17 civil lawsuits are pending against the two bankrupt companies for non-payment of medical insurance bills.
The bankruptcy petitions list 13 unsecured creditors, the largest of whom is Hay’s former attorney, George L. Rogers of Huntington Beach, owed $99,788. Other creditors include JMar Software of Laguna Hills, owed $11,600; Technical Services Group of Anaheim, owed $3,177; and Bayless Stationers of Long Beach, owed $1,716.
Court records also list more than 10,000 health care providers, suppliers and insurance policyholders that are affected by the companies’ bankruptcy filings but are not necessarily creditors.
In a phone interview, Hay denied any wrongdoing and said he has been a victim of bad economic times and financial problems within the insurance industry.
“I think I got the blame and publicity part of an industry that has been in trouble now for the past 10 years,” he said. “I never violated anything in my insurance license.”