D.A. Refuses to Prosecute Arrested Insurance Executive : Investigation: President of California Specialty Insurance in Irvine spends two days in jail amid ongoing fraud probe by police and state agency.

Police arrested an Orange County insurance executive last week on charges stemming from an ongoing embezzlement investigation, but he was freed after the district attorney refused to press charges, authorities said Tuesday.

Albert Frank Ciocatto, president of California Specialty Insurance in Irvine, was arrested July 8 in his office parking lot and booked on suspicion of grand theft and embezzlement, Irvine police Investigator Mark Hoffman said.

Ciocatto was held for two days with bail set at $1 million, then released from the Orange County Jail. A district attorney’s investigator said there was insufficient evidence to charge him.

The allegations stemmed from a joint investigation by Irvine police and the state Department of Insurance into whether Ciocatto’s firm took money from clients and then failed obtain insurance policies for them. Hoffman said the arrest was made after he received a complaint from a businessman who said he paid his insurance premiums but did not receive the proper coverage.

James Harrington, a supervising investigator for the Department of Insurance in San Francisco, said the lack of coverage issue “was part of what we’re looking at” but would not discuss the case further. He said that California Specialty Insurance has been under investigation since January.

Ciocatto’s lawyer, Myron Cohn, said that his client “is bewildered by the entire matter” and that he cannot evaluate any of the allegations unless charges are pressed. Cohn said he is unaware of any insurance clients who allege that they were not given proper coverage.

The arrest, he said, came as a surprise. “I don’t think he was aware of ongoing investigation,” he said of Ciocatto. “If he had, we would have surrendered him.”

Ciocatto’s company bought FGS Insurance last year shortly before FGS was accused of fraud by Insurance Commissioner John Garamendi. FGS, which was noted for its extensive use of radio advertising, was subsequently liquidated. California Specialty took over many of its clients.

Garamendi said at the time, “This is the end of the road for FGS--a road strewn with the wreckage of chiseled policyholders and bilked creditors.”