Executive Gets 4 Years for Insurance Fraud

An Oxnard insurance executive who confessed he was driven by “pure greed” was sentenced Friday to four years in prison for stealing more than $1.5 million in premium payments.

James D. Ismay, 53, rubbed his eyes as Ventura County Superior Court Judge Allan L. Steele denied a plea from Ismay’s attorney for a year in County Jail and five years’ probation.

“The reality is that Mr. Ismay, over a considerable period of time, appropriated a very considerable amount of money,” the judge said. “Over $1.5 million is a lot of money.”

Prosecutors described the case as the biggest insurance fraud ever uncovered in Ventura County.

Ismay pleaded guilty last month to four counts of grand theft and two counts of filing false state income tax returns. The charges carry a maximum term of 13 years in prison, but Steele agreed to impose a sentence of no more than four years in exchange for the guilty plea.

According to a pre-sentencing report filed in court Friday, Ismay began selling business insurance for the Frank B. Hall & Co. agency in Oxnard in 1976 and rose to vice president and account executive, earning more than $70,000 per year.

In 1986, Ismay set up an account in the name of Ag Risk Services and for the next five years instructed some clients to make their payments to that account rather than to the Hall agency, according to the report. The clients were told that ARS was an affiliated company, but none of the funds deposited into the account was used to buy insurance, the report said.

Instead, the lion’s share of the more than $1.5 million deposited into the ARS account wound up in Ismay’s pockets, according to the report. The document alleges that about $250,000 went to another employee of the Hall agency, Terry D. Smalridge, 43, who is awaiting trial on theft charges.

Seven companies made a total of 27 payments as part of the scheme, Deputy Dist. Atty. Jeffrey G. Bennett said. The thefts were uncovered when one of the companies switched to a different insurance provider and found discrepancies in invoices. Ismay and Smalridge were indicted in October, 1992, by the Ventura County grand jury.

“It was a sophisticated and complex scheme that took a great deal of planning,” Bennett said in arguing for a prison sentence for Ismay. “He had to generate thousands of false documents. . . . This is not a simple man’s crime. This is for the big guys, and Mr. Ismay is a big guy.”

In an interview with a probation investigator, Ismay said the scheme began when he was unable to find an underwriter for one of his clients and “decided to just pretend.”

Eventually, Ismay said, he was motivated by “pure greed,” and spent the money on trips to Las Vegas and various luxuries, including a Jaguar automobile. He said he told his family the money came from bonuses.

His attorney, Edward A. Whipple, urged the judge to grant Ismay probation--including a year in the county’s work furlough program--so he could make restitution to his victims. He said Ismay, who had been on bail pending the sentencing, was earning $1,000 a month as a delivery truck driver and every cent was going into a restitution account.

Whipple also said Ismay has no prior criminal record, has been a good husband and father, and has served as a board member for a youth organization.

“He’s just a real unusual person to find in this courtroom,” Whipple said, adding that Ismay would pose no danger to the public on probation.

In response, Bennett said even the four-year prison sentence sends a dangerous message because Ismay probably will be paroled after two years.

“That’s $500,000 a year,” the prosecutor said. “There are people in this town who would sit in a cell for two years for $500,000 a year.”

As for restitution, Bennett said it would take Ismay 133 years to repay his clients at his current income.

Investigators said none of Ismay’s business clients suffered losses that required them to use the insurance they thought they were paying for.

Bennett said the Hall agency was taken over by another firm that has since closed--in part, he said, because of Ismay’s thefts. Several employees lost their jobs, he said.