Laguna Man Arrested in Unlicensed Insurance Firm Case : Crime: The company sold worthless auto policies, with premiums totaling $11.2 million, authorities say.

Authorities have arrested the former owner of a Laguna Beach insurance firm accused of selling 15,000 worthless auto insurance policies, state officials said Tuesday.

Robert M. Granafei, 46, of Laguna Beach surrendered to authorities Monday on suspicion of running an unlicensed insurance company, which officials said left nearly 500 claims unpaid, according to state Insurance Commissioner John Garamendi.

Granafei, released on $10,000 bail, is to be arraigned Jan. 9 on a felony count and three misdemeanor charges of illegal operation.

The state Department of Insurance shut down the Underwriters Reserve Ltd. in May, 1993, on suspicion that it had sold worthless auto policies costing a yearly average of $750. The department also seized affiliates in Fountain Valley, Downey and Lakeside. Insurance Department spokeswoman Candysse Miller said it and the Orange County district attorney’s office have been investigating the case in the year and a half since then.

“They’ve been looking at the case since that time, tracking money and also sorting out the business,” she said. Granafei faces a maximum of three years in jail if he is found guilty. The law doesn’t require him to pay the money back, but Miller said investigators are trying to find ways to have policyholders reimbursed as much as possible.

The company operated for nearly a year, collecting $11.2 million in premiums, Garamendi said. Authorities have seized nearly $2 million in assets, most of which were in a Swiss bank account, Garamendi said.

Garamendi said the company violated state law barring unlicensed California firms from selling insurance. The company claimed to be based in the Caribbean island of St. Kitts, but investigators found it was run from Laguna Beach, Garamendi said.

He said unpaid claims from 472 policyholders total $4.8 million.