Operators of Defunct Insurance Firm Guilty of Conspiracy, Fraud

A federal jury has convicted the operators of a defunct Irvine insurance company on conspiracy and seven fraud charges for selling more than $15 million in worthless bonds to contractors.

The jury found George Jacobs, 70, of Newport Beach and Thomas Ashley, 61, of Santa Ana guilty of one count of conspiracy, two counts each of mail fraud, wire fraud and interstate transportation of property obtained by fraud.

Both men were returned to custody after their convictions late Wednesday. Jacobs’ bail was set at $500,000; Ashley’s at $240,000. Sentencing is scheduled for Nov. 18.

Operating as Federated Bonding Co. and Federated Bonds and Insurance Agency Inc., Jacobs and Ashley sold counterfeit bonds to construction contractors nationwide under the name of Federated Mutual Insurance Co., a legitimate insurer that hadn’t given them authorization, Assistant U.S. Dist. Atty. Wayne R. Gross said.

An investigation by the FBI and the California Department of Insurance found that Jacobs and Ashley had pocketed more than $500,000 in collected premiums from late 1990 through mid-1992.

State investigators said the two men also operated American Diversified Insurance Co., an offshore insurance carrier that is not licensed in California, and its two subsidiaries, Global Marketing Corp. and Republic Surety Insurance Agency Inc.

Federal investigators raided the Newport Beach offices of the American Diversified companies two weeks ago, determining that the companies had collected an additional $2.5 million in premiums since 1991.