The result was withdrawn. —Cryptic 17:18, 13 June 2017 (UTC)
Non-notable company. I found a few newspaper articles that mention the company (LA Times, NY Times, NYTimes), but these are all routine, perfunctory coverage of ongoing business and legal events. None demonstrate the depth of coverage required by WP:CORPDEPTH. Previously discussed at Wikipedia:Deletion review/Log/2017 June 7 -- RoySmith (talk) 17:19, 10 June 2017 (UTC)
((cite news)): Unknown parameter |subscription= ignored (|url-access= suggested) (help)The abstract for the 64-page article notes:
This paper outlines the weaknesses in insurance regulation and supervision, which led to the failure of the Guarantee Security Life Insurance Company in Florida in 1991. There are comparisons to more recent failures of financial institutions in Australia, including Goldfields Medical Fund and Commercial Nominees.
The article notes:
The article provides a timeline:By the fall of 1992, the industry and state receivers had hammered out the concept that became Guaranty Reassurance Corp. It took until April 13, 1993, to get the new industry-owned insurance company in place with John M. Ericson Jr. as its president and chief executive officer.
Through state guaranty associations, life insurers doing business in states where Guarantee Security Life Insurance Co. had policyholders were assessed the initial $3.2 million to capitalize Guaranty Reassurance. They've also periodically been assessed a proportionate share of money needed to pay for the failed insurer's liabilities, based on their share of the market. Last fall, the final $70 million cash call went out to help fund the reserves for the liabilities assumed by Midland National.
Midland National--one of nine bidders for Guaranty Reassurance's business-was selected based on the ceding fee they were willing to pay, their financial strength and their policyholder services.
...
In April 1995, a Circuit Court judge approved a $100 million settlement to be paid by Merrill Lynch, Pierce, Fenner & Smith; Coopers & Lybrand; and the New York law firm of Sheriff, Friedman, Hoffman & Goodman. Receivers claimed that the firms helped Sanford hide Guarantee Security's financial condition.
The Path to Reconstruction
- Aug. 12, 1991 Florida seizes Guarantee Security Life
- Dec. 21, 1991 State sues Guarantee Security owners for fraud
- April 1991 Senate committee conducts hearings on the failure
- Apr. 13, 1991 Guaranty Reassurance Corp. opens
- July 14, 1995 $100 million court judgment awarded to GRC and policyholders
- April 1997 Transmark agrees to forfeit $2.1 million
- Nov. 3, 1997 Book of business transferred to Midland National Insurance Co.
The article notes:
When Guarantee Security Life Insurance Co. failed, it had more than 55,000 policyholders nationwide, including about 9,000 in Florida. Most first learned that their life insurance policies and annuities were in jeopardy when a letter arrived in the mail in the fall of 1991 from the Florida Department of Insurance saying the state was taking over the company and that all accoutred values were frozen, with the exception of several hardship cases.
...
In 1990 and 1991, Guarantee Security policies were paying as much as 10%, when the going rate was about 8%. When the state-appointed receiver stepped in, interest rates were reduced to contractual minimum crediting rate, which for most policyholders was 4%. However, nearly all of them--99.6% of policyholders--kept their policies at the reduced-interest crediting rate and transferred to Guaranty Reassurance Corp., the industry-run restoration company. The incentive to stay with the restoration effort was stiff surrender charges and the possibility of sharing in potential court awards. Policyholders who bailed out at that point received only 32 cents on the dollar.
Under Guaranty Reassurance, the rate was increased to 4.5% in the first year, then 4.75% in the third year and finally 4.875% in the fourth and fifth years.
...
Underwood credits one of the customer service representatives, Louise Simboc, with convincing him to stick out the restoration when he was on the verge of bailing out. In the end, through careful cultivation of assets and court judgments, Guaranty Reassurance was able to cover the nonguaranteed policy values. "I'm so proud of them," Underwood said.
About 42,000 of the original 55,000 policyholders transferred to Midland National Insurance Co., Fargo, N.D., in November.
The article notes:
Mark C. Sanford, his wife and his brother Robert, who settled a civil suit brought against them for their alleged plundering of the Guarantee Security Life Insurance Company, are now paying off. They have given the Department of Insurance, as receiver for the defunct carrier, $8.5 million in cash, $3 million in securities and some other properties. Now they have turned over a private island locale in the Bahamas with an estimated value of $3.5 million. The total settlement with the department was for $15 million, even though the state had sought $300 million. But the state also won settlements totaling an additional $100 million from other defendants.
Insurance Commissioner Bill Nelson called it the largest recovery related to a failed insurer.
Sanford and William Blackburn bought Guarantee Security in 1984 when it had assets of $100 million. Through some heavy sales in supposedly high yield annuities, they increased assets to $1 billion, but the balloon burst because their investments in so called junk bonds failed to materialize. The suit against them was for fraud.
The settlement included a pledge that none of those accused of fraud would work in the insurance business again.
The article notes:
The rash of national insurance company failures hit Florida on Monday as the state's sixth-largest life insurance firm was seized by state regulators.
Guarantee Security Life Insurance Co., based in Jacksonville, was taken over by the state Department of Insurance after an audit revealed the company had a negative net worth of about $40-million, which means its liabilities exceeded its assets by that amount.
...
The failure affects about 6,200 policyholders in Florida. Overall, the failure affects more than 50,000 policyholders, most of whom live in Michigan, Ohio, Illinois, Indiana, Pennsylvania and Florida.
The policies were single premium life insurance and annuities.
...
Guarantee Security had the same problem as Executive Life: an overload of junk bonds.
The bonds accounted for about 60 percent of the company's assets. As of June 30, the assets totaled about $600-million. Its assets had been as much as $970-million.
At one time Guarantee Security had about 90 percent of its portfolio in junk bonds and included such well known names as RJR Nabisco and Gulfstream Land & Development Corp., which developed Tampa Palms.
The article notes:
State guaranty funds from across the country have agreed to form a company that will take over the annuities and policies of Guarantee Security Life Insurance Co., the largest insurance failure in Florida's history.
For consumers who have seen their money frozen after Jacksonville-based Guarantee Security was taken over by regulators last August, the announcement Wednesday means they will soon have access to their money if they choose to withdraw it.
...
It's the first time the guaranty associations have resolved their obligation to policyholders of a failed company by forming a new insurance company.
...
The new insurance company, which does not yet have a name, will assume the $620 million worth of policy liabilities, as well as Guarantee Security's assets, which are predominantly junk bonds.
The article notes:
Surrounded by 4,000 boxes holding 16 million sheets of paper, Daniel Perry and Michael Heekin are charged with making a silk purse out of a sow's ear.
As receivers of Guarantee Security Life Insurance Co., taken over by the Florida Insurance Department in August, Perry and Heekin must lead an operation to save the assets of 57,000 annuity and policyholders.
Their task: Find more than $300 million to balance up the shortfall in Guarantee Security's books. The company's policies have a value of about $620 million, but its assets, depleted by bad transactions and junk bonds, are less than $300 million.
...
A jury will decide whether Guarantee Security's executives, its accounting firm, investment bankers and lawyers acted legally.
Regulators filed a $300 million fraud suit in December against its former managers, including Tampa businessman William B. Blackburn, its securities broker, Merrill Lynch, as well as the accounting firm of Coopers & Lybrand and a New York law firm. Former junk bond king Michael Milken was sued separately earlier this year.
The article notes:
Three Department of Insurance examiners have told the Securities and Exchange Commission they thought transactions by Guarantee Security Life Insurance Co. now alleged to be illegal were fine when done in the mid-1980s.
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At the end of each year between 1984 and 1988, when Guarantee had to report its holdings to state regulators, the company would sell junk bonds to the brokerage Merrill Lynch in return for government-backed notes. That made it look like the company was investing in safer, more stable securities and cosmetically improving its financial books, regulators now claim.
...
In the largest insurance failure in state history, Guarantee Security was taken over by state insurance regulators just one week after those depositions were taken.
The article notes:
Metropolitan Life Insurance Co. has agreed to settle a Florida lawsuit by assuming obligation for 1,000 annuities worth $5 million that had been transferred to the now-failed Guarantee Security Life Insurance Co.
...
MetLife and three other insurers were accused of transferring 7,000 annuities to Jacksonville-based Guarantee between June 1987 and December 1989 without policyholder approval. The holders are mostly elderly people from Ohio, Florida, Illinois, Michigan, Pennsylvania, Indiana and Missouri.
...
Guarantee was sold last year to the National Organization of Life and Health Guaranty Associations, which assumed its policyholder liabilities of about $400 million.
Florida has filed a $300 million fraud suit against Guarantee owners Mark Sanford and William Blackburn of Tampa, Merrill Lynch & Co. Inc. and Coopers & Lybrand.
The article notes:
State regulators seized control of Guarantee Security Life Insurance Co. on Monday, marking the biggest life insurance company failure in Florida history.
Guarantee, based in Jacksonville, has about 57,000 policyholders and $600 million in assets. It is the sixth-largest life insurer based in Florida. About 6,200 of its policyholders are in Florida.
Tom Gallagher, the state insurance commissioner, said losses from junk bond investments pushed the company into insolvency. He estimated that the insurer was at least $50 million in the red.
The article notes:
Yesterday's item about a Securities and Exchange Commission investigation involving Merrill Lynch didn't go over well at the giant brokerage firm, which issued a statement saying: "Merrill Lynch strongly denies that it engaged in any illegal or unethical activity with regard to securities transactions that were conducted as far back as 1984 by Guarantee Security Life Insurance Company."
...
To recap: Guarantee allegedly tried to improve its year-end balance sheet a number of times in the 1980s by temporarily exchanging Treasury securities for junk bonds near the end of each of several years. Merrill's name appears prominently in Guarantee's financial statements during the years in question.
The article notes:
Citing evidence of widespread fraud, Senate investigators urged the Justice Department on Tuesday to look into the failure of a Florida-based insurance company and the payment of more than $50 million to its two chief officers.
The report on the Guarantee Security Life Insurance Co. said evidence indicates that top managers, including Tampa businessman William Blackburn, "misled regulators and defrauded policyholders . . . while paying themselves generous compensation."
While the report by the Senate Permanent Subcommittee on Investigations criticized Florida insurance examiners for failing for years to detect the company's financial problems, it said the 41 other states in which the company operated also failed to intervene.
The report also faulted the accounting firm of Coopers & Lybrand and the brokerage firm of Merrill Lynch for failing to properly oversee the company's operations or to report irregularities.
The article notes:
About 6,200 Florida residents who had policies with a defunct Jacksonville insurer will receive notices next week outlining their share of a $100 million settlement against the firm, state officials said Friday.
Last month, a Leon County judge gave preliminary approval to the Guarantee Security Life Insurance Company settlement - the largest consumer payout ever obtained by the state's Department of Insurance.
...
In July, the state struck the deal with the defunct insurer's brokerage firm, Merrill Lunch Corp.; its accounting firm, Coopers & Lybrand; and its New York law firm, Shereff, Friedman, Hoffman & Goodman.
...
Guarantee Security, or GSLIC, was placed into receivership in August 1991. At that time, it was $300 million in debt largely due to a $600 million investment in junk bonds.
...
Merrill Lynch will pay $45 million; Coopers & Lybrand $50 million; and Shereff Friedman $5 million. No agreement has been reached with the company's officers and directors.
The article notes:
Citing evidence of widespread fraud, Senate investigators urged the Justice Department on Tuesday to look into the failure of a Florida-based insurance company and the payment of more than $50 million to its two chief officers.
The report on the 42-state operations of the Guarantee Security Life Insurance Company said that evidence indicates that top managers "misled regulators and defrauded policy holders . . . while paying themselves generous compensation."
While the report by the Senate Permanent Subcommittee on Investigations criticized Florida insurance examiners for failing for years to detect the company's serious financial problems, it said the 41 other states in which the company operated also failed to intervene.
The article notes:
The lawsuit, originally asking for $300 million but later increased to $500 million, was brought by Florida regulators in December 1991, and involved the failure of the Guarantee Security Life Insurance Company. The suit followed an investigation of the activities of the insurer's parent, Transmark USA Inc., which was accused of looting the insurer.
Guarantee Security, based in Jacksonville, was seized by Florida insurance regulators in August 1991, after the value of its huge junk-bond investments had collapsed.
The Florida regulators said that officials of Transmark, who were forced out when the insurer was seized, had depleted the company's assets in a series of "phantom trades" between Guarantee and Merrill Lynch. These trades were used to move risky junk bonds off the insurer's books and onto Merrill's books for a few days at the end of several years, from 1984 to 1991, regulators said.
The investigators charged that these trades inflated Guarantee's worth by hundreds of millions of dollars during the periods when the insurer was preparing to report its financial health to regulators. The transfers allowed the company to appear solvent, the regulators asserted, when in fact the company became insolvent in 1985.
The article notes:
Florida insurance regulators brought a lawsuit yesterday against Merrill Lynch & Company, charging that it arranged false trades with a troubled insurance company to help hide the insurer's deteriorating financial condition from regulators.
The $300 million lawsuit involving the failed Guarantee Security Life Insurance Company also named Coopers & Lybrand, the insurer's auditors, and Shereff, Friedman, Hoffman & Goodman, a New York law firm that represents the insurer's parent, accusing them of malpractice and breach of fiduciary duty. The suit also named the insurer's former top managers.
Guarantee Security, based in Jacksonville, Fla., was seized by Florida insurance regulators in August. It failed because the value of its huge junk bond investments had collapsed and, regulators say, because officials of its parent, Transmark USA Inc., had depleted its assets. The officials were forced out when the insurer was seized.
The article notes:
Merrill bought large amounts of junk bonds from Guarantee Security at the end of each year in 1984, 1985, 1986 and 1988, paying with cash or high-quality Treasury bonds. The firms then reversed the transactions days later at the same prices. The result: Guarantee Security was able to falsely improve its year-end balance sheets.
The article notes:
In Transmark, USA, Inc. v. Florida Dept. of Ins., 631 So.2d 1112 (Fla. Ct. App. 1994), the Florida Department of Insurance placed Guarantee Security Life Insurance Company (“GSL”) into receivership. Id. at 1113. GSL was a wholly- owned subsidiary of Transmark USA. Id. The Receiver then brought a lawsuit against Transmark, as well as the former directors and officers of both Transmark and GSL, alleging that the defendants had concealed the insolvency of GSL from regulators. Id.
Transmark and GSL, while legally distinct entities, were essentially operated by the same employees and had, for the most part, interlocking directors and officers. Id. at 1114. Transmark maintained its legal files together with those of its subsidiaries, and employed the same in-house and outside counsel with respect to various matters. Id. Multiple attorneys (both in-house and outside counsel) testified that “there was no expectation or mandate that communications” with the entities’ lawyers would be treated as confidential between any of the entities themselves. Id.
The Receiver sought production of documents from Transmark and one of its directors/officers related to GSL. Id. at 1115. Transmark and the director resisted production, asserting that the attorney-client privilege protected the documents from disclosure, and the Receiver moved to compel. Id. Relying on the Florida statutory scheme governing the attorney-client privilege and exceptions thereto, the Florida Court of Appeals affirmed the trial court’s order compelling production of the documents. Id. at 1116-17. The court noted that there was evidence to support the trial court’s conclusion that the attorneys jointly represented both companies “in matters pertinent to the transactions at issue in the complaint” and that there was never any expectation of confidentiality in attorney communications between the parent and subsidiary during the time that they were operated together. Id. at 1117. Accordingly, the court confirmed that the attorney-client privilege did not apply to the documents and communications that the Receiver sought. Id.
((cite news)): Unknown parameter |subscription= ignored (|url-access= suggested) (help)The article notes:
When time came to reinvest, the same agent who introduced Gossett to Paul Revere talked him into putting his money with a different company -- Guarantee Security Life Insurance Co. of Jacksonville. Guarantee was offering policyholders as much as 11 percent interest on annuities and a fat commission for agents who sold them. It sounded almost too good to be true. It was. While Gossett was buying annuities in Louisiana, Mark C. Sanford was in Ponte Vedra Beach, investing in a chain of nude dance bars and filling the driveway of his oceanfront home with exotic sports cars. Sanford was Guarantee Security Life Insurance Co. and regulators would say later the money he was spending on himself should have stayed with his insurance company. Together with business partner William Blackburn, he had taken a modestly profitable insurance company and turned it into the sixth largest in the state. It brought him millions in salary and fees. He bought an island in the Bahamas and minted his own coin.
Barely three years after Gossett invested in Guarantee, the company was seized by insurance regulators who said the company had been "looted" of more than $100 million between 1985 and 1991, its dire financial condition camouflaged with the help of the company's accounting firm and Wall Street broker.
Cunard (talk) 21:24, 11 June 2017 (UTC)
19 years after the fraud was uncovered, the company received significant coverage in Actuaries Institute's Australian Actuarial Journal in 2010:
((cite news)): Unknown parameter |subscription= ignored (|url-access= suggested) (help)The abstract for the 64-page article notes:
This paper outlines the weaknesses in insurance regulation and supervision, which led to the failure of the Guarantee Security Life Insurance Company in Florida in 1991. There are comparisons to more recent failures of financial institutions in Australia, including Goldfields Medical Fund and Commercial Nominees.
Cunard (talk) 21:24, 11 June 2017 (UTC)