Federal law enforcement officials have served the city with a subpoena requesting documents about Hybrid Insurance Group, the firm at the center of a controversy over unpaid insurance premiums, as details surfaced that a grand jury has been convened to investigate the city’s dealings with Hybrid.
Among the recipients are the city’s audit commission and board of education, sources said Friday.
Corporation Counsel Saundra Kee Borges said her office is cooperating with the U.S. attorney’s office. She declined to elaborate.
The subpoena states that the city must appear before the grand jury in U.S. District Court in Hartford, or provide records to the FBI.
Hybrid and its chief executive officer, Earl O’Garro Jr., are the subject of ongoing state labor and insurance investigations, including the alleged nonpayment of $670,000 in insurance premiums to two city insurance carriers.
In addition, city officials had called for an internal audit commission investigation into what they called a possible conflict of interest between Hybrid and City Treasurer Adam Cloud. The commission decided Wednesday not to take up the matter, instead suggesting it be referred to the city’s ethics panel.
Hartford Minority Leader Larry Deutsch wrote a letter to Chief State’s Attorney Kevin Kane earlier this week asking that Kane investigate O’Garro, his company, Hybrid, and its relation to Hartford officials, including Cloud.
It also appears that the city made its own formal request for a criminal probe into Hybrid. In an Oct. 2 email obtained by the Courant through the Freedom of Information Act, Director of Risk Management John Griffin indicates that he asked the chief state’s attorney’s office to consider criminal charges.
“This was done today,” Griffin wrote in the email to Paula Altieri, the school system’s chief financial officer, and one of the city’s insurance agents.
Griffin filed a complaint with the state’s insurance regulator on Sept. 19, alleging that Hybrid did not pay $670,000 in premiums to Starr Indemnity and National Casualty, the city’s excess liability insurers. Cloud’s office wired the money to Hybrid on July 18 at the request of O’Garro, who claimed that the city’s insurance policies were under threat of cancellation.
As of early October, both insurers have confirmed to the city that they never received the premium payments from Hybrid. The city’s excess liability coverage remains in place, city officials have said.
On Friday, a woman at Hybrid’s downtown Hartford office told the Courant that O’Garro was not in the building and he would be the only person from the company who could speak to the media. O’Garro, 30, has not returned requests for comment in recent days and weeks. He declined to comment last week when approached at his Bloomfield home.
Hybrid is located at 30 Lewis Street, a building owned by Cloud, his brother Christopher and their father, Sanford “Sandy” Cloud Jr. Records released by the state show that Hybrid’s first rent payment for the office space was $7,650 in January 2012.
Christopher Cloud is registered with the state as a lobbyist for Hybrid, which received a $100,000 state loan and $26,320 matching grant from the state’s Small Business Express program in March 2012 to help fund the firm’s relocation from Windsor to the Cloud family’s building.
Hybrid has defaulted on the loan and owes the state $105,792.46, including $73,858 for the loan principal and $26,320 to repay the state grant, according to the state Department of Economic and Community Development.
In an internal memorandum dated Sept. 24, Altieri wrote that Adam Cloud’s treasurer’s office “moved” a fiduciary liability policy from one broker to Hybrid about February 2012 “without the need to ‘compete.'” Mayor Pedro Segarra, Superintendent Christina Kishimoto and school board Chairman Matthew Poland forwarded Altieri’s memo to the city’s internal audit commission on Oct. 2.
Cloud has denied that a personal relationship had anything to do with the city’s hiring of Hybrid as an insurance broker.
“The mere fact that Hybrid happens to have an office in a building in which the treasurer and some of his family members have an ownership interest is of no consequence whatsoever — as the treasurer did not select, approve or authorize any business relationship between Hybrid and the city, nor does he have the power to,” Cloud has told the Courant.
A June 19 email that O’Garro sent to Cloud mentions Hybrid’s work on the city’s fiduciary liability policy and asks the treasurer to consider his firm for other lines of coverage. “I appreciate the time that you’ve taken to review this information and look forward in assisting you and the rest of the city of Hartford,” O’Garro wrote.
The following day, Cloud forwarded O’Garro’s email to then-Finance Director Julio Molleda. Cloud wrote that Hybrid is a certified minority contractor for the city and “should get a serious look” from H.D. Segur, one of the city’s insurance agents, “as they seek brokers to place the insurance business of the city.”
O’Garro also faces a state labor department investigation for allegedly failing to pay wages to employees at Hybrid and the defunct Us Restaurant and Lounge in Middletown, the Main Street eatery he opened in March with his wife, Kendra. Us Restaurant closed in September and was served with an eviction notice for failure to pay rent, court records show.
Several former employees of O’Garro have told the Courant they are owed at least one paycheck. Kendra O’Garro, the restaurant’s co-owner, said recently that she had no information about the business or payments to Us employees.
Town documents and court records indicate that financial problems have been mounting for Earl O’Garro, a Windsor native who formed Hybrid in 2010. One of his homes, at 83 Johnson Road in Marlborough, faces foreclosure, and on Tuesday the insurance firm AmTrust E&S Insurance Services filed a lawsuit against him seeking $300,000.
The suit against O’Garro and several other defendants, including Hybrid, charges that Hybrid received at least $299,972 for premiums on several policies, but failed to send the money to insurance carriers.
AmTrust also alleges that O’Garro posed as one of the company’s underwriters and “created bogus proposals or quotes for insurance coverage” to try to obtain payments on policy premiums for four of O’Garro’s companies that exist in name only.
On Oct. 18, the Connecticut Insurance Department filed an 11-count complaint against O’Garro and Hybrid that included AmTrust’s allegation that O’Garro attempted to persuade Capital Premium Financing to pay insurance premiums for the “fake” businesses, according to the state complaint.
O’Garro has been asked to appear at the department’s public hearing Nov. 21. If he fails to appear, the state could revoke his license to conduct insurance business in Connecticut, and possibly issue a fine.
AmTrust’s lawsuit also states that the Internal Revenue Service filed a notice of tax lien against Hybrid Insurance on Sept. 12 for failing to pay certain taxes between Dec. 31, 2011 and June 30, 2013.
Story By Jenna Carlesso, Vanessa de la Torre and Edmund H. Mahony, Hartford Courant; Video By Beau Berman, FOX CT