OKLAHOMA CITY – A felony embezzlement charge was filed against the person who was appointed as a fiduciary to liquidate a failed insurance company, state Attorney General John O’Connor announced.
Nestor Romero is accused of taking more than $1 million from an insurance company’s receivership estate.
He was charged Sept. 2 with one count of embezzlement. If convicted, he faces up to eight years in prison and $10,000 in fines, along with restitution.
When an Oklahoma-based insurance company cannot meet its policy obligations, the Oklahoma County District Court appoints a receiver to liquidate the insurance company. The Oklahoma Insurance Commissioner is the receiver and appoints an assistant receiver to wind down the company.
Romero is a CPA who previously served as an examiner of insurance company financial operations for state insurance departments. The Oklahoma County District Court placed Red Rock Insurance Co. in liquidation on Aug. 21, 2014, and Romero was appointed assistant receiver.
This past February the Oklahoma State Bureau of Investigation was asked by the A.G.’s office to investigate allegations that Romero wrongfully transferred $1.2 million from Red Rock Insurance Co.’s receivership accounts to his personal and business accounts. According to court documents, the fraudulent transactions took place between 2015 and 2019 when Romero had total control of the insurance company’s bank accounts.
“As a court-appointed receiver, Romero was entrusted with control of millions of dollars belonging to Red Rock Insurance Co.,” O’Connor said. “This prosecution … will send a message to all fiduciaries: All Oklahoma taxpayers ultimately pay, to some degree, for insurance company failures.”
“When I first took office, we did a top-to-bottom review of all processes,” state Insurance Commissioner Glen Mulready said. “I’m proud of the accounting controls that we put in place that led to this discovery. These receiverships are complex, and it is my job to make sure that all parties are upholding the law and held accountable to their fiduciary responsibility.”
Policyholders, claimants and credits who had claims against Red Rock were instructed to file a proof of claim, together with proof of loss, with the assistant receiver no later than Feb. 20, 2015. Claims received after that date lost their statutory priority and may not receive a distribution of assets, records indicate.
The court’s Order of Liquidation activated state guaranty funds in the states where Red Rock was licensed to do business. It is believed that most claimants will be protected by their state guaranty fund, subject to statutory limitations, the Oklahoma Receivership Office reported.
In a document filed Dec. 15, 2021, attorneys for the Insurance Commissioner reported that 431 proofs of claim, “not including Class 1 claims,” had been adjudicated by then. Class 1 refers to the reasonable costs and expenses of administration expressly approved by the receiver.