Another week, another tale of brokers in trouble with the FSA. Financial difficulty is often cited as a factor, so will a continuing tough economy result in more shady dealings coming to light?

Just one week after we reported on the sentencing of former Shakespeare Underwriting directors Jayson Hollier and Andrew Booth for fraudulent trading, the FSA has today released the details of another example of bad behaviour in the broker market.

Bury broker Stephen Goodwin has been fined £471,846 and banned from working in regulated financial services after he swiped clients’ insurance premiums. Goodwin was a partner in broker Goodwin Best and, between 2008 and 2010, he and his (now deceased) business partner received premiums from clients that they often paid into their business account rather than to the relevant insurer or broker. Overall they misappropriated about £393,766 in order to fund the partnership’s business expenses.

According to the FSA, the Goodwin Best business was suffering from financial difficulties during that time. The partners transferred money from the premium account to the office account according to when bills and wages were due. However, during the period, Goodwin paid back £89,920 into the premium account to pay client premiums, so the total amount he embezzled was £303,846.

The consequences

At least three clients of Goodwin Best whose policies were not subject to risk transfer agreements suffered loss as a result of Goodwin Best’s actions. One client suffered an uninsured loss, while two others paid the same premiums twice to ensure that their insurance policies remained in force.

Further investigation also reveals another twist in this tale. In November 2010, a start-up Bury broker BLS Insurance Services bought Goodwin Best’s book of business. At the time of the sale, Goodwin was quoted as saying: “Following my decision to retire and sell the business, I received a number of offers, but what mattered most to me was that my clients went to a ‘good home’ and I’m confident that’s what BLS will provide.”

Not long after we did the acquisition, insurance companies started phoning us asking about Goodwin Best’s outstanding premiums”

Brian McGlaulin, BLS

BLS director Brian McGlaulin, speaking to Insurance Times after today’s fine, said he and his fellow BLS directors were unaware of the situation at Goodwin Best, as it had only bought the broker’s goodwill and not its assets and liabilities. This was until he started receiving calls from insurers asking for premiums.

“Not long after we did the acquisition, insurance companies started phoning us asking about the outstanding premiums,” he said. It was game over for Goodwin, who admitted to the FSA on 24 February 2011 that the partners had misappropriated the premiums, expressing significant remorse for his actions.

Cleaning up

Goodwin was declared bankrupt on 12 April 2011 with a debt of £50,699 incurred by Goodwin Best between 2008 and 2010. He has been unable to pay the outstanding premiums owed to the relevant insurers and broker, the FSA said.

McGlaulin said the FSA was thankful to his firm for looking after Goodwin Best’s clients. “How many more times is this happening? That’s the worry.” he said. Food for thought.

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