Breaking News: Houston Silicosis Attorney Indicted
From the Houston Chronicle:
June 28, 2007, 12:24AM
Local lawyer indicted in alleged kickbacks plot
Two insurance company workers on silicosis cases also face charges
By MIKE TOLSON
Copyright 2007 Houston Chronicle
A Houston plaintiff attorney and two insurance company employees were indicted by a federal grand jury Wednesday in connection with an alleged kickback scheme that involved millions of dollars in settlement proceeds from silicosis cases.
Warren Todd Hoeffner, 42, and two claims managers for The Hartford, a Connecticut insurance giant, were charged with 14 counts of conspiracy, mail and wire fraud and money laundering. The U.S. Attorney's Office also is seeking forfeiture of more than $8 million in fees and bribes allegedly collected by the trio.
Texas lawyers involved with silicosis litigation say Hoeffner once had an inventory of cases approaching 1,000 several years ago and decided to settle them all in bulk. Among the insurance companies he asked to meet with him in New Hampshire in February 2002 was The Hartford, which represented eight defendants named in his lawsuits, according to the indictment.
Hartford claims managers Rachel Rossow, 41, and John Prestage, 36, ultimately agreed to pay Hoeffner more than $34 million to settle all his cases. As part of the deal, however, Rossow and Prestage received a total of more than $3 million and each a new BMW automobile, the indictment alleges. Hoeffner collected more than $5.3 million in legal fees.
"There is a presumption of regularity and legality in the business of insurance litigation, which, when corrupted, damages our confidence in the integrity of the system," said local U.S. Attorney Don DeGabrielle. "These allegations ... represent a serious affront to the lawfulness we expect during the settlement of insurance claims."
The condition, controversy
Silicosis is a serious and occasionally fatal occupational lung disease caused by exposure to tiny airborne particles of silica, usually from industrial sandblasting operations. Because of enhanced safety precautions, the disease has been on the decline in recent decades and no longer represents the risk it once did to miners, sandblasters and foundry workers.
Hoeffner's silicosis cases, mostly in Texas, predated the mass filing of silicosis lawsuits in 2002 and 2003 in Mississippi that led to the discrediting of the lawyers who brought them. A federal judge in Corpus Christi, reviewing the 10,000-plus cases that landed temporarily in her court, found the entire enterprise laced with fraud and deceit.
Her 2005 ruling helped stall the progress of what plaintiff lawyers had hoped would be the successor to asbestos litigation, which was beginning to play out. Because of the corruption she exposed, along with tort-reform measures enacted by Texas and other states, the plaintiffs' strategy of filing so many lawsuits that defendants had no option but to settle no longer proved viable.
Hoeffner's settlements, however, took place in Texas before silicosis became a dirty word.
"I had cases with Todd, and it was like having cases with any other plaintiff lawyer," said Dallas defense attorney Steven Russell, who has represented asbestos and silica defendants for years. "It was always on the up and up. There was nothing ever suggested, no wink-wink here or there. So yes, I am surprised. This is almost like a John Grisham novel.
"I have heard of a plaintiff lawyers talking directly with the insurance company," Russell said. "But I've never heard of anyone ever paying kickbacks."
The allegations
Wednesday's indictment outlines an alleged scheme in which Hoeffner wrote a series of checks totaling more than $2.6 million to Rossow and more than $750,000 to Prestage, who were handling the silicosis claims for the companies they insured, and also wired $97,000 to a BMW dealership for a pair of 530i sedans. Hoeffner also is said to have paid for plane tickets for the two to Florida and California.
Hoeffner did not return calls from the Houston Chronicle. A spokesman for The Hartford could not be reached.
The backstory
Before plaintiff lawyers began to view silica as the next asbestos, silicosis lawsuits were limited to no more than 100 per year in Texas. Then a few big verdicts arose from a notorious East Texas foundry, and the idea of a broader mass tort took hold.
"Everybody took notice," Russell said, "and from 2000 on we saw this very rapid escalation of cases being filed. The escalation was part of the plan on the plaintiff bar side to overwhelm the defendants. There was a time when we had multiple cases set for trial every Monday."
Though few defendants are settling silicosis cases these days, at the time it was not an unreasonable solution to dispose of them, Russell said. The Hartford's settlement with Hoeffner likely would have had to be approved higher up but, given the volume of cases and the number of defendants, it might not have seemed out of line, Russell said.
Hoeffner, an attorney for 17 years, was arrested at his home in Tanglewood on Wednesday morning and later released on $250,000 bail. Rossow and Prestage appeared in federal court in Connecticut and were released on bail. The two are to travel here for arraignment.
June 28, 2007, 12:24AM
Local lawyer indicted in alleged kickbacks plot
Two insurance company workers on silicosis cases also face charges
By MIKE TOLSON
Copyright 2007 Houston Chronicle
A Houston plaintiff attorney and two insurance company employees were indicted by a federal grand jury Wednesday in connection with an alleged kickback scheme that involved millions of dollars in settlement proceeds from silicosis cases.
Warren Todd Hoeffner, 42, and two claims managers for The Hartford, a Connecticut insurance giant, were charged with 14 counts of conspiracy, mail and wire fraud and money laundering. The U.S. Attorney's Office also is seeking forfeiture of more than $8 million in fees and bribes allegedly collected by the trio.
Texas lawyers involved with silicosis litigation say Hoeffner once had an inventory of cases approaching 1,000 several years ago and decided to settle them all in bulk. Among the insurance companies he asked to meet with him in New Hampshire in February 2002 was The Hartford, which represented eight defendants named in his lawsuits, according to the indictment.
Hartford claims managers Rachel Rossow, 41, and John Prestage, 36, ultimately agreed to pay Hoeffner more than $34 million to settle all his cases. As part of the deal, however, Rossow and Prestage received a total of more than $3 million and each a new BMW automobile, the indictment alleges. Hoeffner collected more than $5.3 million in legal fees.
"There is a presumption of regularity and legality in the business of insurance litigation, which, when corrupted, damages our confidence in the integrity of the system," said local U.S. Attorney Don DeGabrielle. "These allegations ... represent a serious affront to the lawfulness we expect during the settlement of insurance claims."
The condition, controversy
Silicosis is a serious and occasionally fatal occupational lung disease caused by exposure to tiny airborne particles of silica, usually from industrial sandblasting operations. Because of enhanced safety precautions, the disease has been on the decline in recent decades and no longer represents the risk it once did to miners, sandblasters and foundry workers.
Hoeffner's silicosis cases, mostly in Texas, predated the mass filing of silicosis lawsuits in 2002 and 2003 in Mississippi that led to the discrediting of the lawyers who brought them. A federal judge in Corpus Christi, reviewing the 10,000-plus cases that landed temporarily in her court, found the entire enterprise laced with fraud and deceit.
Her 2005 ruling helped stall the progress of what plaintiff lawyers had hoped would be the successor to asbestos litigation, which was beginning to play out. Because of the corruption she exposed, along with tort-reform measures enacted by Texas and other states, the plaintiffs' strategy of filing so many lawsuits that defendants had no option but to settle no longer proved viable.
Hoeffner's settlements, however, took place in Texas before silicosis became a dirty word.
"I had cases with Todd, and it was like having cases with any other plaintiff lawyer," said Dallas defense attorney Steven Russell, who has represented asbestos and silica defendants for years. "It was always on the up and up. There was nothing ever suggested, no wink-wink here or there. So yes, I am surprised. This is almost like a John Grisham novel.
"I have heard of a plaintiff lawyers talking directly with the insurance company," Russell said. "But I've never heard of anyone ever paying kickbacks."
The allegations
Wednesday's indictment outlines an alleged scheme in which Hoeffner wrote a series of checks totaling more than $2.6 million to Rossow and more than $750,000 to Prestage, who were handling the silicosis claims for the companies they insured, and also wired $97,000 to a BMW dealership for a pair of 530i sedans. Hoeffner also is said to have paid for plane tickets for the two to Florida and California.
Hoeffner did not return calls from the Houston Chronicle. A spokesman for The Hartford could not be reached.
The backstory
Before plaintiff lawyers began to view silica as the next asbestos, silicosis lawsuits were limited to no more than 100 per year in Texas. Then a few big verdicts arose from a notorious East Texas foundry, and the idea of a broader mass tort took hold.
"Everybody took notice," Russell said, "and from 2000 on we saw this very rapid escalation of cases being filed. The escalation was part of the plan on the plaintiff bar side to overwhelm the defendants. There was a time when we had multiple cases set for trial every Monday."
Though few defendants are settling silicosis cases these days, at the time it was not an unreasonable solution to dispose of them, Russell said. The Hartford's settlement with Hoeffner likely would have had to be approved higher up but, given the volume of cases and the number of defendants, it might not have seemed out of line, Russell said.
Hoeffner, an attorney for 17 years, was arrested at his home in Tanglewood on Wednesday morning and later released on $250,000 bail. Rossow and Prestage appeared in federal court in Connecticut and were released on bail. The two are to travel here for arraignment.
Labels: Silicosis
posted by David Stone | 9:06 AM
1 Comments:
Please see the Cross-Claim below for the real facts:
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
SIMON DOMINGUEZ, PEDRO §
DOMINGUEZ, JOSE FRANCISCO §
BRIONES, and ROBERT PEREZ §
On Behalf of Themselves and All Other §
Person Similarly Situated, §
§
Plaintiffs, §
§
v. § C. A. No. 2:07-cv-00285
§
THE HARTFORD FINANCIAL §
SERVICES GROUP, INC., §
THE HARTFORD INSURACE §
COMPANY, WARREN TODD §
HOEFFNER, THOMAS E. BILEK, §
HOEFFNER & BILEK, L.L.P., §
JAMES P. “BUDDY” BELL, and §
BUDDY BELL ATTORNEY AT LAW, §
§
Defendants. §
DEFENDANT WARREN TODD HOEFFNER’S ANSWER TO
THIRD AMENDED COMPLAINT AND CROSS-CLAIM AGAINST
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TO THE HONORABLE JUDGE RAINEY:
Subject to and without waiving his objection to venue in this Court, Defendant Warren
Todd Hoeffner (“Hoeffner”) files the following Answer to Plaintiffs’ Third Amended Original
Class Action Complaint (“Complaint”) (Doc. #5) and his Cross-Claim against The Hartford
Financial Services Group, Inc. (“The Hartford”), as follows:
I.
ANSWER
1. In answer to the allegations in paragraph 1 of the Complaint, Hoeffner denies that
this Court has jurisdiction over the action filed by Plaintiffs against him and that the amount in
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controversy in the action filed by Plaintiffs against him exceeds the sum of $5 million, exclusive
of interest and costs.
2. In answer to the allegations in paragraph 2 of the Complaint, Hoeffner admits that
the Southern District of Texas is the correct District, but denies that the Corpus Christi Division
is a proper venue. Plaintiffs and Hoeffner entered into fee contracts containing a forum selection
clause which specified a court in Harris County, Texas, for adjudication of claims, such as those
made the subject of the Complaint. Contemporaneous with this Answer, Hoeffner has filed a
motion to dismiss Plaintiffs’ Complaint based on improper venue in light of the forum selection
clause in the underlying contracts. In the alternative, Hoeffner has moved to transfer venue to
the Houston Division of the Southern District of Texas and further has requested that this action
be considered by the Honorable David Hittner, who is currently presiding over a related criminal
proceeding involving Hoeffner. In the event that the court dismisses Plaintiffs’ Complaint or
transfers it the Houston Division, Hoeffner has also requested that the court transfer this
contemporaneously-filed Cross-Claim against The Hartford to Judge Hittner.
3. Hoeffner admits the allegations in the first sentence of paragraph 3. He is without
sufficient knowledge to form a belief as to the truth of the allegation in the second sentence that
Simon Dominguez’ claims were settled with The Hartford. Hoeffner admits that Simon
Dominguez’ potential silicosis claims were evaluated. Hoeffner denies the balance of the
allegations in paragraph 3 of the Complaint.
4. Hoeffner admits the allegations in paragraph 4 of the Complaint.
5. Hoeffner admits the allegations in paragraph 5 of the Complaint.
6. Hoeffner admits the allegations in paragraph 6 of the Complaint.
7. Hoeffner admits the allegations in paragraph 7 of the Complaint.
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8. In answer to the allegations in paragraph 8 of the Complaint, Hoeffner is without
sufficient knowledge to form a belief as to the truth of the allegations contained in the paragraph,
and on that basis denies the allegations in such paragraph.
9. Hoeffner admits the allegations in paragraph 9 of the Complaint.
10. In answer to the allegations in paragraph 10 of the Complaint, Hoeffner denies
that Hoeffner & Bilek, L.L.P. “is” a business organization that “maintains” a principal place of
business; however, he admits that it was a business organization and he admits the balance of the
allegations in paragraph 10.
11. Hoeffner admits the allegations in paragraph 11 of the Complaint.
12. Hoeffner admits the allegations in paragraph 12 of the Complaint
13. Hoeffner admits the allegations in paragraph 13 of the Complaint.
14. In answer to the allegations in paragraph 14 of the Complaint, Hoeffner admits
that he represented Plaintiffs in silicosis claims, that their claims were part of a group of
claimants who asserted claims against insureds of The Hartford, and that settlements of
Plaintiffs’ claims against insureds of The Hartford, as well as other insured defendants, were
approved by a court-appointed special master and a court. Further, in answer to the allegations
in paragraph 14 of the Complaint, Hoeffner denies that Plaintiffs’ claims were settled “in bulk,”
that the claims of Plaintiffs herein were settled for more than $34 million, and that Hoeffner
agreed to a kickback scheme whereby the Hartford employees would be paid bribes and
Hoeffner would recover substantial attorney’s fees.
15. In answer to the allegations in the first sentence of paragraph 15 of the Complaint,
Hoeffner admits that Bilek and Bell also represented Plaintiffs herein; however, he is without
sufficient knowledge to form a belief as to the truth of the allegation that Bilek and Bell also
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represented the putative Plaintiff Class. In answer to the allegations in the second sentence of
paragraph 15 of the Complaint, Hoeffner denies the factual allegations in the referenced
indictment, Hoeffner denies that he engaged in “a kickback scheme,” and Hoeffner denies that
Plaintiffs and the putative Plaintiff Class were damaged. Hoeffner denies the balance of the
allegations in paragraph 15 of the Complaint.
16. Hoeffner denies each and every allegation in paragraph 16 of the Complaint.
17. Hoeffner denies each and every allegation in paragraph 17 of the Complaint.
18. Hoeffner denies each and every allegation in paragraph 18 of the Complaint.
19. Hoeffner denies each and every allegation in paragraph 19 of the Complaint.
20. In answer to the allegations in paragraph 20 of the Complaint, Hoeffner denies the
first independent clause and is without sufficient knowledge to form a belief as to the truth of the
allegations contained in the following dependent clause, and on that basis denies such
allegations.
21. Hoeffner denies each and every allegation in paragraph 21 of the Complaint.
22. In answer to the allegations in the first sentence of paragraph 22 of the Complaint,
Hoeffner admits that he owed a common-law duty to Plaintiffs to exercise ordinary care;
however Hoeffner specifically denies the second and third sentences of paragraph 22.
23. Hoeffner denies each and every allegation in paragraph 23 of the Complaint.
24. Hoeffner denies each and every allegation in paragraph 24 of the Complaint.
25. In answer to the allegations in the first sentence of paragraph 25 of the Complaint,
Hoeffner denies he was a fiduciary to “the Plaintiff Class”; however, he admits that he was a
fiduciary with respect to Plaintiffs herein. Further, Hoeffner specifically denies the second and
third sentences of paragraph 25.
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26. In answer to the allegations in the first sentence of paragraph 26 of the Complaint,
Hoeffner denies he was a fiduciary to “the Plaintiff Class”; however, he admits that he was a
fiduciary with respect to Plaintiffs herein. Further, Hoeffner specifically denies the second and
third sentences of paragraph 26.
27. Hoeffner denies each and every allegation in paragraph 27 of the Complaint.
28. Hoeffner denies each and every allegation in paragraph 28 of the Complaint.
29. With respect to the prayer contained on page 7 of the Complaint, Hoeffner denies
that any of the alleged acts or omissions caused Plaintiffs or the putative class members any
damages and Hoeffner denies that Plaintiffs are entitled to recover any damages or any other
relief from him.
30. Any and all allegations not specifically admitted above are denied.
II.
AFFIRMATIVE DEFENSES
31. By way of affirmative defense, Hoeffner pleads accord and satisfaction.
32. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads duress.
33. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads payment.
34. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads release.
35. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads res judicata.
36. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads that statutes of limitations bar Plaintiffs’ claims.
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37. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads judicial estoppel.
38. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads estoppel by contract.
39. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads quasi-estoppel.
40. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads arbitration. Plaintiffs and Hoeffner entered an agreement to resolve any and all disputes
between them by binding arbitration pursuant to the Federal Arbitration Act.
41. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads that the claims asserted by Plaintiffs and the putative class members are barred, in whole
or in part, because the conduct of third parties was the sole proximate cause, superseding and/or
intervening cause of the damages, if any, complained of by Plaintiffs and the putative class
members.
42. Additionally, and/or alternatively, and by way of affirmative defense, Hoeffner
pleads that the claims asserted by Plaintiffs and the putative class members are barred, in whole
or in part, because the conduct of third parties solely caused and/or contributed to the damages, if
any, complained of by Plaintiffs and the putative class members.
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III.
CROSS-CLAIM
A. Overview
1. Hoeffner brings this Cross-Claim against The Hartford for extorting $3 million
from him by and through a division of The Hartford known as Claim and Legal Management
Services (“CaLMS”), which handled general liability lawsuits and claims against The Hartford’s
insureds involving injuries related to asbestos and silica exposure, among other things.
2. Through the actions of professional claims handlers at multiple levels of the
CaLMS’s division of The Hartford, Hoeffner became a victim of an elaborate extortion scheme.
The extortion scheme involved threats to nullify favorable settlements for Hoeffner’s clients,
payments to facilitate divorces of an employee and senior executive of The Hartford, and
manipulation of an often fragile subordinate by executives within The Hartford.
3. The Hartford could have prevented the extortion scheme if it had addressed the
warning signs it ignored. Instead, employees of the Hartford held hostage the legal rights of
Hoeffner and his clients in a plan calculated to enrich themselves. Hoeffner’s reactions to the
extortion scheme all were calculated to prevent harm to his clients. In protecting his clients’
interests, he has suffered for decisions that he should not have been forced to make. Through
this Cross-Claim, he seeks to right that wrong.
B. Parties
4. Cross-Claimant Warren Todd Hoeffner is a citizen of the State of Texas.
5. Cross-Defendant The Hartford Financial Services Group, Inc. is a Delaware
corporation with its principal place of business in Hartford, Connecticut. The Hartford
committed the wrongful actions and tortious conduct alleged herein by and through its agents
and employees, including but not limited to the following individuals:
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a. David M. Cain (“Cain”) was a Vice President at The Hartford from 2001
through 2002, and headed the Hartford’s CaLMS division. In January 2003, Cain was promoted
to Senior Vice President and Special Counsel at The Hartford and continued to have oversight
responsibility for CaLMS. Cain held this position at The Hartford until the end of his
employment. At all relevant times, Cain acted as a senior executive and/or officer of The
Hartford and the actions committed by Cain, as alleged herein, were done on behalf of, and were
within the scope of his employment at, The Hartford.
b. Rachel Rossow (“Rossow”) was an employee of The Hartford within
CaLMS from 2000 until approximately September 2003. From approximately November 2000
until the end of her employment at The Hartford, Rossow was a team leader in the CaLMS,
charged with supervising several claims handlers, including John Prestage. Rossow was
specifically responsible for settling claims and for recommending to The Hartford the
appropriate and cost effective amounts to settle claims against The Hartford’s insureds whose
accounts were under her supervision. The actions committed by Rossow, as alleged herein, were
done on behalf of, and were within the scope of her employment at, The Hartford.
c. John Prestage (“Prestage”) was a claims consultant for The Hartford who
worked under Rossow’s supervision at CaLMS from 2000 until approximately January 2004.
The actions committed by Prestage, as alleged herein, were done on behalf of, and were within
the scope of his employment at, The Hartford.
C. Jurisdiction and Venue
6. Jurisdiction is proper in this Court pursuant to 28 U.S.C. § 1331 because
Hoeffner’s first cause of action pursuant to 18 U.S.C. § 1962 arises under federal law.
Jurisdiction is also proper in this Court pursuant to 28 U.S.C. § 1332 with respect to Hoeffner’s
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remaining causes of action because there is complete diversity of citizenship among the parties to
those causes of action and the amount in controversy exceeds $75,000. This Court also has
supplemental jurisdiction over Hoeffner’s state law claims under 28 U.S.C. § 1367 because the
claims are substantially related to those claims within the Court’s original jurisdiction.
7. Venue is proper in the Southern District of Texas pursuant to 28 U.S.C. §
1391(b)(2) because a substantial part of the acts and omissions giving rise to the claims asserted
herein occurred in this judicial district. However, the Corpus Christi Division of this District is
an improper forum to hear Plaintiffs’ Complaint, and Hoeffner files this Cross-Claim along with
his contemporaneously-filed motion to dismiss Plaintiffs’ Complaint based on improper venue in
light of the forum selection clause in the underlying contracts. In the alternative, Hoeffner has
moved to transfer venue to the Houston Division of the Southern District of Texas and further
has requested that this action be considered by the Honorable David Hittner, who is currently
presiding over a related criminal proceeding involving Hoeffner. In the event that the court
dismisses Plaintiffs’ Complaint or transfers it to the Houston Division, Hoeffner has also
requested that the court transfer this contemporaneously-filed Cross-Claim against The Hartford
to Judge Hittner.
D. Factual Background
8. In 1995 Hoeffner began his own law firm specializing in environmental and toxic
tort litigation. Eventually, this firm became known as Hoeffner & Bilek, LLP and operated as
Hoeffner & Bilek, LLP through 2005. In 1995, Hoeffner began developing a silicosis docket
that involved representing primarily sandblasters and foundry workers for silica-related diseases
contracted from workplace exposure to toxic silica dust. Within a matter of years, Hoeffner
became one of the leading silicosis attorneys in the nation.
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9. With each of his clients who retained him to bring a silicosis-related claim,
Hoeffner entered into a “Power of Attorney and Contingent Fee Contract.” Under these
contracts, Hoeffner and Hoeffner & Bilek, LLP agreed to pursue recovery on behalf of their
clients to compensate for their injuries, with no charge to the plaintiffs until and unless such
recovery was obtained. In exchange, Hoeffner’s clients assigned to Hoeffner & Bilek, LLP an
undivided forty percent (40%) interest in the client’s claims if collection or settlement was made
after suit was filed, and a forty-five (45%) percent interest in the event of an appeal.
Hoeffner Embarks on Strategy to Achieve Global Settlement of Silicosis Docket to
Serve the Best Interests of his Clients
10. In late 2001, Hoeffner determined that it would be in the best interest of his
clients for him to attempt to reach a global settlement of all of his then-pending silicosis cases.
Hoeffner believed this settlement was necessary to avoid emerging threats to his clients’ ability
to recover for their injuries. The primary threats to his clients’ ability to recover were (i)
proposed legislation directed at limiting toxic tort claims and (ii) reports of an imminent
initiation of thousands of silicosis-related lawsuits by plaintiffs from Mississippi, which would
have diluted available recovery for what were then only a few thousand pending silicosis cases
nationwide. Both of these developments would have detrimentally impacted his clients’ ability
to obtain recovery. Hoeffner began formulating a strategy, which required the continued
management and potential resolution of approximately one thousand (1,000) silicosis claims.
11. On February 26, 2002, an initial meeting was held at the offices of Riverstone
Insurance in Manchester, New Hampshire. The purpose of this meeting was to discuss the
framework for a mutually beneficial resolution of all of Hoeffner’s clients’ silicosis cases. This
initial meeting was attended by Hoeffner and representatives from most of the major insurers,
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including AIG, Riverstone, Nationwide Indemnity, Travelers, The Hartford, Zurich North
America, St. Paul Fire & Marine and Liberty Mutual.
12. The Hartford CaLMS division sent Rossow and Prestage to the New Hampshire
meeting. Hoeffner had never met Rossow or Prestage prior to his trip to New Hampshire.
13. In Manchester, Hoeffner presented the representatives of the insurers both orally
and in writing his strategy and approach toward a global settlement of the silicosis claims of his
clients. Hoeffner also demonstrated at this meeting all the benefits to both the insureds and
insurers resulting from a resolution of Hoeffner’s clients’ claims.
14. After the February 2002 meeting in Manchester, Hoeffner spent the next several
weeks disseminating voluminous information regarding his clients’ claims to dozens of
insurance representatives and defense counsel, who represented the silicosis defendants named in
Hoeffner’s lawsuits. Specifically, Hoeffner, at the request of various insurance carriers,
forwarded computer-stored information of the claims to be settled, including a b-read report,
pulmonary exam report, social security printout and exposure information for each claimant.
15. The process of settling all of Hoeffner’s claims with all the defendants likely
required the approval of at least several hundred different individuals, including insurers, defense
counsel and the defendants’ in-house counsel and risk managers.
16. Most silicosis defendants had several policies of insurance issued by various
insurance carriers. Typically, between four to six carriers were involved in the defense of
claims. Some defendants may have had only one carrier involved while others had ten or more.
Each of the carriers had to review, digest and evaluate the information provided by Hoeffner.
17. In addition to the insurance carriers, defense counsel for each defendant/insured
had to analyze the information and make recommendations to the defendant/insured and the
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various insurance carriers involved with that particular defendant. Further, many of the
defendants had in-house counsel or risk managers who also needed to evaluate and approve the
settlements.
18. This process of ascertaining and distributing information concerning Hoeffner’s
clients’ claims took several months.
19. Meanwhile, Hoeffner also was collecting information to determine which
insurance carriers provided coverage for which defendants. Hoeffner provided demands to each
insurance carrier with a specific demand for each of their respective insureds. The settlement
demands were set in accordance with past historical settlements of similar claims between
Hoeffner clients and the respective insured/defendant.
20. In late May 2002, Hoeffner met in Nashville, Tennessee with the insurance
carriers. Counsel for a few of the defendants attended either in person or by teleconference.
21. At this meeting, the parties had significant discussions regarding the terms and
timing of a proposed settlement. These discussions were memorialized in a follow-up
memorandum from Hoeffner to representatives of The Hartford, Liberty Mutual and Riverstone
dated May 30, 2002.
22. From May 2002 through July 2002, Hoeffner engaged in serious negotiations with
several defendants regarding his global settlement proposal and sent dozens of additional packets
of information to newly identified people involved in the process.
23. Hoeffner settled his entire inventory of cases with two defendants during the
month of May. Hoeffner also received very favorable responses and commitments from several
other defendants. Because most of these settlements were greater than a million dollars, these
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deals needed several layers of approval from each insurance carrier. Accordingly, information
was disseminated to well over one hundred different individuals.
24. In August 2002, Hoeffner vacationed in California. While there, various defense
counsel met with Hoeffner as part of the negotiation and settlement process. Many of the
agreements Hoeffner was working on, in which The Hartford also had an interest, were receiving
acceptance by the other carriers, along with the insureds and their respective defense counsel.
Representatives of The Hartford Threaten to Block Settlements with Hoeffner’s Clients
Unless Extortion Demands are Met
25. Rossow and Prestage also visited Hoeffner while he was on vacation in California
in August of 2002, purportedly to finalize settlement details. However, in reality, the purpose of
Rossow’s and Prestage’s trip was to make an extortion threat on Hoeffner. During this trip,
Rossow confronted Hoeffner, telling him that “we are not going to allow you to make all this
money for nothing.”
26. Although Hoeffner at first dismissed Rossow’s comments, it soon became
apparent that Rossow’s extortion threats were serious. She threatened to not only kill the deals
that involved The Hartford, but also to put a halt to Hoeffner’s negotiations with other parties.
27. During this confrontation, Rossow informed Hoeffner that she had the power to
kill the deals and there was nothing Hoeffner could do to prevent her extortionate acts because
Cain, the number one executive in charge of the CaLMS department, was her lover. Rossow
explicitly stated “my boyfriend will kill the deals and he is untouchable at The Hartford.”
28. Further, Rossow let it be known that Cain formerly worked in the general
counsel’s office at Travelers and he would persuade Travelers and other carriers to halt further
negotiations on Hoeffner’s settlements.
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29. Shortly thereafter, Hoeffner discussed Rossow’s comments with Prestage outside
of Rossow’s presence. Prestage confirmed that Rossow was having an affair with Cain, and that
Cain was a senior vice president and the individual in charge of the CaLMS division. Prestage
made it patently clear that Cain was a very powerful person at The Hartford.
30. Before the California trip ended, Rossow demanded that Hoeffner purchase her
and Prestage new automobiles. Rossow further told Hoeffner that she would require a share of
Hoeffner’s attorney’s fees from the settlements, stating that she would let Hoeffner know how
much of Hoeffner’s fees they would require at a future meeting.
31. Rossow further stated to Hoeffner that if he attempted to report her demand for
payments, it would be “your word against mine” and Prestage and Cain would back her position.
She told Hoeffner that if he failed to comply with her demands and she and Cain blocked the
settlements, she would respond to any attempt by Hoeffner to report the extortion by casting him
as a soured plaintiff’s lawyer whose deals fell through.
32. Rossow’s final threat during the California trip was to let Hoeffner know that
Cain was very active in the asbestos defense coalition, implying that Cain also had the power to
prevent future settlements of claims on the closely-related silica docket with any carriers that
were members of the coalition.
33. Unbeknownst to Hoeffner, at the time of the August 2002 meeting in California,
Rossow was having serious problems with her personal finances. Her Corporate American
Express account was cancelled for delinquent payments in July 2002. Senior executives at The
Hartford became aware of Rossow’s personal financial situation no later than November 2002, or
perhaps earlier. A November 2002 internal memorandum from The Hartford’s legal department
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notes that Rossow’s Corporate American Express account had been cancelled and that her
balance was 144 days past due.
34. After the California meeting, Hoeffner became even more convinced that the
extortionists, through Cain’s executive position, had the actual power to destroy the settlements
and thereby impede Hoeffner’s clients’ ability to recover on their claims and/or interfere with
Hoeffner’s ability to make decisions in the best interest of his clients.
35. Hoeffner’s right to make business decisions free from wrongfully imposed outside
pressure was suddenly disrupted by threats of economic loss by multiple levels of The Hartford’s
CaLMS division, including a claims handler, intermediate supervisor and the top executive.
36. Believing that the extortionists intended to exploit their power, Hoeffner
purchased two automobiles worth approximately $100,000.00, as Rossow had demanded, and
agreed to meet with Rossow and Prestage in Florida in September.
Representatives of The Hartford Spell Out Their Extortion Demands: Hoeffner’s
Attorney’s Fees from the Thorstenberg Settlement
37. In September 2002, Hoeffner met Rossow and Prestage in Florida, where Rossow
spelled out her extortion terms. Specifically, she demanded Hoeffner’s attorney’s fees from the
Thorstenberg settlement, one of several settlements involving The Hartford.
38. Rossow again explicitly spelled out the consequences of non-payment and
emphasized that Hoeffner had no choice now that he had purchased the automobiles. When
questioned about her motives, Rossow stated that she and Cain were divorcing their spouses and
Cain wanted the money for their new lives.
39. When questioned about Prestage’s involvement, Rossow said Cain had Prestage
assigned to the accounts so he could act as a buffer to distance Rossow and Cain from the
extortion transactions.
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40. Rossow demonstrated the power of her threats by, among other things, conducting
phone conversations with Cain in Hoeffner’s presence in which she stated that she was “making
progress.” Later, as she made additional extortion trips, it was clear that Cain’s involvement in
the scheme was ongoing as evidenced by his and Rossow’s many telephone communications
during these trips.
41. As a result of Rossow’s threats in Florida at the first extortion trip, Hoeffner
believed the only way to prevent The Hartford from nullifying his efforts to obtain a favorable
settlement for his clients was for him to share a substantial part of the attorney’s fees to which he
was otherwise contractually entitled.
42. On or about November 26, 2002, Hoeffner issued an extortion payment by check
to Rossow in the amount of $312,500.00 and another check to Prestage in the amount of
$262,500.00. This money represented a portion of the attorney’s fees to which Hoeffner was
contractually entitled under the “Humble Sand” settlement, not the Thorstenberg settlement.
43. The reason for the use of the Humble Sand settlement proceeds was that The
Hartford was solely responsible for the Humble Sand account and Cain’s was the only approval
required for immediate funding. Therefore, the extortion payment could be paid more quickly.
44. Cain authorized payment of the settlement funds for the Humble Sand settlement
by signature on or about November 13, 2002.
45. On or about January 22, 2003, Cain authorized the second Humble Sand
settlement payment to be sent to Hoeffner.
46. Of all the numerous settlement payments received by Hoeffner from The
Hartford, only the Humble Sand settlement payments had Cain’s approval signature.
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47. On or about February 4, 2003, Hoeffner issued an extortion check in the amount
of $312,500.00 to Rossow and another check to Prestage in the amount of $265,000.00, which
together represented another portion of the attorney’s fees to which Hoeffner was contractually
entitled from the Humble Sand settlement.
48. Hoeffner was instructed by Rossow to put the following notation on the check:
“Title VII settlement with Bell and Hoeffner.” Hoeffner believed that the February 2003
payments were to be the last of the extortion payments.
49. Meanwhile, Hoeffner continued his efforts to settle with all the defendants, the
overwhelming majority of which had no involvement with The Hartford CaLMS division. No
other insurance carrier department or employee ever threatened Hoeffner like the CaLMS
division had done.
50. By February 2003, Hoeffner had successfully negotiated inventory settlements
with approximately two dozen defendants.
After Hoeffner Satisfies Extortion Demands, Representatives of The Hartford Demand
a Further $175,000 Extortion Payment
51. Unexpectedly, Hoeffner received a call in mid-February 2003 from Rossow, who
demanded another in-person meeting. Hoeffner met Rossow and Prestage in Colorado shortly
thereafter. Rossow claimed during the meeting that her extortion demands had not been fully
satisfied in that she had not received an amount equal to the fees from the Thorstenberg
settlement. Hoeffner disputed Rossow’s claim.
52. Although she had received all of the extortion proceeds she previously had
demanded, Rossow now demanded an additional $175,000.00, stating that she needed these
funds for her divorce because her husband wanted a large sum of money for the equity in their
home. She stated that she and Cain would interfere with settlement fundings until she was paid.
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53. In response to Rossow’s demand, and fearing Rossow and Cain would make good
on the threats to block settlements, Hoeffner issued two checks totaling $173,250.00 to Rossow.
One was issued on February 20, 2003 and another on February 26, 2003. Prestage did not
receive a check from this Colorado encounter.
54. Prior to Rossow’s divorce becoming final in February 2003, Rossow apparently
had not deposited or cashed any of her extortion proceeds. Documents indicate that on March
10, 2003, the month after her divorce, Rossow opened an account with Cain’s friend and
longtime financial advisor John McKeon at Salomon Smith Barney and deposited some or all of
the extortion proceeds into that account. Mr. McKeon had been Cain’s financial advisor for at
least fifteen years.
Representatives of The Hartford Make a Further Extortion Threat, Demanding Part of
Hoeffner’s Attorney’s Fees from the Specialty Sand Settlement
55. While Rossow was investing her money with Cain’s financial advisor, Hoeffner
continued to settle claims, and collect and distribute settlement proceeds to clients from earlier
settlements. One such settlement was with Specialty Sand Company. This silicosis settlement
was executed on or about January 30, 2003. The Hartford was not initially involved in this
settlement due to coverage issues, making Specialty Sand responsible for a percentage of the
settlement.
56. On April 15, 2003, Hoeffner wrote a letter to counsel for Specialty Sand about
overdue settlement payments. Specialty Sand’s counsel informed Hoeffner that there were
insurance coverage issues.
57. Hoeffner met with the president of Specialty Sand and its counsel on or about
April 24, 2003. It became apparent that Specialty Sand was wrongfully being denied coverage
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from First State Insurance Company (“First State”). First State is an affiliated company of The
Hartford.
58. After weeks of negotiation, Hoeffner entered into a contract with Specialty Sand
to pursue a declaratory judgment action against First State. Hoeffner was representing Specialty
Sand and he also was attempting to collect settlement proceeds for his clients who had settled
their claims against Specialty Sand.
59. Sometime in June 2003, Rossow learned Hoeffner was entering into a contract
with Specialty Sand. Rossow demanded another out of town meeting.
60. Several weeks later, in July 2003, Hoeffner met Rossow and Prestage in
California. Rossow tried to convince Hoeffner that she was in charge of the Specialty Sand
account and nothing would happen without her and Cain’s approval. Again, Rossow threatened
to kill the settlement by invoking Cain’s power. She was emphatic that Cain needed this money
to recover monetarily from his upcoming divorce.
61. Hoeffner’s contract with Specialty Sand to pursue Specialty Sand’s claims against
its insurers expired in December 2003, and any delays in resolution with the insurers would have
resulted in expiration of the contract. To prevent the loss of recovery for Specialty Sand and his
silicosis clients, who were entitled to proceeds from the Specialty Sand settlement, Hoeffner was
forced to agree to the further extortion of a portion of the attorney’s fees to which he was
contractually entitled under the Specialty Sand settlement.
62. During negotiations between Hoeffner and First State on the Specialty Sand
settlement, Rossow was terminated by The Hartford for unknown reasons. Her termination
occurred in mid-September 2003.
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63. At the time of Rossow’s termination, Cain talked Rossow out of filing a wrongful
termination claim against The Hartford by convincing her that it would be unwise to draw
attention to her involvement with the Hoeffner & Bilek law firm.
64. After her termination, Rossow contacted Hoeffner to let him know that Cain
could and would still kill the deal if he failed to meet her demands and that she and Prestage
would blame Hoeffner if he attempted to report the extortionate conduct.
65. A few weeks after Rossow’s termination, the Specialty Sand matter settled for
$20 million and was approved by the court on or about October 27, 2003.
66. When Hoeffner received the first half of the Specialty Sand settlement in
December 2003, Rossow demanded her portion of Hoeffner’s fee. Because he was under a
threat that Rossow and Cain would interfere with the funding of the second-half of the Specialty
Sand settlement, Hoeffner sent a payment to Rossow in the amount of $1,675,000.00.
Rossow and Cain Open a Joint Checking Account and Complete Dream of Living
Together
67. Sometime in early 2004, Rossow and Cain opened a joint checking account at
Windsor Federal Savings and Loan Association. Both Cain and Rossow executed signature
cards authorizing each the use of the account at Windsor Federal. At the time this account was
opened, Cain was still a Senior Vice-President at The Hartford and was still married to his first
wife.
68. On or about April 7, 2004, Hoeffner wired $150,000.00 to a Rossow account at
Windsor Federal Savings and Loan. All of Rossow’s and Cain’s extortion plans and dreams
were almost complete. The only thing missing was Cain’s divorce.
69. Cain had not kept his promise to Rossow of leaving his wife to marry Rossow.
As a result of his manipulation of her and his broken promise to leave his wife, Rossow was
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distraught. Her anguish caused her to go to Cain's house while he and his wife were on vacation
and confront Cain’s teenage daughter with information about the affair and later to post bills all
over his neighborhood calling him an “adulterer.”
70. Eventually, Cain’s wife filed for divorce. Sometime thereafter, Cain and Rossow
began living together.
The Hartford’s Knowledge of, and Failure to Address, Rossow and Cain’s Improper
Relationship that Fostered the Extortion Scheme
71. In February 2002 Cain admitted to high ranking executives at The Hartford that
he was engaged in an improper “mentoring relationship” with Rossow.
72. Cain told his supervisor, Jeff Morris, that he would end the relationship.
73. Despite this knowledge, The Hartford continued to allow Cain to lead the CaLMS
division and also left Rossow in the CaLMS division under Cain’s supervision.
74. The Hartford took no further action against Cain.
75. The relationship between Cain and Rossow continued despite Cain’s promise to
The Hartford executives to terminate it. Moreover, The Hartford knew that the relationship was
on-going.
76. An internal memorandum of The Hartford’s legal department styled “Legal
Confidential” memorandum and dated November 20, 2002, acknowledges Cain’s control over
Rossow. The memorandum details five pages of evidence of Cain’s affair with Rossow.
77. The November 2002 memorandum also includes a series of e-mails between Cain
and Rossow from Nov. 14, 2002. Specifically, in response to an e-mail sent by Jeff Morris
regarding a holiday party, Rossow forwarded the invitation to Cain with the question: “please tell
me this is without others.” Cain responded, “It was with last year!” Rossow replied, “It’s
amazing how a year changes things. I can’t take another year like last year – I will have a
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complete public breakdown.” Later, after Morris sent an e-mail cancelling the party, Rossow emailed
Cain, “I am soooo disappointed… I am sure others are extremely relieved!” Cain
responded “everything works out with time” and Rossow replied, “one can only hope….”
78. The November 2002 memorandum demonstrates that The Hartford ignored many
other warning signs that, if addressed, would have prevented the extortion scheme. Specifically,
The Hartford knew Rossow was having financial difficulties; knew Rossow was negotiating
multi-million dollar deals with Hoeffner; knew there was an inappropriate relationship with
Cain; and knew that Cain controlled the purse strings in the CaLMS division.
79. The November 2002 memorandum summarized the legal department’s response
to the continued affair as follows: “Additional investigation may be required to further develop
these issues but could heighten the visibility of this inquiry.”
80. The Hartford did not discipline Cain.
81. The Hartford did not provide counseling for Rossow.
82. Notwithstanding Cain’s misconduct, Neil Wolin, general counsel for The
Hartford, promoted Cain in January 2003 to the position of Senior Vice President and Special
Counsel and gave him a raise.
83. Around the same time, Cain, with the knowledge of one or more high ranking
executives of The Hartford, encouraged a sexual relationship between Rossow and Cain’s
brother, who was single.
84. Meanwhile, Rossow remained a team leader at the CaLMS division.
85. Rossow and her new supervisor, the manager who The Hartford selected as
Cain’s replacement at the CaLMS division after he had been promoted, had also had an improper
work relationship in the past.
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86. Thus, despite the sexual relationships between its senior managers and employee
Rossow, The Hartford promoted Cain, replaced him with another Hartford manager who, like
Cain, had had an improper relationship with Rossow, and attempted to create a sexual
relationship between Rossow and Cain’s brother.
87. Had The Hartford followed its own internal sexual harassment policies and
properly responded on or about February 2002 when it discovered the improper relationship
between Cain and Rossow, Hoeffner would have never been victimized by Rossow and Cain’s
extortion scheme.
88. Instead, because the relationship was allowed to continue through Cain’s entire
employment with The Hartford, Hoeffner was extorted for more than three million dollars.
Despite Its Wrongful Conduct, The Hartford Substantially Benefited by Obtaining
Settlements with Hoeffner’s Clients that Were Fair and Reasonable, Avoiding Millions
of Dollars in Defense Costs, and Recouping Settlement Proceeds from Reinsurers
89. Despite its wrongful conduct, The Hartford substantially benefited from the
settlements with Hoeffner’s clients. The amount of the settlements were fair and reasonable to
all parties and were consistent with historical settlements between Hoeffner and The Hartford on
similar claims.
90. In fact, all but one of The Hartford settlements described herein ultimately
settled for an amount equal to or less than Hoeffner’s original demand. The one exception was
the Pulmosan settlement, the historical value of which was increased because of an interim
settlement. As described below, the Pulmosan settlement, like the other settlements was
independently recommended by defense counsel, approved by The Hartford after a roundtable
and independently deemed to be fair and reasonable by a Texas state district court.
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91. The Hartford’s internal documents show that the Hoeffner settlements resulted in
a savings of at least $40 million in defense costs.
92. Furthermore, The Hartford, its insureds and other carriers that approved the
settlements in question all received releases from nine hundred (900) of Hoeffner’s clients.
93. The Hartford further benefited by ceding all the settlements in question to
numerous reinsurance companies, which allowed The Hartford to recover a substantial portion of
the settlement proceeds it paid to Hoeffner’s clients. It is unknown whether The Hartford
disclosed the extortion payments to its reinsurers.
94. Defense counsel for insured Mine Safety Appliances recommended the Hoeffner
settlement.
95. Defense counsel for insured Pulmosan Equipment Corporation recommended the
Hoeffner settlement.
96. Defense counsel for insured Thorstenberg Materials Company, Inc. a/k/a Ideal
Basic Industries, Inc. recommended the Hoeffner settlement.
97. Defense counsel for insured Oglebay Norton Safety Equipment Corporation
recommended the Hoeffner settlement.
98. Defense counsel for insured Gifford Hill recommended the Hoeffner settlement.
99. Defense counsel for insured Empire Abrasive Equipment Company recommended
the Hoeffner settlement.
100. Defense counsel for insured Pauli & Griffin Company recommended the Hoeffner
settlement.
101. Strasberger & Price recommended the settlement between The Hartford and
Specialty Sand Company.
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102. The Hartford had a roundtable meeting regarding the Hoeffner Pulmosan
Equipment Corporation settlement.
103. The Hartford had a roundtable meeting regarding the Hoeffner Thorstenberg
Materials Company, Inc. settlement.
104. The Hartford had a roundtable meeting regarding the Hoeffner Oglebay Norton
Safety Equipment Corporation settlement.
105. The Hartford had a roundtable meeting regarding the Hoeffner Humble Sand
Company settlement.
106. The Hartford had a roundtable meeting regarding the Hoeffner Gifford Hill
settlement.
107. The Hartford had a roundtable meeting regarding the Hoeffner Empire Abrasive
Equipment Corporation settlement.
108. The Hartford had a roundtable meeting regarding the Hoeffner Pauli & Griffin
Company settlement.
109. The Hartford had a roundtable meeting regarding the Hoeffner Specialty Sand
Company settlement.
110. After the roundtable meeting, The Hartford approved the Pulmosan Equipment
Corporation settlement.
111. After the roundtable meeting, The Hartford approved the Thorstenberg Materials
Company, Inc. settlement.
112. After the roundtable meeting, The Hartford approved the Oglebay Norton Safety
Equipment Corporation settlement.
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113. After the roundtable meeting, The Hartford approved the Humble Sand Company
settlement.
114. After the roundtable meeting, The Hartford approved the Gifford Hill settlement.
115. After the roundtable meeting, The Hartford approved the Empire Abrasive
Equipment Corporation settlement.
116. After the roundtable meeting, The Hartford approved the Pauli & Griffin
Corporation settlement.
117. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Pulmosan Equipment Corporation settlement.
118. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Thorstenberg Materials Company, Inc. settlement.
119. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Oglebay Norton Safety Equipment Corporation settlement.
120. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Humble Sand Company settlement.
121. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Gifford Hill settlement.
122. The Hartford’s insured received 900 releases from Hoeffner’s clients for the
Empire Abrasive Equipment Corporation settlement.
123. The Hartford’s insured received 900 releases from Hoeffner’s clients for the Pauli
& Griffin Company settlement.
124. Specialty Sand Company provided a release to The Hartford in connection with
its declaratory judgment action against The Hartford.
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125. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Pulmosan Equipment Corporation.
126. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Thorstenberg Materials Company, Inc.
127. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Oglebay Norton Safety Equipment Corporation.
128. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Humble Sand Company.
129. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Gifford Hill.
130. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Empire Abrasive Equipment Company.
131. The Hartford ceded a claim against one or more reinsurers for the Hoeffner
settlement with Pauli & Griffin Company.
132. The Hartford ceded the Specialty Sand Company declaratory action settlement to
one or more reinsurers.
133. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Pulmosan Equipment Corporation claim.
134. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Thorstenberg Materials Company, Inc. claim.
135. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Oglebay Norton Safety Equipment Corporation claim.
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136. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Humble Sand Company claim.
137. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Gifford Hill claim.
138. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Empire Abrasive Equipment Company claim.
139. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Pauli & Griffin Company claim.
140. The Hartford received reinsurance proceeds from one or more reinsurers after
ceding the Specialty Sand Company claim.
141. The Hartford continued ceding claims information to its reinsurers on the
Hoeffner settlements after it had knowledge of Hoeffner’s payments to Prestage or Rossow.
142. The Hartford continued receiving reinsurance proceeds from the Hoeffner
settlements after it had knowledge of Hoeffner’s payments to Prestage or Rossow.
143. The Hoeffner silicosis settlements were recommended by a special master as
being fair and reasonable.
144. The Hoeffner silicosis settlements were approved by a Texas State district court
as fair and reasonable.
145. The settlement between The Hartford and Specialty Sand Company was
determined by a Texas State district court to be fair and reasonable.
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E. Causes of Action
-FIRST CAUSE OF ACTIONRACKETEER-
INFLUENCED AND CORRUPT ORGANIZATION (“RICO”)
(18 U.S.C. § 1962(c))
146. Paragraphs 1 through 145 of this Cross-Claim are hereby realleged and
incorporated as set forth in full herein.
147. Hoeffner is a person who may bring a RICO claim under 18 U.S.C. §§ 1961(3)
and 1962(C).
148. Hoeffner has standing to assert this Cross-Claim as a direct victim of extortion.
Hoeffner also owns all of Hoeffner & Bilek’s rights to assert its Cross-Claim. Specifically,
Hoeffner & Bilek’s operating agreement states “Hoeffner solely owns all future rights to any
claim against The Hartford.”
149. The Hartford and its officers, agents and employees are persons within the
meaning of U.S.C. §§ 1961(3) and 1962(C).
150. CaLMS is a RICO enterprise within the meaning of 18 U.S.C. § 1961(4) and
1962(C) (the “CaLMS enterprise”). During all relevant times, the CaLMS enterprise was
engaged in, and its activities were affected by, interstate commerce.
151. At all relevant times, The Hartford conducted or participated, directly or
indirectly, in the conduct of the CaLMS enterprise’s affairs through a “pattern of racketeering
activity” within the meaning of RICO, 18 U.S.C. § 1965(5), in violation of RICO, 18 U.S.C. §
1962(C).
152. Specifically, at all relevant times, The Hartford and its employees, agents and
officers engaged in “racketeering activity” within the meaning of 18 U.S.C. § 1961(1) by
engaging in acts which constitute a violation of 18 U.S.C. § 1951 (extortion).
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153. Defendant The Hartford conducted the affairs of the CaLMS enterprise through a
pattern of racketeering activity involving extortion in violation of 18 U.S.C. § 1951. The pattern
of racketeering activity is evidenced by The Hartford’s use of fear and threats to obtain money
and property from Hoeffner. The pattern of racketeering activity began at least as early as
August 2002 and continued through April 2004. The predicate acts committed by Defendants
are related and continuous, and amount to or threaten long-term criminal activity. The pattern of
racketeering activity includes, but is not limited to, the following acts:
Extortion: 18 U.S.C. § 1951
154. Defendant, The Hartford, obstructed or affected commerce through extortion.
Specifically, The Hartford obtained property from Mr. Hoeffner, with his consent, induced by
wrongful threats and fear.
155. The Hartford unlawfully committed extortion by inducing Hoeffner to make
payments to The Hartford’s agents and employees through at least four wrongful threats of force
and fear made between July 2002 and April of 2004:
a. In August 2002, The Hartford made its initial threat that it would interfere
with Hoeffner’s settlements with the Hartford and with other insurance
agencies if Hoeffner did not agree to its demands. As a result of these threats,
Hoeffner was induced to purchase two new automobiles for The Hartford’s
agents, Rossow and Prestage.
b. In September 2002, The Hartford made another threat to withhold settlement
and interfere with settlements from other insurers if Hoeffner refused to meet
The Hartford’s demands.
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c. In mid-February 2003, during a meeting with Mr. Hoeffner in Colorado, The
Hartford made yet another threat, demanding still more money or The
Hartford would withhold settlement.
d. In July 2003, The Hartford again demanded a meeting with Mr. Hoeffner and,
in that meeting, threatened to halt Mr. Hoeffner’s impending settlement with
First State Insurance Company (an affiliate of The Hartford) if Mr. Hoeffner
refused to meet The Hartford’s demands.
156. Given the power and influence of The Hartford and its executives within the
insurance community, Mr. Hoeffner reasonably believed that the Hartford would, in fact, harm
Mr. Hoeffner’s settlements with The Hartford and with other insurers, thereby causing his clients
severe economic harm. Based on these threats, Hoeffner was induced to make the following
payments:
a.) Check dated 11/26/02 in the amount of $262,5000.00;
b.) Check dated 11/26/02 in the amount of $312,5000.00;
c.) Check dated 2/4/03 in the amount of $265,000.00;
d.) Check dated 2/4/03 in the amount of $312,500.00;
e.) Check dated 2/20/03 in the amount of $25,000.00;
f.) Check dated 2/26/03 in the amount of $148,750.00;
g.) Check dated 12/5/03 in the amount of $1,675,000.00; and
h.) Wire transfer on or about 4/7/04 in the amount of $150,000.00.
157. The Hartford’s multiple acts of extortion affected interstate commerce in many
aspects, including but not limited to: the use of interstate common carriers to carry out the
extortion scheme; the use of bank wire transfers across state lines; and the depositing of checks
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drawn on out of state bank accounts. In addition, The Hartford’s extortion scheme affected the
settlement of legal claims in Texas from its headquarters in Connecticut.
158. The above acts of racketeering activity constituted a “pattern of racketeering
activity” within the meaning of 18 U.S.C. § 1961(5). The acts alleged were related to each other
by virtue of common participants, common victims, a common method of commission, and the
common purpose and common result of extorting Hoeffner for over $3 million, causing a
significant injury to Hoeffner. Moreover, these acts were continuous for a period of over 15
months. Accordingly, The Hartford’s actions amount to or threaten long-term criminal activity
insofar as they demonstrate a number of closely related criminal acts over a long period of time,
and demonstrate a regular pattern of business activity by The Hartford.
159. The scheme to extort Hoeffner involved multiple levels of the CaLMS division
including claims handlers, intermediate supervisors and the top executive in the CaLMS division,
who was also a Senior Vice-President of The Hartford.
160. The CaLMS enterprise through its racketeering activity benefited The Hartford by
reducing or exhausting coverage on policies of insurance which The Hartford determined costly
to the corporation. These benefits are reflected in lost/cost saving reports and spreadsheets.
161. The Hartford’s actions proximately caused injury to Plaintiffs’ business and
property.
162. Pursuant to 18 U.S.C. § 1964(c), Plaintiffs are entitled to recover threefold the
damages sustained, plus costs including attorneys’ fees, from Cross-Defendant The Hartford.
- SECOND CAUSE OF ACTION -
ECONOMIC DURESS/BUSINESS COERCION
163. Paragraphs 1 through 145 of this Cross-Claim are hereby realleged and
incorporated as set forth in full herein.
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164. The actions taken by The Hartford, as set forth above, were without legal
justification and imposed economic duress on Hoeffner because they constituted illegal and
imminent threats that destroyed Hoeffner’s free will, leaving him with no other choice but to
agree to the demands of the extortionists.
165. Specifically, The Hartford, by and through its agents, threatened Hoeffner to
make extortion payments, which it had no legal right to do and which Hoeffner would not
otherwise have done had he not feared the threats of The Hartford’s employees, which would
have led to the total destruction of the settlements on behalf of Hoeffner’s clients.
166. The extortion payments, as demanded by The Hartford, by and through its agents,
constituted an illegal and wrongful exaction of over $3 million.
167. The threats made by The Hartford, by and through its agents, were so imminent
that Hoeffner’s free agency was destroyed to such an extent that he was without means to protect
himself. Indeed, failing to agree to the demands of The Hartford would have resulted in the
destruction of favorable settlements between The Hartford and potentially other insurers and
Hoeffner’s clients. To prevent harm to Hoeffner’s clients, Hoeffner was left with no other
choice but to acquiesce to the demands of the extortionists.
168. The economic duress imposed by The Hartford has caused damages to Hoeffner.
Specifically, the economic duress imposed by The Hartford forced Hoeffner to pay over $3
million in extortion payments in order to avoid the financial losses to his client’s settlements that
would result from the extortionate threats; to incur legal fees and expenses for the defense of
civil and criminal actions filed against him because of the extortion payments; loss of income,
including from being required to waive additional cases as a result of criminal allegations; and to
suffer mental anguish, public humiliation, embarrassment and anxiety.
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 33 of 39
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- THIRD CAUSE OF ACTION -
NEGLIGENCE AND GROSS NEGLIGENCE
169. Paragraphs 1 through 145 of this Cross-Claim are hereby realleged and
incorporated as set forth in full herein.
170. The Hartford owed a duty or legal obligation, to the general public, including
Hoeffner, to exercise ordinary care in supervising, retaining and training its employees or agents,
including but not limited to, Cain, Rossow and Prestage.
171. The Hartford breached its duties of ordinary care by, among other things, failing
to supervise its employees and by fostering an environment under which it was foreseeable that
the extortion scheme could occur. Specifically, The Hartford ignored the following warning
signs that, if properly addressed, would have prevented the extortion scheme: (i) that Rossow and
Cain were having an improper sexual relationship; (ii) that Rossow was having significant
difficulties with her personal finances and had shown evidence of being psychologically
unstable; (iii) that Rossow was nonetheless being allowed to negotiate settlements worth millions
of dollars on behalf of The Hartford; and (iv) that the settlements Rossow was negotiating could
have been approved or disapproved at the sole discretion of her paramour, Cain.
172. The Hartford’s breach of its duties of ordinary care proximately caused
Hoeffner’s damages. Specifically, but for The Hartford’s breach, Hoeffner would not have been
required to pay the extortion demands of its employees/agents or suffer the various damages set
forth below. Furthermore, given The Hartford’s knowledge of the improprieties of its employees
and agents, including Cain, Rossow and Prestage, as alleged above, and its failure to adequately
supervise them, The Hartford should have anticipated the danger it created which ultimately led
to the injuries sustained by Hoeffner.
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 34 of 39
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173. The actions of The Hartford in failing to supervise its employees and agents was
so extreme as to amount to recklessness and/or a conscious indifference to the rights, safety or
welfare of others, including Hoeffner. Accordingly, The Hartford is liable for gross negligence
and/or malice.
174. As a result of the negligence and/or gross negligence committed by The Hartford,
Hoeffner is entitled to an award of actual damages for his injuries, including but not limited to
pecuniary losses from the extortionists’ demands, past mental anguish, loss of earning capacity,
and legal fees required to defend various civil and criminal actions as a result of The Hartford’s
unlawful acts. Hoeffner is also entitled to an award of exemplary damages under Chapter 41 of
the Texas Civil Practice and Remedies Code because The Hartford's tortious actions amounted to
gross negligence and/or malice.
- FOURTH CAUSE OF ACTION -
TORTIOUS INTERFERENCE WITH THE ATTORNEY-CLIENT RELATIONSHIP
175. Paragraphs 1 through 145 of this Cross-Claim are hereby realleged and
incorporated as set forth in full herein.
176. Hoeffner entered into a “Power of Attorney and Contingent Fee Contract” with
each of the plaintiffs, whereby Hoeffner agreed to represent the plaintiffs in silicosis and
asbestosis-related litigation. Hoeffner agreed to “sue for and recover all damages and
compensation to which the Client may be entitled as well as compromise and settle all claims for
home, household, property and person,” and the plaintiffs agreed to convey to Hoeffner an
undivided forty percent interest in all of the plaintiffs’ claims and causes of action, and forty-five
percent in the event of an appeal.
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 35 of 39
36
177. The Hartford had knowledge of the attorney-client relationship that existed
between Hoeffner and the plaintiffs when Hoeffner approached The Hartford about entering into
a settlement agreement with the plaintiffs.
178. The Hartford willfully and intentionally asserted improper influence over
Hoeffner when The Hartford, by and through its agents, extorted money from Hoeffner to
prevent The Hartford from blocking settlements with his clients.
179. The Hartford’s intentional interference with Hoeffner’s attorney-client
relationship with the plaintiffs caused Hoeffner to incur damages, including but not limited to the
amount of the extortion payments.
180. The Hartford acted with malicious intent when it extorted money from Hoeffner.
- FIFTH CAUSE OF ACTION -
TORTIOUS INTERFERENCE WITH CONTRACT
181. Paragraphs 1 through 145 of this Cross-Claim are hereby realleged and
incorporated as set forth in full herein.
182. Hoeffner entered into a “Power of Attorney and Contingent Fee Contract” with
each of the plaintiffs, whereby Hoeffner agreed to represent the plaintiffs in silicosis and
asbestosis-related litigation. Hoeffner agreed to “sue for and recover all damages and
compensation to which the Client may be entitled as well as compromise and settle all claims for
home, household, property and person, and the plaintiffs agreed to convey to Hoeffner an
undivided forty percent interest in all of the plaintiffs’ claims and causes of action, and forty-five
percent in the event of an appeal.
183. The Hartford had knowledge of the contracts entered into between Hoeffner and
the plaintiffs when Hoeffner approached The Hartford about entering into a settlement agreement
with the plaintiffs.
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 36 of 39
37
184. The Hartford willfully and intentionally committed acts calculated to cause
damage to Hoeffner in his lawful business. Specifically, The Hartford, by and through its agents,
threatened to block settlements with Hoeffner’s clients unless Hoeffner made the extortion
payments.
185. The Hartford’s intentional interference with Hoeffner’s contract with the plaintiffs
caused Hoeffner to incur damages, including but not limited to the amount of the extortion
payments.
186. Further, The Hartford acted with malicious intent when it extorted money from
Hoeffner.
PRAYER
WHEREFORE, Hoeffner prays for judgment against The Hartford for:
(i) Compensatory damages caused by The Hartford’s wrongful conduct, including
economic damages, which shall be trebled pursuant to RICO;
(ii) Exemplary damages in an amount to be determined at trial;
(iii) Attorney’s fees, costs and other expenses permitted by law;
(iv) Pre-judgment and post-judgment interest as permitted by law; and
(v) Such other and further relief as may be just and proper
Respectfully submitted,
/s/ Chris Flood
Chris Flood
State Bar No. 07155700
Southern District Bar No. 9929
914 Preston, Suite 800
Houston, Texas 77002-1832
Telephone: (713) 223-8877
Telecopier: (713) 223-8879
ATTORNEY-IN-CHARGE FOR DEFENDANT,
WARREN TODD HOEFFNER
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 37 of 39
38
OF COUNSEL:
John Flood
State Bar No. 07155910
Southern District Bar No.12593
FLOOD & FLOOD
802 N. Carancahua, Suite 900
Corpus Christi, Texas 78470
Telephone: (361) 654-8877
Telecopier: (361) 654-8879
Lynne Liberato
State Bar No. 00000075
Southern District Bar No. 3072
Kent Rutter
State Bar No. 00797364
Southern District Bar No. 20519
Mark Trachtenberg
State Bar No. 24008169
Southern District Bar No. 24584
HAYNES AND BOONE, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010-2007
Telephone: (713) 547-2000
Telecopier: (713) 547-2600
R. Thaddeus Behrens
State Bar No. 24029440
HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Telephone: (214) 651-5000
Telecopier: (214) 651-5940
ATTORNEYS FOR DEFENDANT,
WARREN TODD HOEFFNER
Case 2:07-cv-00285 Document 28 Filed 10/15/2007 Page 38 of 39
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document was filed with the
Court’s ECF system and served (1) via electronic transmission by the Court on those parties
authorized to participate and access the Electronic Filing System for the Southern District of
Texas, and (2) via e-mail or facsimile on the parties appearing below on this 15th day of
October, 2007:
Counsel for Plaintiffs:
Jeffrey D. Meyer
MOULTON AND MEYER LLP
600 Travis Street, Suite 6700
Houston, Texas 77002
jmeyer@moultonmeyer.com
Christopher A
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