Public Adjuster Accused of Scamming Claimants Took Cash Advances on Commissions

A public adjusting firm that was cited by regulators in both Texas and Louisiana for allegedly pocketing insurer payouts has also received cash advances from financing companies over the past several months, documents obtained by the Claims Journal show.

At least two factoring companies are seeking to recover payments made to Mitchell Adjusting International and a third company has won a collection judgment from a New York State court.

Insurance regulators in Texas and Louisiana last month sanctioned the company and its operators, Andrew Joseph Mitchell and his son Kade Austen Mitchell, for allegedly cashing more than $600,000 in checks that were intended for policyholders.

Steven Badger, a partner with the Zelle law firm in Dallas, represents insurers whose policyholders were allegedly victims of the scheme. He says the growing use of factoring companies by public adjusters is a disturbing trend.

“Initially, if a public adjuster has already sold his future commission, he has no incentive to continue working the claim,” Badger said in an email. “This leads to an increased percentage of claims getting referred to lawyers, which slows down claim resolution.

“Further, the amount of the factoring sale depends on the estimated value of the future commissions. This leads to public adjusters grossly inflating their estimates to make it look like they have large anticipated future commissions, which also slows down claim resolution and causes more claims to end up in litigation.”

On June 22, the Texas Department of Insurance filed a petition with the State Office of Administrative Hearings seeking to revoke the public adjuster license issued to Andrew Joseph Mitchell, alleging that he stole insurer checks amounting to $335,082.56 that were intended for seven policyholders. On July 22, the Louisiana Department of Insurance suspended the public adjuster license issued to Kade Austen Mitchell, alleging he forged endorsement signatures on two checks totaling $267,000.

Online records maintained by the Texas Secretary of State’s Office show Mitchell Adjusting International has received funding from several financial organizations in the past several months. On Aug. 2 — after the company was cited by regulators in Texas and Louisiana — Mitchell International received funding from Vitalcap Fund in New York City. The financing statement filed under the Uniform Commercial Code does not reveal the amount owed, only that a lien is in place.

Corporation Service Co. in Springfield, Illinois filed a similar lien notice on June 17, naming Mitchell Adjusting International and Kade Austen Mitchell. Westwood Funding Solutions in Hollywood, Florida filed a lien notice on June 1. Eleven Capital in Brooklyn, New York filed a lien notice against Mitchell International and several affiliates on May 18. C T Corporation System filed a lien notice against Mitchell Adjusting and Andrew Joseph Mitchell on May 10.

The state documents show numerous other liens were filed and later terminated, which usually means the debt was paid. But some creditors allege Mitchell Adjusting International owes them money.

On July 18, the Kings County Superior Court issued a judgment requiring Mitchell Adjusting International and the Mitchells to pay Yes Capital Group $128,506.37. Yes Capital’s website describes it as an “investment banking boutique” that raises venture capital.

More litigation may be coming. The Claims Journal obtained a copy of a demand letter from New York City attorney Tara N. Pomparelli, who represents 5G Funding. The letter seeks to recover $250,000 from Mitchell Adjusting International and the Mitchells. According to a “merchant cash advance agreement” attached to the letter, the Mitchell’s on May 19 sold $374,750 in “receivables” to 5G Funding in exchange for a $220,000 cash advance. They also owe a $30,000 funding fee, the letter says.

Badger said he has seen a significant increase in public adjusters selling their future commissions. Lawmakers should put a stop to the practice, he said.

“Public adjuster licensing statutes should be amended to prohibit any factoring or sale by public adjusters of future commissions before they are earned, which is when the claim payment is actually made,” he said. “There is nothing unreasonable in requiring public adjusters to actually earn their commissions by resolving claims.”

The Mitchells did not respond to emails sent to their business addresses. The company’s website is no longer active. Joseph Andrew Mitchell’s attorney, David W. Alexander, did not return telephone calls.