Former Claims Shop Owner Pleads Guilty to Bank and Wire Fraud
The former owner of Worley Claims Services, who in 2014 sold a majority stake in the company that continues to bear his name, this week pleaded guilty to bank and wire fraud charges.
Michael Allen Worley of Zachary, Louisiana admitted in a plea agreement approved Monday that he swindled $29 million from banks and private equity funds by lying about the value of his assets and underreporting the amount of his debts.
“As a result of his conviction, Worley faces a significant term of imprisonment, a fine and a period of supervised release,” stated U.S. Attorney Brandon J. Fremin.
Worley Claims Services bills itself as one of the largest independent adjusting firms in the U.S. The company is perhaps best known for its management of BP Oil’s Deepwater Horizon claims after the disastrous Gulf of Mexico oil spill in 2010.
Federal prosecutors say Worley, 57, defrauded Investar Bank, United Mississippi Bank, Highlands Bank, NCC Financial and Callais Capital Management from 2014 until 2018. He overstated income and assets, misrepresented the amount of cash on hand, overstated the equity he owns in Worley Claims Services and omitted debts, mortgages and other liabilities from loan applications, according to the government’s charging papers.
Worley also forged documents to obtain loans, according to those charges. In February 2017, Worley emailed United Mississippi Bank a fraudulent real estate purchase contract with a forged buyer’s signature to show that a property was under contract for sale for $2.4 million. The bank increased Worley’s line of credit by $500,000 and delayed the payoff date for $7.2 million in prior loans.
The Highlands Bank loaned Worley $7.8 million after he misrepresented the equity in his business and omitted loan obligations, according to the charges. In all, Worley obtained more than $18 million in loans from various financial institutions, prosecutors say.
Worley also pulled cash out of private lenders and equity funds. NCC Financial loaned Worley $8 million to pay tax liabilities. He photocopied two personal checks to the Internal Revenue Service and said he had delivered them that day, but actually he had paid only $4 million to the IRS and used the rest of the money to repay a loan he had taken from his company.
In all, Worley obtained more than $11 million from various private equity funds for himself and his businesses, according to his plea agreement.
Worley’s undoing began when he filed for Chapter 11 bankruptcy in January 2018. United Mississippi Bank filed a lawsuit the following October, alleging that the financial statements that Worley had submitted for the bankruptcy filing showed that he had submitted false information when he applied for a loan in August 2017.
Worley told the bank he had assets of $145.45 million and liabilities of $103.65 million. He claimed $2.7 million in income from salary, bonuses, commissions and dividends.
But during the bankruptcy less than six months later, he submitted sworn statements that showed his total assets actually amounted to $80.7 million and his liabilities amounted to $107.5 million. His annual income was only $700,000, the bank said.
A Bankruptcy Court judge signed an order declaring that Worley’s $7,280.639.25 debt to United Mississippi Bank cannot be discharged through his bankruptcy proceeding. In the meantime, litigation between Worley and Callais Capital continues in federal court.
While Worley was borrowing money that he could not repay, the New York City-based private equity fund that bought a majority stake in his business has been rapidly growing the footprint of the business. After Aquiline Capital Partners took control of Worley Claims in 2014, the company has purchased NCA Group in Louisiana, RJMW Claims Services in North Carolina, Nexxus Solutions Group in Orlando, Audit Service Inc. in the Atlanta area, Apex Claims Service of New England in Massachusetts and Replacement Source of America in Dallas.
Worley is also getting a new foothold in the claims business. In July, attorney Steve Brown announced the formation of Legion Claims Solutions in Baton Rouge, with Worley as the company’s chief operating officer.
Brown said in a telephone interview that he was aware that Worley was suffering from financial difficulties when he hired him to manage the firm, but he has been a friend of Worley’s for years and respects his vast claims experience.
“Although Mike has no ownership in and is not an officer of Legion, we would not be where we are today without his professional contributions to the company,” Brown said in a statement. “The staff of Legion will continue to support Mike personally during this difficult time.”