Amid a criminal investigation into his company’s alleged wrongdoing, the likes of which were compared to Enron, the former head of Southern U.S. Insurance Inc. (SEUS) said there was no fraud “either intended or committed.”

In early January, Georgia Insurance Commissioner John Oxendine announced an investigation into M. Clark Fain III, regarding his executive leadership of SEUS, which fell into insolvency and liquidation under the insurance regulator. Oxendine said after reviewing financial transactions by the company, he had “no other recourse” but to open a criminal investigation into Fain’s activity, specifically the company’s bookkeeping practices which he compared “to those of Enron.”

Oxendine highlighted “a questionable transaction” regarding SEUS and a hunting club under its ownership in Seminole County, Ga., which was unwound after a request by insurance regulators.

In a statement released Jan. 20 to IFAwebnews.com, Fain said allegations that he improperly took out a $10.2 million loan from SEUS, a workers’ compensation provider, are false.

Transaction details

From 2002 to 20008, Fain said, an investment was made in eight parcels of agricultural, timber and recreational land in Seminole and Miller counties costing $8.7 million and purchased by a wholly-owned subsidiary of SEUS that he solely owned.

In 2008, those parcels were appraised at $10.2 million and Fain, who said he was advised by statutory accountant and legal counsel to do so, personally purchased the real estate at that value, financed by SEUS through a mortgage note secured by the purchased real estate and an additional $1.4 million in pledged assets Fain owned.

Fain said the transaction was to provide “needed liquidity and additional capital” to SEUS and under the terms of the note, he was obligated to repay the $10.2 million, plus interest, at market rates.

Paperwork for the transaction was filed with Georgia regulators, he said. Georgia law states that if the department of insurance made no finding after 30 days, the transaction was deemed approved.

There was no word from regulators during that window, Fain said, but later, the department raised “verbal objections.” Fain said he met repeatedly with the department’s staff, including Oxendine, to resolve the matter and ultimately volunteered to undo the transaction.

At no time, Fain said, has he ever been notified in writing of the department’s disapproval of the real estate transaction.

“I worked more than 20 years to build SEUS into a viable insurance company that covered thousands of Georgians over that time,” Fain said in his statement. “I relied on a team of industry professional advisors and did what I believed I needed to do to save the company. There was no fraud, either intended or committed.”