Block letters spelling fraud, with magnifying glass

U.S. authorities have charged two men for their involvement in an alleged investment scheme that defrauded insurance companies of hundreds of millions of dollars.

The U.S. Department of Justice (DoJ) announced that two former executives with a New York-based private equity firm have been charged with five counts of wire fraud and two counts of conspiracy.

According to the DoJ, the two executives with Southport Lane L.P., a private equity firm that specialized in managing insurers’ investment portfolios, used their positions as investment advisors to defraud the insurers by causing them to exchange liquid portfolio assets for overvalued, illiquid securities they had created.

The allegations against the men, Andrew Scherr and Robert McGraw, have not been proven.

The DoJ alleges that they perpetrated the scheme, in part, by acquiring insurance companies, and acting as their investment advisor, giving them access to the companies’ investment portfolios. The indictment also alleges that the scheme caused hundreds of millions of dollars in losses to the companies.

“According to the indictment unsealed today, Scherr and McGraw diverted hundreds of millions of dollars from insurance companies’ investment portfolios, leaving several companies unable to pay their policyholder claims,” assistant attorney general Brian Benczkowski said in a statement.