Insurance Broker Guilty of Embezzling Clients’ Money

Presented with reams of evidence and no defense, a San Fernando Superior Court jury on Monday convicted the president of a small Burbank insurance brokerage of embezzling the insurance premiums of three clients.

Gary Martin, 53, president of Welmar Insurance Services, was convicted on six felony counts--three counts of grand theft embezzlement and three violations of the Insurance Code--for using $24,000 from a trust fund reserved for insurance premiums to pay the operating expenses of his firm. The theft left three clients without valid policies.

During the four-week trial, Deputy Dist. Atty. Steve J. Ipsen documented virtually every dollar that went into and out of the Welmar Insurance Service’s insurance premium trust account. By law, money given to brokers to buy insurance policies must be held in trust until it is remitted to the insurers.

Using large charts to make sense of dozens of Welmar’s financial documents, Ipsen demonstrated that Martin used money from the trust fund to pay the costs he incurred in running his business, including the rental of two luxury cars, cable television for the office, bottled water, and his own salary.

Defense attorney Steven Flanagan presented no defense on behalf of his client, who is still a licensed insurance broker, but argued that the district attorney had not met the burden of proof. The jury did not agree.

“We went through the checks and the deposits, and when you had all the evidence laid out with the law, it was clear he broke the law,” said jury foreman Holly Holland of Granada Hills. She said that members of the jury calculated how much money should have been in the trust account at various times, concluding that the account was always short.

State officials have received an increasing number of complaints about insurance brokers and agents who allegedly misappropriate premiums, leaving clients without coverage. Many other unscrupulous brokers probably go undetected, state insurance officials say, because their clients file no claims.

Even when these cases are reported, insurance officials say, they are so short of manpower that they usually initiate audits only in cases of multiple accusations or large sums.

Prosecutors stumbled onto the Martin case by accident after Patrick McMurray, owner of a small San Fernando manufacturing firm, tried to add a vehicle to his policy.

Insurance Canceled

Unable to reach his agent at Welmar Insurance, McMurray telephoned the insurance company, Century National Insurance of North Hollywood, and was told his policy had been canceled for non-payment.

McMurray called police, who discovered that two other Welmar clients also had policies canceled, although they had paid premiums to Welmar.

Martin’s former partner, Clark Wells, testified that he knew Martin was raiding the trust fund account, but said nothing because the business was in financial trouble and he wanted to protect their joint venture. Wells pleaded guilty in October, 1986, to grand theft embezzlement and insurance code violations, and was sentenced to 30 months probation.

After the verdict, Martin, who had been free on his own recognizance, was jailed in lieu of $25,000 bail until sentencing Oct. 10. He faces a maximum of four years and four months in state prison and revocation of his broker’s license.