Danny Ly, the former supervisor of the California Insurance Guarantee Association, has filed a lawsuit against the association accusing him of firing him after exposing alleged financial irregularities, potential accounting fraud and other potentially illegal behavior .
The lawsuit was filed in Los Angeles County Superior Court.
CIGA serves as a safety net for California consumers who purchase liability, auto, property and workers’ compensation insurance. In the event of the insolvency of their insurance company and bankruptcy, CIGA’s mission is to be there to cover claims made to this insurance company.
According to Ly’s lawsuit, however, poor management practices resulted in higher costs, which are ultimately passed on to individual policyholders. Ly also alleges that the financial and accounting dispute at CIGA may have led to the potential overbilling of some insolvent insurers.
A call to CIGA chief executive Wayne Wilson was not immediately returned.
Some of the accounting irregularities and irregularities alleged by Ly include:
- Incorrect recognition of revenue, amounting to an overestimate of approximately $ 250 million in CIGA’s income statement;
- Abusive write-offs of over 40,000 stale checks, totaling over $ 15 million, resulting in an overestimation of net income and an underestimation of liabilities;
- CIGA’s apparent failure to comply with California Unclaimed Property Law;
- Suspicious opening and closing of numerous bank accounts for no apparent legitimate reason;
- Checks written and recorded in the general ledger that have never been issued to named payees, increasing the risk of fraud;
- Incorrect recording of recoveries before liquidation, overestimation of net income and underestimation of liabilities;
- Poor capitalization of expenses, leading to an overestimation of the net result;
- Failure to record unearned premiums, underestimation of liabilities.
Ly alleges that after complaining about accounting irregularities and irregularities, CIGA began to retaliate against him and then quickly fired him.
Ly is represented by Mizrahi Law, APC and Helmer Friedman LLP.
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