Operators of a public adjustment company that has been cited by regulators in Texas and Louisiana for allegedly pocketing payments from insurers have also received cash advances from finance companies in recent months, according to documents obtained by the Claims Journal.
At least two factoring companies are seeking to recover payments made to Mitchell Adjusting International and a third company has obtained a collection judgment from a New York state court.
Insurance regulators in Texas and Louisiana last month sanctioned the company and its operators, Andrew Joseph Mitchell and his son Kade Austen Mitchell, for allegedly cashing more than $600,000 in checks intended for policyholders.
Steven Badger, a lawyer at the Zelle law firm in Houston, represents the insurers whose policyholders would have been victims of the scheme. He says the growing use of factoring companies by public valuers is a worrying trend.
“Initially, if a public adjuster has already sold their future commission, they have no incentive to continue working on the claim,” Badger said in an email. “This leads to an increase in the percentage of claims referred to lawyers, which slows down the resolution of claims.
“Furthermore, the amount of the factoring sale depends on the estimated value of future commissions. This leads public adjusters to grossly inflate their estimates to give the impression that they have large anticipated future commissions, which also slows claims settlement and leads to more claims ending up in litigation.
On June 22, the Texas Department of Insurance filed a petition with the State Office of Administrative Hearings seeking to revoke the public adjuster’s license issued to Andrew Joseph Mitchell, alleging that he stole insurer checks for the amount of $335,082.56 for seven insureds. On July 22, the Louisiana Department of Insurance suspended the public adjuster license issued to Kade Austen Mitchell, alleging he forged endorsement signatures on two checks totaling $267,000.
Online records maintained by the Texas Secretary of State’s office show Mitchell Adjusting International has received funding from several financial organizations over the past several months. On August 2 – after the company was cited by regulators in Texas and Louisiana – Mitchell International received funding from the Vitalcap Fund in New York. The financing statement filed under the Uniform Commercial Code does not disclose the amount owed, only that a lien is in place.
Corporation Service Co. in Springfield, Illinois filed a similar notice of lien on June 17, naming Mitchell Adjusting International and Kade Austen Mitchell. Westwood Funding Solutions in Hollywood, Florida filed a notice of lien on June 1. Eleven Capital in Brooklyn, New York filed a notice of lien against Mitchell International and several affiliates on May 18. CT Corporation System filed a notice of lien against Mitchell Adjusting and Andrew Joseph Mitchell. May 10.
State documents show that many other liens were filed and then terminated, which usually means the debt was paid. But some creditors say Mitchell Adjusting International owes them money.
On July 18, Kings County Superior Court issued a judgment requiring Mitchell Adjusting International and the Mitchells to pay Yes Capital Group $128,506.37. Yes Capital’s website describes it as an “investment banking boutique” that raises venture capital.
Other disputes may arise. The Claims Journal obtained a copy of a demand letter from New York attorney Tara N. Pomparelli, who represents 5G Funding. The letter seeks to recover $250,000 from Mitchell Adjusting International and the Mitchells. According to a “merchant cash advance agreement” attached to the letter, the Mitchells on May 19 sold $374,750 of “receivables” to 5G Funding in exchange for a cash advance of $220,000. They also owe a $30,000 fundraising fee, the letter says.
Badger said he saw a significant increase in the number of public experts selling their future commissions. Lawmakers should put an end to this practice, he said.
“Public adjuster licensing laws should be amended to prohibit any factoring or sale by public adjusters of future commissions before they are earned, i.e. when payment of the claim is actually made” , did he declare. “There is nothing unreasonable in requiring public adjusters to actually earn their commissions by resolving claims.”
The Mitchells did not respond to emails sent to their work addresses. The company’s website is no longer active. Joseph Andrew Mitchell’s attorney, David W. Alexander, did not return phone calls.
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