Did Michael Robertson and the Duane Morris Law Firm Commit Insurance Fraud against Chubb?

Did Duane Morris help Michael Robertson defraud Chubb Insurance

out of $100,000? Read the documents, and YOU be the judge.

NOTE: As with any personal blog, the opinions expressed here are my own. Each reader should come to their own conclusion, based on the factual documents linked to from this blog.

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I think everyone would agree that those who defraud insurance companies should be held accountable and criminally liable. When criminals defraud insurance companies, we all pay for it through higher premiums. Each of us should do our part by reporting insurance fraud, anytime we become aware of it.

It is my opinion that Michael Robertson may have possibly committed insurance fraud against the Chubb insurance company, and that Ed Cramp and the law firm he works for, Duane Morris, aided and assisted Robertson in that possible fraud. Only through a criminal investigation and trial would my belief be validated, but in the meantime, I'll present facts and documents and let you, the reader, decide for yourself how ethical the actions of Robertson, Ed Cramp, and the Duane Morris law firm were. Is it fraud? Unethical? Poor judgement? Or just business as usual?

As came out in depositions with Robertson, his company Linspire was paid $100,000 in damages by Chubb Insurance for, what I believe, was quite possibly a fraudulent claim. Presented here are links to the pertinent documents. Read them, then you can decide for yourself if you feel that actions were taken to intentionally defraud the Chubb Insurance company out of $100,000, and that these actions warrant a criminal investigation.

I Believe Michael Robertson, Ed Cramp and Duane Morris Filed a Deceptive Insurance Claim

As many of you know, Michael Robertson has been trying to use the US court system to attack and bully former Linspire employees. Fortunately, the truth continues to come out, Robertson keeps losing in the courts, and the former employees continue to be vindicated, all be it saddled with huge legal bills (a subject I'll discuss in a future blog).

A few weeks back, when I was going through some of the discovery provided by Michael Robertson in his lawsuit against the former employees, I came across one document that made me fall out of my chair. I couldn't believe what I was reading. It was an insurance claim that Ed Cramp (a lawyer with Duane Morris) had filed on behalf of Michael Robertson with the Chubb insurance company. I believe many of the statements in the claim were false and were soundly shown as such in recent court proceedings. (I've attached a signed declaration from Linspire's former IT Director, giving just one of several examples of the false statements I believe Duane Morris alleged in the claim.)

Most shocking, however, was that pertinent information about the situation had been left out of the claim, information that presumably Robertson and Duane Morris would have known about. I can only believe they intentionally left out this critical information to mislead Chubb to get their claim paid. Ed Cramp used the weight of his nationally-known law firm, Duane Morris, to give the claim credibility, so Chubb would likely have assumed that the claim was accurate, truthful and contained all the pertinent information. I'm sure seeing the Duane Morris letterhead on the claim letter gave Chubb a sense of security in believing what was presented in the application. I can't help but wonder if Chubb would be shocked to learn of what was left out, and may very well not have paid Robertson the $100,000 claim, had they been provided with the full story.

What is Insurance Fraud?

Insurance fraud is defined as, "...when someone intentionally deceives another about an insurance matter to receive money or other benefits not rightfully theirs." In other words, when you file a claim with an insurance company, you can't intentionally misrepresent what happened or leave out relevant information in order to intentionally deceive the insurance company so that they are more likely to pay your claim.

For example...suppose you and a friend were at your house, and you both got into a heated argument, and you threw a book at your friend, but instead it hit and broke your TV. Suppose you can't afford to replace the TV, so you decide to file a claim with your insurance company to have it replaced. However, you're not sure if you policy would cover any damage from you throwing a book through your TV, but you are quite confident you are covered for "theft." So, when you file your claim with the insurance company, instead of telling them about the disagreement you had with your friend and tossing the book, you say that a thief broke into your house in the middle of the night and stole the TV. The insurance company, based on your report of "theft," pays you cash to replace the damaged TV. By misrepresenting the facts to the insurance company, you likely have committed insurance fraud.

I believe you'll see from the documents provided below, that this seems to be exactly what Michael Robertson, Ed Cramp and the Duane Morris law firm did.

Robertson's Claim

I've attached a copy of the actual claim letter given to Chubb, signed on Duane Morris letterhead by Ed Cramp. (I've redacted the former employee's names, as Robertson has dragged their names through the mud enough already with his false allegations.)

As you can see, in the insurance claim letter (viewable here), Duane Morris references this as an "Employee Theft Claim," and makes all sorts of claims as to criminal activities such as "theft" and "embezzlement." Duane Morris also references a "Police Report" which Robertson had filed with the San Diego Police Department. The reason I was so shocked when I found the insurance claim, was that the ultimate findings of the San Diego Police Department's investigation were left out of the claim. You see, Linspire had been told the results of the San Diego Police Department's investigation, approximately THREE MONTHS PRIOR to them having filed this claim. Linspire was told at that time that "no crime had been committed and the issues...were civil in nature."

Viewable here is a declaration, signed under penalty of perjury, by Michael McEwen, a Detective with the San Diego Police Department's Financial Crimes Group. It's only two pages long, and I'd encourage everyone to read it. Here is one portion of Detective McEwen's statement:

"Based on my review of the facts of the case, I determined no crime had been committed and the issues discussed in Mr. Robertson's letter and case submission were civil in nature. My conclusion was that the case involved a disagreement between the Chairman and the CEO of the company, which CEO was an officer and agent of the company. This disagreement did not constitute a crime. I relayed my findings on to Mr. Robertson's representative and to Comerica Bank. I specifically told them 'no crime report was taken and no case number issued.'"

So, according to the detective, Linspire knew that the San Diego Police Department had said that no crime had been committed, and had known this for around three months prior to filing their claim, yet they still filed a claim to Chubb alleging criminal "theft" and "embezzlement." I have to doubt that Linspire's policy with Chubb covered, as Detective McEwen put it, "a disagreement between the Chairman and the CEO, " so I believe they probably decided to tell Chubb it was "theft," something for which they would more likely be covered. In my opinion, such misrepresentations could quite possibly constitute criminal insurance fraud and should be investigated further.

Did Duane Morris Participated in Fraud?

Do you think Chubb would have paid out $100,000 to Robertson had they known of the San Diego Police Department's findings? If Duane Morris had included the findings from the police investigation (as I believe they certainly should have), and let Chubb know that Linspire was told "no crime had been committed," would Chubb have paid the claim? Not having a copy of the insurance policy to review, I can't know for sure, but I do believe it's likely that Robertson and Duane Morris may have felt their chances were better if Chubb considered the claim "theft" and a "crime." I think that is likely why they left out the results of the police investigation, so that the insurance company would not find out what the results were so Linspire's claim of "theft" would more likely be covered. Regardless of what the policy would or would not have covered, leaving out such pertinent information is possible grounds for insurance fraud.

How could the law firm of Duane Morris not have known the results of the police investigation were pertinent? They went to great lengths in their claim to list out all the details of their allegations of "theft" to the police department, even attaching a copy of their "police report," and yet they didn't think to let Chubb know the outcome of that investigation three months after those results had been given to Linspire? Does Duane Morris expect us to believe that Ed Cramp didn't know the outcome? Would Ed Cramp be that incompetent to include the "police report," and yet not take a minute to find out what the results to that report were? In his deposition, Robertson was asked, "Who was the person who liaised with the police department about the police report; in other words, communicated with the police department?" For which Robertson replied, "Michael Umansky." At that time, Michael Umansky was another attorney at Duane Morris who, along with Ed Cramp, worked on the Linspire matter. Robertson also testified that Umansky helped create the "police report" document, and yet Ed Cramp didn't bother to find out how it turned out? It just isn't believable to me. I have to believe Ed Cramp, Michael Umanskey and Duane Morris absolutely knew the outcome of the police investigation, and yet, it appears that THEY FAILED TO DISCLOSE THOSE RESULTS to Chubb. That is by definition insurance fraud, in my opinion, and I have to wonder if Chubb would agree.

A pattern of fraud? Did Robertson and Duane Morris also try to defraud Linspire's bank Comerica in a similar fashion?

Another extremely interesting document that came to light in discovery was a letter from Linspire's bank, Comerica, to Duane Morris. In December of 2008, I blogged about how Robertson lost in summary judgement a case against Comerica. (You can read the details of that outcome here.)

As you can see in this letter from Comerica to Duane Morris in January of 2008, Comerica felt that Robertson and Duane Morris had made "false claims" in trying to have Comerica pay for wire transfers to employees for severance. (Keep in mind this letter came to Duane Morris two weeks BEFORE they filed their claim with Chubb.) Robertson and Duane Morris did the exact same thing to Comerica that they did to Chubb Insurance, using their "police report" to imply they were the victim of "theft," and yet failed to tell Comerica the no-crime-was-committed results of that investigation. Comerica had to track down and interview Detective McEwen themselves, since Linspire did not disclose Detective McEwen's findings to Comerica. As you can tell from the stern tone in Comerica's letter, they felt very much deceived, and called into question not only Linspire's credibility, but that of Duane Morris as well:

"Not only does this undermine Linspire's credibility, it also undermines yours. The motivation underlying Linspire's decision to refrain from signing the Fraud Affidavit under oath is so obvious it strains credulity to suggest it is either accurate or legitimate."

The letter points out that Duane Morris knew of the outcome of the police report BEFORE they gave a copy of it to Comerica:

"Detective McCewen advised Comerica that no case number was assigned to the Draft Police Report because--as he said he informed you prior to your delivery of the Statement and the Draft Police Report to Comerica--the District Attorney determined that no crime was committed and that this was a civil dispute between Linspire and the Employees. He pointed to the employment contracts provided by Linspire to the SDPD, which indicate that the respective amounts of the Employee Wires were less than the amounts legally owed by Linspire to the Employees for contractual severance."

Comerica's letter ends in pointing out that defrauding a financial institution is a crime:

"See, 18 USC 1344 (federal crime to knowingly execute or attempt to execute shceme to obtain money of financial institution by means of false or fraudulent pretenses, representations, or promises)."

These are just a few excerpts from the letter. I would encourage everyone to read the entire letter here. You'll see that the Comerica bank shares many of my beliefs about Robertson and his lawyers. It's hard to imagine that after Duane Morris received this stern letter from Comerica, warning them of possible criminal charges for fraud, that Duane Morris would, just two weeks later, make the same allegations to Chubb. This is evidence that Duane Morris likely knew full well what it was choosing to include, and leave out, when they sent their claim to Chubb.

One might wonder why a nationally-known law firm would put itself at risk by seemingly participating in insurance fraud. Consider what happened in 2002 with one of the Big Five accounting firms, Arthur Andersen. After being found guilty of criminal charges relating to the firm's handling of auditing of the failed Enron corporation, Arthur Anderson voluntarily surrendered their licenses to practice as Certified Public Accountants in the US. Firms can become so addicted to collecting hundreds of thousands of dollars of easy client fees, that they just don't have the courage or willpower to stop and drop a questionable client who pressures them to participate in an activity that finally crosses the line.

I've always had a low opinion of Michael Robertson's ethics (see www.freespire.com), and why I feel he needs a strong, ethical law firm to keep him in check. It's very disappointing that such a large, seemingly respectable firm such as Duane Morris would let Robertson pull them down into what I believe are fraudulent activities. Is this the standard Duane Morris holds itself up to? I have to wonder if filing such a claim was something only Ed Cramp was comfortable doing, or is this the culture at all of Duane Morris?

I find it quite ironic that Robertson falsely accuses former employees of criminal activities, and yet he may be the one who attempted the real crimes of bank and insurance fraud. Robertson tried to have former employees arrested and thrown in jail. They have been vindicated of any criminal wrong-doing. I think the facts now show that it's Robertson and Ed Cramp who need to be investigated and perhaps belong in jail and disbarred. Hopefully Chubb will investigate, along with the appropriate government insurance fraud investigation units.

I have forwarded a copy of this blog to Chubb, who claim they prosecute insurance fraud vigorously, stating "We will not pay a fraudulent claim. In fact, we will spare no expense when fighting fraud." I have also filed a police report on this matter with the San Diego Police Department, as well as filed a report with the Department of Insurance for the State of California.

Kevin

PS: Follow the outcome of any investigation on this matter at Freespire.com.  

Court Hands Michael Robertson Yet Another Loss, Ruling Supports Former Linspire Employees

Several months back, Michael Robertson* and then-Linspire CEO, Larry Kettler, sued Linspire's bank, Comerica. The court has now ruled in the matter. The case was so absurd that not only did Robertson lose the case, but it was kicked out in summary judgment. That means the judge felt Robertson was so clearly in the wrong that it wasn't worth the bother of a trial, and the Judge refused to let Robertson's lawsuit proceed. This is yet another victory for truth and justice and stands as further evidence that Robertson's attacks on former employees were unfounded. (Here is a copy of the ruling. This was the tentative ruling which the judge confirmed as the final ruling during the hearing.)

Does Anyone Believe Michael Robertson Anymore?

So, why did Robertson sue his own bank?

To answer that, let me fill in some more of the story surrounding my departure as CEO for Linspire...

When I was CEO, I decided to make some shifts in the company's product line strategy which required letting some employees go. These were wonderful, hard-working, committed, trusted, long-term employees, most having worked for Linspire for around five years. These had been some of the most key individuals for Linspire over the years, including our lead OS engineer, the Director of the OS, and other employees and executives.

It was unfortunate that we needed to let these good people go, and I felt the least we could do was give them fair and reasonable severance to ease the blow. After all, it was these very same employees who had just helped Linspire turn in an extremely profitable year. Their good work had allowed us to pay off all of our debt and still have millions of dollars in the bank (which some shareholders believe Robertson took and/or squandered). At a minimum, I felt it only fair to use a very small portion of that year's profits to pay them a respectful severance. I wanted to treat these employees with respect and fairness. I knew by treating these long-time employees fairly, they would be happy to continue to help us if called upon (as departing employees so often are).

That's how I felt anyway. Michael Robertson, however, being the greedy man that he is, originally wanted to see these good people terminated with only two weeks severance. After a week of arm twisting, he suggested slightly more, but still less than I felt what was appropriate.

Fortunately for these employees however, Robertson had no operational or executive role at Linspire (he played absolutely no role in the huge profits we brought in that year), and it was up to me as the CEO to set the severance amounts for any laid-off employees. So, contrary to Michael's suggestion, I laid the employees off with the reasonable severance amounts I felt were appropriate, totaling only a few percentage points of the huge revenue and profits these employees had brought in that year. Prior to every action I took, I consulted with outside counsel to ensure that everything I did was proper and within the scope of my authority.

In less than 24 hours from when I had laid off the employees, I received this email from Robertson:

KC,

Do not do your proposed reduction in force. Please focus all of you energies on getting the new products to market at this time.

-- mr

Translated, I took that to mean: "Hey, before we stick the knife in these employees' backs and fire them with a few measly weeks of severance, let's abuse them one last time. Don't tell them anything about the pending layoffs just yet, but rather, keep them slaving away for a few more days until we get CNR.com and the new version of Linspire out and THEN you can fire them."

When I read this I became so infuriated at the level of greed Robertson had, that I decided to resigned, and sent Robertson this email:

Michael (Chairman of the Board),

I hereby offer my resignation, effective immediately.

After six years of quality service as President, and two years of having also been CEO, it is apparent that you are no longer willing to let me function in ways I see best for the company. Since closing on [recent lucrative deals], you have tried to challenge me and my authority as CEO and attempted to override my judgment with decisions which I do not believe to be in the best interest of the company and its shareholders.

To facilitate a smooth transition, please contact me as soon as possible so we can discuss and coordinate how to best message my resignation to employees, customers, the press, [partners], etc.

Thanks,

Kevin Carmony
President & CEO, Linspire, Inc.

I further told Michael that I didn't want one dime in severance for myself. I just wanted to be done with Robertson's greed, rants and unethical tactics and move on.

Michael replied and immediately accepted my resignation. However, he never did meet with me. Instead of coordinating with me a successful course of transition for Linspire with customers, employees, and partners, Robertson set about a maniacal plan to do all he could to take away the severance payments given to these good employees. He tried to reverse the severance payments, but of course the employee's banks refused. He then did the unthinkable. He filed a false report with the San Diego police department claiming that the money I, as CEO, had given these good employees as severance had been embezzled by them! Who does something that insane?!? Because he wasn't happy with my decision as CEO about their severance payments, he calls them all embezzlers???

Fortunately, seeing the nonsense in his claims, the police department didn't even open a file up on the case and dismissed it out of hand. However, that didn't stop Robertson from continuing to call these good employees embezzlers, even to this day. For example, Robertson, still calling these employees embezzlers, had false reports filed with the IRS to try and keep the portions of the severance payments which had been withheld for taxes. (The IRS met with all the employees and had them each file a 3949-A fraud report against Linspire, which they each did). Linspire also called these employees embezzlers to try and deny some of their unemployment claims. (They lost on all those attempts as well.)

Michael Robertson ran these employee's names through the mud and did everything he could to get his greedy hands on the employees severance, but alas, to no avail. Two of the employees even offered to give back their well-deserved severance, and Robertson told them it wouldn't be necessary, and yet he continues to this day to call them part of a "criminal conspiracy" to embezzle money from Linspire.

Michael Robertson Sues His Bank

After losing his bogus claims with the San Diego police department, the IRS, and the unemployment office, Robertson decided to sue his bank, Comerica, trying to get the bank to reimburse him for the severance payments, claiming that I was not authorized to wire these to the employees.

So, yet again, Robertson dragged out his ridiculous claims that these severance payments were embezzlement. Even though I was the CEO, and the payments were authorized by me, Robertson claimed that no one but he had real authority to make these severance payments. Not the CEO, CFO, Controller, etc., no one but him. The rest of us were all just embezzlers.

Judge Dismisses Robertson's Case in Summary Judgement

Comerica, also realizing how ridiculous Robertson's claims were, and knowing they were certainly in no way responsible for sending payments instructed by the CEO, filed a motion for summary judgment to have the case dismissed. In other words, they asked the Judge to rule that the case was so groundless, that he kick it out of court and not waste any more of the courts time.

Judge Meyer Rules Robertson's Statements as "Irrelevant."

I attended the hearing which lasted only about a half hour, at which the Judge granted Comerica's motion and disposed of the case in Comerica's favor.

Here are a couple of excerpts from Judge Meyer's ruling:

"Carmony was plaintiff's President and CEO at the time the payment orders were made. Long was plaintiff's Controller. Undoubtedly, both were agents of Plaintiff Linspire, Inc., and were acting within the scope of their agency."

"[The] implied powers of a general agent or manager are very broad, embracing authority to do all acts customarily connected with the business in which he is engaged....An agent has authority: 1. To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency..."

"[Carmony and Long] had actual and apparent authority to cause the payment orders to be issued in plaintiff's name."

At one point during the trial, the Judge seemed frustrated with Robertson's lawyer, and asked him:

"Carmony's the CEO, and Long is the controller! How can there not be authority?"

"Well, I'm not sure I understand. Carmony's the CEO and Long's the controller, and they were at the time of these transactions. How can there be any factual dispute as to whether or not they were authorized agents of Linspire?"

The judge's ruling correctly confirms that I, as CEO, had the authority to wire these employees their severance payments. Sadly, even with a judge saying all this in an open-court ruling, I'm sure Robertson will continue with his false embezzlement allegations against these good employees, showing just what kind of unethical person he is.

Judge Further Rules Robertson's Statements as "Irrelevant"

As part of their "evidence" against Comerica, Linspire included a declaration from Robertson. Filled with nonsense and misstatements, Robertson basically rants that he was the one with the authority, not the CEO. He claims this because I and the laid off employees were all just a bunch of embezzlers. Never one to let the truth get in the way of a good story or lawsuit, he attempted to re-cast layoffs, private executive meetings, and severance payments as some kind of sinister plot carried out by a group of conspiring embezzlers, continually using such words as "secret meetings" and "unauthorized wire transfers" to describe regular business affairs.

Here is what the Judge had to say about Robertson's declaration:

"Because virtually all of the substantive statements made in Mr. Robertson's declaration are irrelevant, the Court declines to issue individual rulings on each discrete objection."

In other words, I was the CEO, wiring the severance payments was authorized, and Robertson just needs to get over it and deal with those facts.

I had told Robertson on numerous occasions and in emails that if he disagreed with how I was running the company, that there were steps shareholders can take to remove a CEO. Those steps were never taken, so I had full authority to give these employees severance, even though Robertson wanted to give them paltry severance for their years of hard work.

Our CFO had an employment agreement guaranteeing him two-years of severance should he ever be terminated. I amended that agreement some time ago, all by myself, without any board approval, and removed the 2-year severance commitment. Interestingly, Robertson claims that I didn't have authority to grant severance payments. If this were true, then I certainly wouldn't have had authority to amended our CFO's employment agreement. Perhaps the CFO should sue Linspire to receive those two years of severance?

Greedy Robertson

Even if Robertson was legally in the right here (which the court has ruled he wasn't), it would still show how greedy he is and how he treats employees. Regardless of court rulings, the fact remains that Robertson wanted to treat these employees poorly, and when I refused to do that, he calls them thieves and embezzlers to get back at me and them. Does it get any lower than that?

Robertson "said" he wanted to only give them the smaller severance so that he could keep as much money in the company as possible for it to succeed. Hmmmm...how did that work out for everyone? In just a few months after I left, Linspire was gone and the shareholders have yet to be told anything. Robertson said he didn't want the employees to get more money, and so who ultimately would have gotten the money if I hadn't paid these employees severance? Robertson! It was very transparent to me then, and remains so today, that Robertson wanted as much money for himself as possible. I believe his greed is pretty evident and should give anyone pause before ever working for him. (If you should ever find yourself considering going to work for Robertson, email me for a list of dozens of former employees you can speak with first about Robertson.)

It was pretty ridiculous for Robertson to think that the bank would pay him money just because he disagreed with the severance amounts I, as CEO of the corporation paid. It gives you an idea as to the alternate reality Robertson lives in.

Rather than running around suing people, perhaps he should just focus on actually building something. I've never sued anyone in my entire life. Have you?

Kevin

*Note: As far as anyone knows (since Robertson isn't talking to shareholders we can't be certain), Michael Robertson is the only employee at Linspire, now called Digital Cornerstone, Inc. So, when Linspire/Digital Cornerstone sues someone, it's Robertson doing the suing.