March / April 2007
 |
 The Future is Bright |
| We just completed our rounds of company interviews and almost all of the surety executives were smiling. Another good year for the industry. We have also had the opportunity to attend a number of construction industry functions, and the contractors and subcontractors were also smiling. No coincidence. The construction market is hot in almost every region, and the outlook for ’07 and ’08 looks very good. At our annual meeting, AGC economist, Ken Simonson will tell us more about the construction outlook for ’07 and ’08.We cannot forget that 2006 was also a very good year for the insurance industry in general. There were no hurricanes, earthquakes or other major natural disasters. Primary and reinsurance markets did very well. Paula Rogers, CEO of Safeco Insurance should also provide us with a broader view of the insurance industry as our keynote speaker in Phoenix.
I would also like to give you my optimistic perspective of our industry based on my year as president of NASBP. “Relationships” remain the cornerstone of our industry. Business is transacted based on trust and honesty every day. Far more than almost any industry I can think of, the enthusiasm and commitment from surety leaders remains high and long term as discipline and underwriting ideas return to our business. This is important because our industry needs passionate and experienced people to continue our recovery and help with the transition to the next generation. I see nothing but opportunity for the young people entering our business. Our firms are eager for young people to learn and take on responsibility. I have had the good fortune to meet many of our 5-15 leadership group and they are bright, talented and full of enthusiasm for our business. Also, in teaching two ethics classes at our Level II school, I came away with a confidence that integrity and honesty are critical to our industry and uppermost in the minds of the young people coming into our business. NASBP also continues to move in the right direction. Dick Foss has assembled a great staff. They bring talent and credibility to our association and an ability to respond to our members and industry issues. Our new web site which I spoke about in my last letter is up and running. It offers a convenient way to keep up with what is happening at NASBP and the industry in general. More is yet to come. Our committees are headed by great leaders and membership participation. Our relationship with SFAA and SIO has never been better, and we continue to dialogue and find ways to work together and improve our industry. We continue to partner with AGC, ABC, CFMA, ASA, ASC and other industry groups to protect our product and improve the industry. We will mark a milestone with the installation of our first woman president. Sarah Finn brings great leadership and the support of a great executive committee. Our association is alive and well. Now a few words of caution. As Shakespeare penned in The Tempest, “What is past is prologue.” Our industry is still in recovery. We need qualified people at all levels, a continued emphasis on ethics, relationships, training, and disciplined underwriting. If there is anything we can count on, it is change; but let’s not make the same mistakes we made before. |
|
|
 |
| The Latest “Cautionary Tale” for Contractors & Producers: The New Morse Diesel Decision |
| Through anti-corruption laws, such as those addressing kick-backs and false claims, the U.S. Government has powerful means to prosecute those contracting with the federal government that do not adhere to proper practices pertaining to billing, documentation, and certain other matters. Federal agencies also are increasingly emboldened to enforce these laws against government contractors, including those performing construction of federal facilities. Construction contractors that bring contract suits against the government should not be surprised by counterclaims alleging false claims violations, and false claims liability can result in the imposition of severe civil and criminal penalties.A construction contractor may incur potential false claims liability in various contexts, such as by falsely certifying compliance with prevailing wage laws, inflating material price invoices; submitting inaccurate or incomplete pricing data; and falsifying records addressing disadvantaged business entity subcontracting. Many alleged false claims practices seemingly arise from carelessness or inattention rather than deliberate fraud, but, for a contractor to incur civil liability for false claims, the government need not show a specific intent to deceive.
A recent decision of the U.S. Court of Federal Claims, Morse Diesel International, Inc. v. United States, decided in late January of this year, sheds light on practices with respect to the billing of surety bond premiums that were construed to violate the federal False Claims Act and the Anti-Kickback Act. Although involving a very complex factual background, the case essentially involved a government contractor that was performing construction work on various federal facilities, including a courthouse and a customs house. The contractor brought separate breach of contract actions against the government, and the government, in turn, asserted counterclaims against the contractor alleging violations of the Anti-Kickback Act and False Claims Act. The government also contended that the contractor violated the Forfeiture of Fraudulent Claims Act, therefore resulting in forfeiture of the contractor’s consolidated claims. The government then sought summary judgment on its counterclaims. In ruling that the contractor engaged in actions that constituted violations of the False Claims Act and the Anti-Kickback Act, the Court pointed out that the contractor had, in multiple instances, requested that its bond producers forward invoices stamped “paid” for bond premiums due, when in fact such premiums had not been paid and were remitted to the bond producers weeks later. The contractor then used that documentation to seek and to obtain reimbursement from the government. The court observed that the contractor had been advised by contracting officers that it could seek reimbursement only for those bond premiums that had been paid. The submission by the contractor to the government of claims for reimbursement of “paid” bond premiums that, in actuality, had not been paid to the bond producer constituted violations of the False Claims Act, found the Court. The Court also reaffirmed an earlier determination that the contractor had engaged in actions that constituted violations of the Anti-Kickback Act. The Court noted that the contractor had submitted claims for reimbursement of bond costs which included amounts representing undisclosed rebates of part of the producer’s bond commissions back to the contractor’s parent corporation and that these rebates never inured to the benefit of the government—that is, were paid or credited to the government. The Court also noted that each contract established that reimbursements solely could be obtained for the actual amount of premiums paid for performance and payment bonds. The Court reasoned that the same actions by the contractor that had been determined to be violations of the Anti-Kickback Act also constituted violations of the False Claims Act. Lastly, the Court ruled that, under the Forfeiture of Fraudulent Claims Act, the contractor forfeited consolidated claims of more than 53 million dollars as a result of its intentional efforts to defraud the government. The Court cited the contractor’s guilty plea in a separate criminal False Claims Act suit as further proof that the contractor had practiced fraud against the government. Without question, Morse Diesel provides sobering cautions for contractors and producers on the billing and treatment of bond premiums on federal projects. Such cautions that in an era of close government scrutiny cannot be forgotten by all who conduct business in and cater to the federal construction marketplace. These materials are provided to NASBP members solely for educational and informational purposes. They are not to be considered the rendering of legal advice in specific cases or to create a lawyer-client relationship. Readers are responsible for obtaining legal advice from their own counsels, and should not act upon any information contained in these materials without such advice. |
|
|
| Director of U.S. Small Business Administration Office of Surety Guarantees Updates NASBP on the Bond Guarantee Program |
| NASBP recently had the opportunity to meet with the Director of the U.S. SBA Office of Surety Guarantees, Frank Lalumiere. Below is a brief summary of some of the points discussed. Mr. Lalumiere also attended NASBP’s Annual Meeting where Mr. Lalumiere discussed the Bond Guarantee Program with interested producers.What is the mission of the SBA Surety Bond Guarantee Program?
The mission of the Surety Bond Guarantee Program is to help small construction businesses obtain bonds, in direct partnership with surety companies and producers. The program targets those small businesses who could not otherwise obtain bonds in the commercial market. With the SBA/Surety Industry Partnership, these small businesses will grow and prosper, and eventually graduate from the SBA program. What is the status of the proposed rule? The Proposed Rule was published in the Federal Register on September 26, 2006 (Federal Register Vol. 71, No. 186, at 56049). Among other proposed changes are an increase in the guarantee percentage from 80% to 90% for Veterans and Service-Disabled Veterans in the Prior Approval Program, a proposed revision that will allow affiliates of Preferred Surety Companies to participate in the Prior Approval Program, and a proposal that will allow Preferred Surety Companies to charge small businesses the rates that have been approved by individual States, as is currently the practice for Prior Approval Sureties. We are now completing a review of the public comments, and will submit the Final Rule for OMB approval in the next few weeks. For more information, click here to view the Pipeline article published this past fall about this Proposed Rule. What is SBA doing to strengthen its relations with the Surety Industry? Surety Companies and Producers are SBA’s customers, and we are committed to enhancing our service to them, as we join hands to help small business. SBA has focused attention on the following key areas of the Program: Claims Cycle Time: The claims process has been re-engineered to reduce cycle times and expedite payment to our customers. e-Application: SBA is developing a new e-Application that is customer driven. The system will permit small businesses, surety companies and producers to submit applications electronically. Full implementation is targeted for July 2007. Is there a point of contact should a surety producer need additional information on participating in the SBG Program? All interested producers should contact Pam Swilling, Program Review Analyst of the Office of Surety Guarantees, at pam.swilling@sba.gov. |
|
|
| The SuretyPAC Seeks Authorizations from NASBP Members to Conduct Solicitation Campaign for New Election Cycle |
| NASBP’s Political Action Committee, SuretyPAC, is the only federal PAC that is 100% devoted to representing the surety industry and establishing and nurturing relationships with candidates running for congressional office. As a trade association whose membership comprises companies, NASBP is required under Federal Election Law to obtain written authorization from the key contacts of its member companies prior to soliciting these companies’ executives and administrative personnel and their families for contributions to the SuretyPAC. To obtain written authorizations, the SuretyPAC has revised its prior approval form and is requesting authorizations to conduct solicitations for 2007 through 2011. If you are interested in providing authorization to the SuretyPAC to solicit your company’s executive and administrative personnel, please click here and complete all information on the prior approval form, forwarding the completed document to NASBP.2007 marks the start of a new, very important election cycle, one that runs through the 2008 Congressional and Presidential elections. To maximize our influence on the Hill, the SuretyPAC will need maximum participation from NASBP member companies to ensure that candidates familiar with and friendly to bond producer and surety interests are supported. At this critical time, please consider authorizing the SuretyPAC to conduct solicitations of your company personnel. The authorization does not obligate anyone to contribute to the SureytPAC; the authorization solely provides the SuretyPAC with the ability to request contributions.
Please note that your company may only approve a solicitation from one trade association in a given year. Contributions to the SuretyPAC are not deductible for federal income tax purposes, and the SuretyPAC will only accept personal, not corporate, checks. If you have questions, please contact Kathy Hoffman at khoffman@nasbp.org or 202-464-1175. |
|
|
| Register Now for the Next Surety School |
| The William J. Angell Surety School Level I will be held August 8-11, 2007 at the Fairmont Dallas Hotel in Dallas, Texas. Limited space is available. Click here for more information and to register on-line. |
|
|
| Students of 2007 Risk Workshop Participate as Contractors in Mock Bid Day |
| The 3-day Risk Workshop, “Analyze Risk and Understand the Bid Process Workshop” was an eye-opening experience for students who created their own construction companies and went through the bidding process. The interactive program placed participants in the boots of the contractor! Special thanks to all of the participants and expert presenters for making the workshop a success. Click here for photos of the 2007 Risk Workshop. |
|
|
| Briefly Noted |
| POSITIONS1) The Hartford Contract Surety Underwriter The Hartford is seeking an ambitious, energetic individual to be trained as a contract surety underwriter in our New Orleans office. We are also interested in any experienced underwriter candidates. Responsibilities:
Requirements:
Contact: Send resumes, via e-mail to: ******************************************* 2) Lockton Companies, LLC Chicago Series Based in Kansas City, Lockton Companies, LLC is the world’s largest privately owned global insurance broker and employs more than 3,700 risk professionals. Lockton provides more than 15,000 clients around the world with insurance, benefits, surety and risk management services. Lockton’s mission is to be the worldwide value and service leader in the insurance and risk management industry, our commitment is “to provide the most uncommon results in a most common business.” Lockton is known throughout the insurance industry as an entrepreneurial, progressive and successful insurance broker. As a result of continued individual and group accomplishments, Lockton has a record of steady and substantial growth. If you are a committed professional with a passion for delivering unparalleled service, Lockton is interested in hearing from you. The Account Manager will be responsible for servicing the bond/surety accounts. Duties:
Preferred:
Requirements:
Lockton Companies, LLC is an equal opportunity employer. As a privately held company, we offer a competitive compensation and benefits package reflecting our commitment to attracting and retaining great individuals. This includes health and dental coverage, which begins on your first day of work, 401(k) with match and immediate vesting, a competitive vacation plan and unrivaled career advancement opportunities. Our Chicago location is in close proximity to Union Station. In addition, the office is near the Blue, Brown and Purple lines and several bus routes. Contact: ******************************************* 3. OLD REPUBLIC SURETY COMPANY Old Republic Surety Company has underwriting opportunities at four locations. With 15 straight years of profit and written premium growth for a 6th straight year, we offer strength and stability for the right career-minded individuals. For marketing-minded candidates who enjoy travel: Locations: Kansas City, Kansas & Minneapolis, Minnesota Responsibilities:
Requirements:
Includes a company car and bonus programs. For desk underwriters desiring limited travel: Locations: Phoenix, Arizona & Irvine, California Responsibilities:
Requirements:
Contact: MEMBERS With sadness, we report the passing of Robert B. Risnychok, Sr., age 63, on March 25, 2007, at his home in Drexel Hill, PA. Bob had served as an NASBP Board Member, Regional Vice President, and Director. He was employed by Risnychok & Associates. He served in the Army during Vietnam War. Bob is survived by his wife Mrs. Regina J. (Copple) Risnychok; daughter-Amy R. Urban (Daniel) of Sellersville, PA; son-Robert B. Risnychok, Jr. (Michelle) of Concord Twp, PA; son-Gregory J. Risnychok (Nichole) of Blue Bell, PA; sister-Dianna (Risnychok) Hill of Hatboro, PA; and brother-Theodore Risnychok of Blue Bell, PA. In lieu of flowers, contributions may be made to Delco Memorial Foundation, c/o Delaware County Memorial Hospital, 501 N. Lansdowne Ave., Drexel Hill, PA 19026 or on-line by clicking here. Click here to make an entry in the online guest book for Bob. NASBP sadly announces that Roland Seaburn Hines, Jr., age 60, of Pelham, AL, passed away on April 3, 2007. Roland was active in the NASBP and President of Hines, Ridolphi and Associates and Hines, Ridolphi, Carper and Aman insurance agencies of Birmingham, AL. Roland was born in Mobile, AL and moved to Birmingham in 1970. He is survived by his wife, Susan Ethel Lavinghouze Hines of Pelham, originally of Mobile; sons, Roland Seaburn (Burnie) Hines, III, Benjamin Jason Hines and Brian Andrew Hines; sister, Rebecca Sue Hines Lund; and several grandchildren and nephews. In lieu of flowers, donations may be made to Hunter Street Baptist Church by clicking here; Stonecroft Ministries by clicking here; or to the American Cancer Society by clicking here. Click here to make an entry in the online guest book for Roland. NASBP sadly reports that Raymond Ellsworth Pierce, age 84, passed away March 17, 2007 at Meadow Ridge Nursing Center, Redding, CT after a brief illness. Ray was active in the NASBP and had opened his own firm, Raymond E. Pierce Inc., in Falls Church, VA which specialized in surety bonds for the construction industry. Born in Belleville, New Jersey, Ray attended Columbia High School in Maplewood, NJ and later joined the Army Air Corps during World War II. In 1949, Ray graduated from Franklin & Marshall College where he was a member of Chi Phi fraternity, college swim team, and college band. In 1964, he married Elaine Martin who designed their home in Fairfax, VA. Ray is survived by his two nieces, Doris Ingber & Janet Adair; a grandniece, Lauren Cassie; two grandsons, Andrew & Troy Martin; and eight great grandchildren, Rebekah, Rachal, David, Daniel, Matthew, Abigail, Anna Rose, & Michael Martin. Donations may be made to the Parkway Assembly of God, 260 New Canaan Avenue, Norwalk, CT 06850 or to the Mid Fairfield Hospice, P.O. Box 489, 180 School Road, Wilton, CT 06897. |
|
|
| Treasury Announces Changes to the T-List |
The Department of the Treasury’s Listing of Approved Sureties (Department Circular 570) has been updated to reflect:
For a complete listing of all states where these companies are licensed to transact surety business, please refer to the Circular 570 at: http://fms.treas.gov/c570/c570.html. |
|
|
| Welcome New NASBP Members |
| NASBP welcomes the following new members who have joined the Association since the last issue of Pipeline.Bond Placements, Ltd. bondplacements@aol.com Denver, CO Key Contact: Gregory Hettinger Bond Services of California, LLC Six & Geving HKMB International Insurance Brokers Surety Placement Services LLC TIS Insurance Services Turner Surety and Insurance Brokerage, Inc. Viking Bond Ward Insurance Agency, Inc. Webb, Young, Webb, Liles & Tolentino |
|
|
| SIO Revises Two Popular PowerPoint® Presentations |
SIO has updated two popular PowerPoint® presentations available free through the SIO Web site:
These presentations are among 15 that can be downloaded from SIO’s Web site. Be sure to order free SIO materials to distribute to your audience. |
|
|
|
Get Important Surety Industry News & Info
Keep up with the latest industry news and NASBP programs, events, and activities by subscribing to NASBP Smartbrief.
