Days after federal prosecutors announced his arrest for allegedly misappropriating $20 million from his insurance firm, Michael Segal stepped down Thursday as the chief executive officer of Near North Brokerage Inc.
The firm, which for decades has been synonymous with political clout, named John Harney, 38, a senior vice president, to the post of chief operating officer.
Segal is accused of mail and insurance fraud for allegedly raiding a trust fund in which insurance premiums paid by customers were supposed to be set aside before they were transferred to carriers that provided the actual insurance.
Federal prosecutors allege there was a shortage in the fund of $20 million and that the company tapped two insurance carriers last fall to replenish the fund.
Segal, 59, is accused of misapplying the $20 million for business acquisitions and personal expenses.
Harvey Silets, Segal’s attorney, has called the charges specious and said Segal will vigorously defend himself.
Segal is the sole shareholder in the privately held company.
“It’s a testament to his leadership abilities, his integrity and his dedication to our customers that he’s chosen to step aside as CEO until these issues are resolved,” said Sherri C. Stanton, a Near North senior vice president and general counsel.
Near North Insurance Brokerage is the state’s second-largest insurance brokerage, with sales reportedly exceeding $100 million. Harney declined to disclose the firm’s revenue.
It is one of 13 companies Segal owns under the umbrella of the Near North National Group, which employs nearly 1,000 people and has offices nationwide and in London.
Harney said the company “has received a large amount of support from our clients and insurance carriers” since the news of Segal’s arrest.
The company, which was founded by former Cook County Board President George Dunne, has over the decades captured millions of dollars in business from governments and agencies such as Cook County, Chicago, the State Illinois Toll Highway Authority and the state. But on Thursday Harney called the firm’s business with government entities minimal.
He said some details of how the companies will function have yet to be worked out and some of those decisions will be made by a new board of directors who will soon be named.
Last summer, Near North voluntarily reported to the state regulator of the industry, the Illinois Department of Insurance, that there was a problem with the trust fund.
In a press release, Near North said those problems had been resolved, but Nathaniel S. Shapo, the director of the state agency, disputed the company’s assertion Thursday.
“From a regulatory point of view, the matter was not resolved,” he said.
Shapo said the company still must appoint an outside board of directors, provide the state with a detailed report on the trust account, and have state auditors examine its books.
New details were emerging about the company’s finances. Records show Segal obtained a $10 million bank loan in June on his home in Highland Park. The revolving mortgage allows him to borrow as much as $20 million.
“The purpose of the loan was to infuse additional capital into the company,” Silets said.
A 16-acre portion of the estate was held in the name of Near North, Silets said. It was also put up for collateral.
