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Berkshire Hathaway and underwriting unit sued for running ‘reverse Ponzi scheme’

A New York City-based courier service has sued Berkshire Hathaway Inc. and one of its companies, saying they’ve been running a “fradulent scheme” by misusing premiums that were supposed to be used for funding its workers’ compensation coverage.

Breakaway Courier Systems in a lawsuit filed Friday said Berkshire BRK.A, +1.55%BRK.B, +1.60% and its Applied Underwriters company have engaged in what was “essentially a reverse Ponzi scheme.”

Breakaway said it was led to believe that funds for discounted workers’ compensation insurance were being put into “protected cells” which would eventually be returned.

“Instead, Berkshire Hathaway illegally siphons off premiums through an unlicensed, unregistered and undercollateralized Hawaiian entity, leaving New York employers and injured workers without the funds that New York State requires to be available to cover losses due to worker injuries,” according to the complaint.

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