Tuesday, April 19, 2005

The Collapse of Reciprocal of America

From the New York Times: the story of the decline and fall of Reciprocal of America, a
malpractice insurer based in Richmond, VA, which sold a substantial number of policies in the
South and the Mid-West USA. The story documents the effects of the collapse on physicians,
hospitals, and patients. Some physicians were unable to effectively defend against malpractice
law-suits after their insurer went bankrupt. A few found themselves personally liable for
malpractice judgments, and risk personal bankruptcy. Many physicians lost malpractice coverage, and found that they had to pay more than they expected for new policies. Some hospitals also lost malpractice coverage and also found that new policies cost much more than they had budgeted. Some patients have yet to receive promised compensation.
The failure of Reciprocal was not due to simply bad luck, or even less than brilliant management. Its former CEO, Kenneth R. Patterson, and former Executive Vice President Carolyn B. Hudgins have pled guilty to federal fraud charges. The US Department of Justice is pursuing investigations of other individuals involved with the company.
The Times documents what may now sound like familiar stories of a "dizzying matric of offshore accounts, secret transactions and financial sleight of hand" with "deals in luxurious surroundings, even as Reciprocal itself was falling apart." In fact, the fall of Reciprocal is now linked to larger problems affectin companies such as General Re and American International Group.
Here is yet another story of shady managers of a large health care organization whose mismanagement was to the detriment of patients, doctors, and hospitals.


Anonymous said...

Is there any possibility of General Re/Berkshire-Hathaway being a deep pocket for this tangled case of fraud?

Anonymous said...


check it out on Oct 3rd