Seven failed self-insurance funds operated by Compensation Risk Managers LLC (CRM) of Poughkeepsie and two others that failed in 2006 under the management of Consolidated Risk Services (CRS) have been linked together by a common thread.
According to documents provided by the New York Workers’ Compensation Board, Daniel G. Hickey Jr. and Martin D. Rakoff were involved in the development of insurance funds managed by CRM and CRS. Hickey is the chief executive officer of CRM Holdings Ltd., CRM’s parent organization. Hickey and Rakoff founded the company in 1999, which Rakoff left as co-chief executive officer in 2006 with a $3.3 million severance agreement.
Hickey would not comment on his involvement with CRS nor would he agree to an interview, which was communicated through his spokesman. Rakoff could not be reached.
Final state audits are being conducted to find out what went wrong with CRS’ funds. These audits will hopefully provide insight into the problems that brought down CRM’s New York funds. The Workers’ Compensation Board is planning for final “forensic” audits of CRM’s funds, also called trusts.
The trusts were organizations comprised of similar employers that came together to provide less-expensive insurance coverage for workers injured on the job. The understanding was that if money ran out, the employers, not an insurance company, would be responsible to cover shortfalls.
Seven of CRM’s eight New York trusts and two CRS trusts accumulated heavy deficits.
The 89-member Manufacturing Industry Workers’ Compensation Self-Insurance Trust, which was formed in 1997, closed in 2006 and had a $9.7 million deficit. The 46-member Provider Agency Trust for Human Services Workers’ Compensation Trust, which was formed in 1996, had a $16.9 million deficit. Both trusts had deficits almost every year of operation, according to the forensic audits. State officials believe that CRM principals played a role in the CRS trusts.