Aon Corporation has sued the former CEO of its subsidiary in Bolivia for fraud and misconduct it alleges cost the company more than $20 million and the ability to do business at all in the South American country.
In the lawsuit filed June 5 in federal court in Chicago, giant commercial insurance brokerage Aon alleges Jose Luis Contreras Cabezas, who formerly served as chief executive officer, general manager and board chairman of Aon Bolivia and Aon Re Bolivia, funneled funds from the Aon companies to a shell company, Grupcor S.R.L., which he owned with Aon Bolivia’s former chief operating officer, Gonzalo Luis Romero Benavente. The men were the only two shareholders in Grupcor.
The complaint alleges Cabezas used more than $700,000 in Aon Bolivia funds to buy a building in Grupcor’s name, and then leased space in the building to Aon Bolivia. In addition to collecting rent in that building, Grupcor spent nearly $1.5 million in Aon funds to buy office and parking spaces in the city of Santa Cruz de la Sierra, which it then leased to Aon Bolivia.
According to the lawsuit, Cabezas misappropriated additional funds to make payments to himself, including depositing more than $275,000 in a U.S. E*Trade account in his name.
In all, documents, said, Cabezas stole millions of dollars from Aon subsidiaries between 2011 and 2014. The suit alleges counts of breach of fiduciary duty and fraud against Cabezas, and seeks more than $20 million in compensation for its losses, plus court costs and punitive damages.
In the spring of 2014, the Autoridad de Fiscalizacion y Control de Pensiones y Seguros, Bolivia’s insurance regulatory agency, initiated a technical audit of Aon Re Bolivia and found the company had underreported its revenues by more than $675,000 between 2011 and 2014. As a result of the audit’s findings, Aon launched an internal audit of the companies under Cabezas’ management, and he voluntarily resigned from all of his positions with Aon. Aon then hired outside auditor Deloitte to carry out a special audit.
Court documents said audits found Cabezas had underreported revenues, and the Aon and Deloitte audits confirmed he had paid out Aon funds to himself and Grupcor.
As a result of the underreporting, Aon owed unpaid taxes for the difference between its reported and actual revenues. This past spring, Bolivian regulators permanently revoked Aon Re Bolivia’s insurance brokerage license and seized control of the company. Aon is no longer permitted to conduct insurance brokerage business locally in Bolivia, and its retail operations in the nation have been effectively destroyed, the lawsuit states.
The charges state, in addition to falsifying financial records, Contreras willfully concealed his involvement with Grupcor, in violation of Aon’s ethics policies. The lawsuit says Contreras engaged in a number of email and telephone exchanges with Aon’s real estate staff regarding leases with Grupcor, but never revealed he owned 50 percent of the company. The lawsuit notes Contreras even offered twice to buy Aon Re Bolivia from Aon, in an effort to conceal his alleged duplicity.
In arriving at the $20 million figure, Aon included the amount of funds actually misappropriated, the cost of the internal and external investigations into Contreras’ wrongdoing, and the cost of running afoul of the regulatory authority. In addition, his misappropriation left a shortfall in Aon Re Bolivia’s funds that had to be made up with capital contributions from other Aon subsidiaries, the complaint alleges.
The plaintiff has demanded a jury trial. Aon is being represented by Holly A. Harrison and Patrick E. Croke of Sidley Austin LLP.
Founded in Chicago, Aon describes itself as “the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services,” operating in 120 countries worldwide. It has been headquartered in London since 2012.