Pelham Man Pleads Guilty to Mail Fraud Scheme Involving Fraudulent Surety Bonds
CONCORD - Leo Rush, 76, of Pelham, pleaded guilty in federal court to mail fraud, United States Attorney Scott W. Murray announced today.
According to court documents and statements made in court, Rush ran the Newport Insurance Company from his home office in Pelham. As Rush knew, the Newport Insurance Company was not licensed to sell insurance in New Hampshire or any other state. Rush also maintained a website for the company that listed a false address in Rhode Island.
From 2012 through 2019, Rush sold fraudulent surety bonds through Newport Insurance Company for construction projects in several states. Surety bonds are a form of insurance, subject to oversight by state insurance regulatory agencies. For certain construction projects, contractors are required to purchase surety bonds from licensed insurance companies to ensure that workers and material suppliers are paid and to ensure that a contractor’s work is completed and performed according to a contract’s specifications. Thus, if a contractor defaults on a contract, the owner of the construction project can trigger the surety’s obligation and receive payments required to complete the contract up to the value of the bond.
Rush sold these surety bonds knowing that they were fraudulent. He knew his company was not a licensed insurer and that it did not have the financial ability to make payments equal to the value of the bonds. In fact, after the deposits were made in the Newport Insurance bank account, Rush used the proceeds for his personal benefit, leaving no money to make payments on claims made against surety bonds.
From 2012 through 2019, Rush’s victims paid him over $633,000 for fraudulent surety bonds valued at over $23 million.
Rush is scheduled to be sentenced on December 10, 2020.
“Financial crimes cause serious harm to victims and deprive them of their hard-earned money,” said U.S. Attorney Murray. “Through this deceitful scheme, the defendant obtained over $600,000 from his victims, while subjecting them to the risk of major financial loss in the event that they needed to file a claim against his fraudulent surety bonds. To stop this type of criminal activity and seek justice for victims, we work closely with our law enforcement partners to identify and prosecute fraudsters and other white collar criminals.”
“Mr. Rush’s conduct is inexcusable. With today’s guilty plea, he is finally taking responsibility for deceiving and defrauding his clients out of hundreds of thousands of dollars by selling fake insurance policies that would have left them in serious trouble if claims were made, since he did not have the money to back them,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “Individuals like Mr. Rush who engage in this type of financial fraud should know they will not go undetected, and sooner or later, they will be brought to justice. We thank the New Hampshire Insurance Department for its partnership in this investigation.”
This matter was investigated by the New Hampshire Insurance Department and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Matthew T. Hunter and former Assistant U.S. Attorney Robert Kinsella.