Hartford Settles Lawyer’s Suit Involving Treasury Deputy

Hartford Financial Services Group Inc. (HIG) settled a lawsuit by a Texas attorney who accused the insurer of causing him to be prosecuted on bribery charges that were later dropped after a mistrial, a lawyer for the man said.

The lawyer’s negligence allegations against Hartford included claims that the company’s former general counsel, Neal S. Wolin, now U.S. deputy treasury secretary, took part in a cover-up linked to alleged extortion by two employees, attorneys for the lawyer told jurors in opening statements last week.

“We settled today, and I can’t discuss the terms,” John Flood, who represents Texas lawyer Todd Hoeffner, said yesterday in a phone interview when the trial in state court in Houston was halted before Hoeffner was to take the stand.

Wolin, who isn’t named as a defendant in the lawsuit, testified against Hoeffner in a 2009 criminal trial that ended with a deadlocked jury. Wolin’s testimony was to be part of the jury trial that began last week.

Hoeffner was charged with making illegal payments to two claims processors to get inflated insurance settlements for clients suffering from silicosis. The charges followed an internal company investigation ordered by Wolin and given to federal prosecutors, according to court records.

2009 Trial

Jurors at the 2009 trial couldn’t reach a verdict. Hoeffner, later faced with new charges that didn’t include bribery, agreed to pay prosecution costs and the criminal case was dropped.

Hoeffner sued Hartford in October 2011 on claims the insurer lied to the government about him. The motive, he said, was to hide the claims processors’ extortion of $3 million from the portion of the settlements paid to him as legal fees. He accused Hartford of negligence, economic duress, interference with his attorney-client relationships and intentional infliction of emotional distress.

Hartford protected the employees to keep them from telling regulators the company lacked sufficient cash reserves to pay asbestos-related claims at the time of the scheme, and Wolin participated in the cover-up, Hoeffner said in court filings.

Thomas Hambrick, a spokesman for the Hartford, Connecticut- based insurer, didn’t immediately respond to an e-mail seeking comment yesterday on the settlement. He said in a phone interview before the trial that there was “no evidence to support Hoeffner’s allegations.”

Wolin, through his attorney, denied Hoeffner’s allegations and said that when he learned of what appeared to be a bribery scheme involving rogue workers, he ordered company investigators to dig into the matter.

Law Enforcement

“He directed them to investigate the facts no matter where those facts led them, and if they deemed it appropriate, to refer the matter to law enforcement authorities for a full and complete investigation,” James E. Rocap, Wolin’s lawyer, said in an e-mail before the trial. “Any assertion to the contrary is ridiculous.”

Wolin left Hartford in early 2009 to become an adviser in President Barack Obama’s administration. He was named to the second-highest ranking post at the Treasury in May 2009.

As the No. 2 official behind Treasury Secretary Timothy Geithner, Wolin has helped lead the department’s efforts on the Dodd-Frank Act financial overhaul.

The case is Sanchez v. Hoeffner, 2010-15489, 133rd Judicial District Court of Texas (Houston).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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