When Doing Business in Italy Means a Box of Bullets in the Mailby and
Insurer says Italian broker stole data and paid off abitrator
Filing tells tale of private eyes and undercover operations
The box arrived at his home in Italy and, when he opened it, the insurance executive was chilled by its contents: nine bullets, one each for him, his wife and their seven children. Sent by "persons unknown," the package is one of the more lurid elements of an international saga of private eyes, secret recordings and claims of bribery.
AmTrust Financial Services Inc., a New York-based insurer, describes the episode in a U.S. lawsuit against a former business partner in Italy after a deal went sour. The company says its Italian chief received the bullets though it doesn’t name the sender. AmTrust does, however, contend that its spurned ex-partner stole data, tried to poach staff, demanded more than 1 billion euros ($1.13 billion) it had no right to, and then bribed an arbitrator.
The allegations are contained in a lawsuit filed in federal court in Manhattan this month and suggest that doing business in Italy, which ranked the worst of any Eurozone member in Transparency International’s 2015 corruption index, is not for the faint-of-heart.
Antonio Somma, whose company was once AmTrust’s exclusive insurance broker in Italy, is accused of bribing Marco Lacchini, president of two arbitration panels in Milan. The alleged goal was to get him to issue rulings forcing AmTrust to pay hundreds of millions of dollars to settle a fight over the early termination of their business relationship. AmTrust, which has expanded to 20 countries and more than $17 billion in assets since its founding in 1998, says Somma offered Lacchini 10 percent of the final award.
Posing as Chinese Investors
In its New York suit against both Somma and Lacchini, AmTrust says it hired private investigators who posed as middlemen for Chinese investors and recorded Somma bragging about the alleged scheme. Separately, it says, the investigators taped Lacchini describing his ability to assure "amazing results" in arbitration.
Somma, 54, denies the claims, accusing AmTrust of seeking to delay the arbitration and fabricating evidence.
"I am flabbergasted," Somma said when reached for comment. "All allegations against me are groundless and even scandalous." He said AmTrust would pay for the damage it was causing.
Lacchini, 50, declined to comment when reached by phone. Neither has yet responded in court.
Michael Carlinsky, AmTrust’s lawyer with Quinn Emanuel Urquhart & Sullivan LLP in New York, said Somma’s claim that AmTrust faked evidence "is untrue and reflects Somma’s desperation." AmTrust had $6.8 billion in gross written premiums in 2015, an increase from $2.2 billion four years earlier, regulatory filings show. In 2009, the company began underwriting medical malpractice insurance in Italy and in 2012 opened its Italian branch which now generates 5 percent of its premiums.
Whether or not AmTrust proves its case, Italy continues to fight an uphill battle against graft despite a beefed-up anti-corruption law passed in 2012.
"There is still a need to catch up with the Anglo-Saxon countries," said Paolo Boccardelli, a dean at LUISS Business School in Rome, while praising Italy for being on the right path.
Somma founded Naples-based Trust Risk Group Spa in 2010, becoming one of AmTrust’s first insurance brokers in Italy. In early 2011, Somma and AmTrust CEO Barry Zyskind struck an exclusive deal under which Trust Risk would collect and remit premiums on policies underwritten by AmTrust for a commission, the suit says. Ties grew deep, with the Italian attending meetings in New York and traveling on AmTrust’s corporate jet, it adds.
But by 2013, according to the suit, Somma was planning to compete with AmTrust and tried to poach two employees. He enlisted his daughter’s boyfriend, Attilio Schettino, to work as an analyst at AmTrust’s London office in what AmTrust says was a bid to steal proprietary data.
Downloaded Secret Data
In January 2014, Schettino allegedly downloaded secret data about AmTrust’s policies and claims to his personal cloud-based storage account. Later that year, he copied a database of malpractice claims from his AmTrust laptop onto his personal computer, according to the complaint. AmTrust said it detected the breach and had Schettino walked off the premises.
Schettino, who isn’t named in the complaint, said in a phone call that the claims are unfounded.
AmTrust parted ways with Trust Risk and says Somma concocted a bogus excuse to seize 50 million euros in premiums.
In Nov. 2014, the Italian Criminal Court froze most of Trust Risk’s bank accounts after finding Somma misappropriated those premiums -- a decision upheld on appeal. Italy’s insurance regulator then expelled Somma as a broker.
With Somma’s alleged scheme in tatters, he launched his apparent backup plan -- allegedly bogus arbitrations against AmTrust and its European unit -- to force AmTrust to choose between paying exorbitant settlements or face "potentially ruinous awards," AmTrust says.
It says the bullets arrived six months later. The company’s lawyers declined to provide details, citing safety concerns. The insurer didn’t specifically accuse Somma or Lacchini of involvement. In his interview, Somma said AmTrust sent the bullets itself. AmTrust denies that.
Around the same time, AmTrust contends, Somma began sending "taunting and threatening" text messages to CEO Zyskind. One said, “My friend, I hope you and your family are comfortable, I think you have to start to get the money, thanks,” according to the suit.
Suspicious of Somma’s "aggressive behavior," AmTrust hired a business intelligence firm. Two of its private investigators met Somma in Rome on Feb. 12, saying they wanted to introduce him to Chinese investors. They asked Somma about the AmTrust dispute and taped the conversation.
400 Million Euros
Somma "told the investigators that the dispute would be resolved on November 8, 2016, and that the result would be a decision awarding him 400 million euros," according to the suit. Prompted by the investigators to explain, Somma told them, "The arbitration is a man" and then "rubbed his thumb against his fingers in a gesture commonly understood to indicate money," the complaint states.
According to the complaint, one investigator responded, “That’s the Italian way.” He then asked Somma if he could ask him something “very, very, very private," namely how much Somma had paid for a positive outcome.
On a slip of paper, Somma wrote “10%,” AmTrust said in the complaint. “What I wrote to you tonight ... not even my wife knows,” he said, the suit contends.
The same business intelligence firm sent investigators to meet with Lacchini, pretending to seek his involvement in a new business academy being established in the Middle East, according to the complaint. AmTrust says the investigators asked Lacchini whether it was possible to ensure the result of an arbitration.
"Lacchini stated that when he is the president of an arbitration, he can assure the result of it, and he bragged about ‘amazing results’ he had achieved in arbitrations in Italy, including a result he obtained for a party asserting claims against Deutsche Bank," AmTrust said in the complaint.
Troy Gravitt, a spokesman for Deutsche Bank AG, said in a statement: “While the matter referenced in the AmTrust complaint was resolved, the allegations concerning potential impropriety by the arbitrator are obviously concerning and we are reviewing them carefully.”
AmTrust said its arbitrations with Somma were suspended after it petitioned an Italian court. No settlement was reached and no final award was issued, but AmTrust says it has to pay almost half a million dollars for service fees in the "sham" arbitrations.
The Milan courthouse chief, Roberto Bichi, said he’s not in a position to comment on the proceedings, which are independent. He wouldn’t confirm whether the arbitrations against AmTrust had been suspended.
"The court is evaluating the recusal of the arbiter," Bichi said.
Adam Karkowsky, AmTrust executive vice president of strategic development, said in a statement that the company still has a "solid foundation" for success in Italy but has been taught an expensive lesson: "We have learned the value of choosing the best possible partners in all of our markets."