Anthony Bonomo, a star cooperating witness in the Dean Skelos federal corruption trial and co-owner of the latest Kentucky Derby winner, has been ousted from control of Roslyn-based Physicians Reciprocal Insurers amid charges of self-dealing, cronyism and mismanagement.
New York financial services Superintendent Maria Vullo found in an order issued Thursday that Bonomo breached fiduciary duties to the malpractice insurer, ignored “sound actuarial principles” when setting loss reserves and covered up problems by firing auditors and whistleblowers.
Bonomo ran subscriber-owned PRI, one of New York’s two largest malpractice firms, through a company he owned called Administrators for the Professions. Independent PRI board members ended the insurer’s relationship with Bonomo’s company after Vullo’s order, according to a release.
PRI operated for years with low reserves through legislative “extenders” that exempted it from usual requirements. Former Senate Republican leader Skelos was convicted of corruption based in part on charges he used control over the extenders to get Bonomo to hire his son Adam Skelos.
Issues of Bonomo’s mismanagement were not aired at trial. A spokesman for the Manhattan U.S. attorney declined to comment on Bonomo’s immunity agreement or on how the state audit might affect his credibility if Skelos wins a retrial on appeal.
Bonomo, 59, of Manhasset, a politically connected former head of the New York Racing Association whose horse Always Dreaming won this year’s Derby in May, made a $3 million salary at Administrators for the Professions.
In a statement, a spokesman for Bonomo and the company blasted the “substance and tone of this unprecedented action,” and said if there were real problems the state would have acted long ago. “We will fight this improper and unauthorized action vigorously through all appropriate legal channels,” the spokesman said.
The state said in the order that Bonomo left PRI chronically short on reserves while basing its payments to his company on total premiums rather than PRI’s fiscal performance — providing “every incentive . . . to write as many policies as possible regardless of the risks and costs to PRI.”
Vullo, who made a review of PRI a priority after taking over the Department of Financial Services last year, said Bonomo and his company repeatedly overvalued PRI’s assets to keep it afloat while wasting money on unqualified cronies.
One investment adviser, later convicted of fraud, oversaw portfolio losses of $135 million, and his successor was hired partly because his daughter played with Bonomo’s on a youth basketball team, the state said.
The audit found that Bonomo’s company had failed to repay $4 million it overcharged PRI for administrative services, and used PRI’s assets to make millions in charitable donations to benefit him personally by “promoting his own reputation and ego and not because of any benefit to PRI.”
Altogether, the state said $2 million in donations benefited organizations linked to Bonomo, his brother Carl, or another executive — including $90,000 for a recreational baseball field named after him, $130,000 to Adelphi University where a baseball field was named for Bonomo’s dad, and $95,000 to a church that let a cousin use it to shoot a film.
PRI was founded in 1981, and Bonomo, who sat on the board, said at the Skelos trial that his 315-employee company earned $45 million a year from the insurer. A spokesman for the state Department of Financial Services declined to comment on future legal action to recover money.