BELLNGHAM, WA. – (KGMI.com) The former owner of a long-time Bellingham insurance agency is facing a multi-million-dollar lawsuit in federal court that alleges massive fraud.
PCF Insurance Services states in its lawsuit that it bought Rice Insurance in 2021 and kept previous owner James Fritts on to run the agency.
The buyout agreement included lucrative “earn-out” bonuses Fritts could earn during the first five years based on the company’s year-over-year growth.
PCF alleges in its lawsuit that Fritts devised a plan to inflate the agency’s growth even before the sale agreement was signed.
It claims Fritts and others at Rice kept a second, secret set of books for the company and used undisclosed accounts to pay company expenses and even some employees.
PCF says it learned of accounting discrepancies in July of this year and began an investigation that Fritts tried to obstruct.
It claims it overpaid the earn-out bonuses by $19 million in the first year it owned the agency alone and expects those losses to be much higher.
A call to Rice Insurance requesting comment was not returned, but PCF provided KGMI with this statement:
“Last month PCF initiated litigation against a recently terminated employee at one of our more than 270 brokerage offices after an investigation found evidence of deliberate manipulation of financial records for personal gain. Based upon the investigation we have undertaken to date, we do not believe any customers or carriers have been impacted financially. We are committed to managing a network that operates with the highest levels of integrity.”
Rice Insurance was founded in Bellingham in 1946 and has expanded its operations nationwide.
