Schmidt, Charter's ex-chief, charged with $1 million theft

October 25, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

A Baltimore County grand jury yesterday indicted the former chief executive of Charter Group Inc. of Towson, who disappeared last year after allegedly stealing or diverting nearly $1 million of company and policyholder money.

Hamilton A. Schmidt, 39, who was last seen by an auto dealership worker who dropped him off at Penn Station on Sept. 14, 1993, was charged with two counts of theft and 15 counts of embezzlement.

Among the alleged victims: 13 insurance companies that did not receive $622,000 in premiums customers paid Charter for health insurance premiums between July and September last year; a group of more than 30 savings and loan associations that paid $115,000 for Charter to pass along to Blue Cross and Blue Shield of Maryland to administer health care plans; the company itself, from which Mr. Schmidt is charged with taking $105,000 in unauthorized pay; and Charter's employee stock ownership plan, from which Mr. Schmidt allegedly stole $110,000 in the form of a "loan" that he repaid with company stock he did not own.

Authorities still don't know where Mr. Schmidt is.

"He was heading either to New York or Washington," said Maryland Attorney General J. Joseph Curran, whose office presented the case to the grand jury. Mr. Schmidt, who lived in Parkville, was dropped off at the train station after leaving his company Cadillac at a downtown dealership for service.

Officials believe Mr. Schmidt probably did not flee the country because most of the embezzled money went into supporting the overhead of a once-thriving business, leaving little to support Mr. Schmidt on the road.

"He got stuck with a lot of fixed expenses," said Stewart H. Rosenberg, president of Oak Insurance Inc. of Timonium. Oak bought Charter's assets from ITT Hartford Insurance Group of Hartford, Conn. last year, after the insurer foreclosed on a $3.55 million loan Charter had taken out to allow its employee stock plan to buy out former partners in the agency.

Mr. Rosenberg said Charter was once capable of supporting the overhead, but business fell sharply between 1992 and 1993 and premium rates also declined as the casualty insurance business went through one of its frequent price wars.

"He tried his best to keep it afloat," Mr. Rosenberg said. "But running out of town doesn't solve anything."

He said the company sold enough policies to generate $30 million in annual premiums at its peak, around 1992, but only $10 million by the time Oak took over operations. He blamed Mr. Schmidt's poor management of Charter's sales force after becoming president in 1990.

"He [angered] the commercial [insurance] brokers," Mr. Rosenberg said. "They took their business elsewhere."

People involved in the tangled case of Mr. Schmidt and the Charter Group -- which includes the company's continuing bankruptcy case and other civil actions, some of which have been settled -- say Mr. Schmidt diverted money other than that named in the indictment.

James A. Vidmar Jr., Charter's bankruptcy lawyer, said Mr. Schmidt also borrowed $700,000 from the company in 1990 to buy stock in the firm. That stock is now worthless, but the money is not in Mr. Schmidt's pocket because he spent it on the stock.

Mr. Rosenberg said a credit card company also took a big loss on Charter because of Mr. Schmidt's love of softball, but that was not part of the indictment.

"He took [the company softball team] to Disney World and stuck American Express with that bill," Mr. Rosenberg said. The Sun last year quoted people who estimated the softball team's travel tab at $45,000.

Mr. Schmidt also had the company pay for personal expenses, such as the care of horses, said Mr. Rosenberg.

However, Mr. Curran and Mr. Rosenberg said Charter's clients lost little, if any, money. Because Charter was the legal agent for the 13 health insurance companies whose customers paid Charter the $622,000, Mr. Schmidt's alleged theft was not the policyholders' responsibility.

The Maryland League of Financial Institutions, which represented the S&Ls for the purpose of buying health insurance, was not covered by this provision. But their loss, which equalled about one month's premiums, was covered by Oak in exchange for keeping the business.

ITT Hartford spokeswoman Connie Gurney said the company will take an undetermined loss on the $3.55 million loan to the ESOP.

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