[December 16, 2020]

Court Agrees with Peretz & Associates' Defeat of Greenspan Adjusters International's Attempt to Hide Illegal Conduct in Whistleblower Lawsuits

The Superior Court of California, County of San Francisco recently rejected attempts by The Greenspan Company/Adjusters International, Greenspan Adjusters International, Inc. ("Greenspan") and its Directors Gordon Scott, Paul Migdal, Steve Severaid, Clay Gibson and Mark Fratkin (the "Individual Defendants") to suppress the facts alleged by Masood Khan, a former Vice President and Assistant General Counsel, and Gary Johnson (News - Alert), a former CEO and President of Greenspan Adjuster International, Inc. in two key rulings in their lawsuits contending illegal conduct, regulatory violations, work place discrimination, hostile work environment and corporate malfeasance.

Court Denies Greenspan's Attempt to Hide the Facts in Masood Khan's Case

First, the Court denied Greenspan's motion to seal Mr. Khan's legal complaint to try and sweep away damaging facts of unethical behavior out of the public record. Greenspan improperly contended that Mr. Khan's lawsuit contained numerous allegations that were protected by the attorney-client privilege because Mr. Khan allegedly learned the information as Greenspan's Assistant General Counsel. Mr. Khan exposed that Greenspan illegally allowed Mark Fratkin to engage in the unauthorized practice of public adjusting and insurance transactions, which requires a license to practice in California under the Public Insurance Adjuster Act at California Insurance Code § 15006 ("PIAA" - available HERE). in Washington under Revised Code of Washington Section 48.17.060 ("RCW" - available HERE), and Federal Law at 18 U.S.C. Section 1033 (available HERE), because Mr. Fratkin was ineligible to obtain a license due to two prior felony convictions for embezzlement in 1991. (Copies of the court dockets of the criminal cases against Mr. Fratkin can be found HERE and HERE.)

Mr. Khan's whistleblower allegations contend that despite these felony convictions, Greenspan permitted Mr. Fratkin to act as a de facto officer and director of Greenspan and manage and operate its sales, marketing, business development, claims, and other operational departments; and also allowed Mr. Fratkin to impersonate other Greenspan employees, including Mr. Khan, to solicit potential clients and on other external communications. Mr. Khan has also alleged and intends to demonstrate that Greenspan and the Individual Defendants harassed him in a racial discriminatory and hostile work environment. (A copy of Khan's complaint can be found HERE. - CGC-19-581129)

An evidentiary hearing was recently held by San Francisco Superior Court Judge Ethan P. Schulman on whether Mr. Khan's lawsuit was subject to private arbitration under an arbitration agreement, keeping them out of the public eye. During the hearing, Mr. Khan testified that there was a "directive" from Greenspan and its "highest levels" of management including the President, Gordon Scott, and General Counsel, Paul Migdal, that sales and other activity subject to licensing requirements ere essentially under the direction of Mr. Fratkin. Greenspan maintained that "any and all emails related to sales or certification had to go by [Mr. Fratkin]," and provided Mr. Fratkin with control over "a generic email address, as well as other individuals' email addresses, including" Mr. Khan's, to engage in unethical conduct. At the same time, Mr. Khan testified that Greenspan and the Individual Defendants "knew that Mark was [a] convicted felon," and "unlicensed solicitor," and "couldn't get licensed." Thus, Mr. Khan testified, Greenspan buried the perception that Mr. Fratkin was engaged in this activity by instituting a policy that Greenspan "should not list him [Mr. Fratkin] on any emails going outside the company to insurance company people or clients" because "that would be considered unauthorized practice of public adjusting," which Mr. Khan contends is unethical.

Under questioning from Mr. Khan's attorney, Yosef Peretz, Mr. Fratkin admitted that he was convicted of "three counts of embezzlement of [sic] fraud that involved over a million dollars of allegedly embezzled funds" in 1991. Mr. Fratkin admitted these convictions caused him to surrender his license as a public adjuster at that time, because he was "sure it would have been revoked" otherwise. Despite this, Mr. Fratkin also admitted that he had "effectively performed [the] functions of a "director of sales at Greenspan" for the last five or six years, admitting "that's the role that I act in, yes." Mr. Fratkin also characterized himself as "the highest level administrator at the company, involved in anything and almost everything as far as the - primarily sales, marketing, and business development." Mr. Fratkin claimed to "have been involved in almost every aspect of the Greenspan Company as we, as a group of people who manage the company," to "have a lot of roles and a lot of tasks involving either "management, finances, I.T., and sales" of the company, and Fratkin claimed to "have more institutional knowledge than most, perhaps anyone at Greenspan." Mr. Fratkin also admitted that Greenspan employed as company policy that he was "not to be copied on email, only bcc" on external company emails. Mr. Fratkin admitted this policy was put in place because "what we [Greenspan] don't want to do was put my name out there because we didn't want an insurance company to ask questions…the insurance company would like nothing more than to find a reason to come after us. And so it was real simple: Don't cc Mark because he's not doing anything that needs to be cc'd in that vein; we don't need the other side to see this." That is the reason Mr. Fratkin also admitted that he did not obtain a waiver from the California Department of Insurance ("DOI") necessary for him to work at Greenspan until 2019, only after a whistleblower complaint was filed with the DOI concerning Fratkin's unlicensed and improper activity. Mr. Fratkin answered these questions in reference to internal emails memorializing the Fratkin's sales and email policy, which stated "Mark should never show as a cc on emails to ins companies, clients etc. Only a bcc as needed." (available HERE.) A copy of the transcript of these proceedings, held on October 30, 2020 and November 3, 2020, can be found HERE (October 30, 2020) and HERE (November 3, 2020).

In the ruling issued by Judge Schulman with respect to Greenspan's motion to seal and hide damaging facts, the Court categorically denied Greenspan's unsupported arguments to shield its dirty laundry. The Court found that Greenspan's reliance on a "general assertion" that Mr. Khan "advised Greenspan on legal matters including issues related to allegations in the First Amended Complaint'" and a "conclusory sentence" in a declaration submitted by Greenspan's current General Counsel Paul Migdal was "entirely inadequate" to establish that the complaint contained privileged information worth sealing. The Court also questioned Greenspan's motivations, finding "Greenspan's lengthy delay…strongly suggests that its motivation in seeking to seal the pleadings is to avoid adverse publicity, not to protect genuinely privileged or proprietary information." (A copy of the Court's findings and rulings in support of Mr. Khan is attached HERE.)

Court Recognized Mr. Khan's Rights to Pursue his Lawsuit in Private Arbitration

Second, the Court separately ruled that Mr. Khan's lawsuit must proceed in private arbitration, pursuant to a written arbitration agreement Mr. Khan had allegedly signed in 2017. On December 10, 2020, Greenspan issued a self-serving press release which wrongly claimed the Court dismissed the lawsuit. In their statements, named defendants Gordon Scott and Clay Gibson attempted to down-play the seriousness of Mr. Khan's allegations by improperly misrepresenting the Court's order finding that a private arbitration agreement existed as constituting a full dismissal of Mr. Khan's allegations. The Court did no such thing, and Mr. Khan's claims will continue in private arbitration.

Greenspan's press release also falsely stated that Mr. Khan voluntarily left the company to join SunPoint Public Adjusters, Inc. ("SunPoint") and compete directly with Greenspan. SunPoint and its affiliates is another public adjusting firm that was successfully operating and serving the public many years prior to Mr. Khan's joining the firm. But Mr. Khan was left with no choice but to resign from Greenspan due to intolerable working conditions, racial and national origin discrimination, and illegal activity and did not resign because he desired to help form SunPoint. In arbitration, Mr. Khan intends to demonstrate that Greenspan and the Individual Defendants violated regulatory requirements, created a hostile work environment, and failed to live up to industry ethical obligations, such as those promulgated by the National Association of Public Insurance Adjusters (available HERE). It will be left to the private arbitrator to decide his whistleblower complaints of illegal conduct, a hostile work environment due to racial and other discrimination, and improper workplace harassment. Contrary to Greenspan's self-serving press release, the Court did not decide the merits of the case or make any findings on whether Mr. Khan acted unethically at any point.

Johnson's Lawsuit of Discrimination and Wrongful Termination Is Not Over

Mr. Johnson recently voluntarily dismissed from his lawsuit a portion of his claims against Greenspan alleging violations of California employment discrimination laws, after the Court ordered that those claims were required to proceed to private arbitration. Mr. Johnson preserved his non-employment related claims against Greenspan in his lawsuit, alleging violations of fiduciary duties owed to him as a shareholder of Greenspan. These allegations include the claim that Greenspan's employment of Mr. Fratkin as a de facto officer and director of sales and operations was illegal and tantamount to the unauthorized practice of public adjusting due to his prior felony convictions. Mr. Johnson also alleged that Greenspan's directors misappropriated significant sums from the company for their own purposes, including "funding personal trips, purchasing prostitutes, [and] holding extravagant parties in strip clubs during which lap dances and other sexual acts were paid for with corporate funds." (CGC-20-583239). These claims will continue to be vigorously litigated in the San Francisco Superior Court. Both Messer. Johnson and Khan intend to seek justice for the wrongdoing and unethical conduct by Greenspan and the Individual Defendants.

For more information concerning these lawsuits, contact Yosef Peretz at (415) 732-3777 or via email at [email protected].

View source version on businesswire.com: https://www.businesswire.com/news/home/20201216005925/en/

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