OneAmerica Securities Inc. has agreed to pay the state $805,000 to settle allegations it failed to supervise a former representative who helped orchestrate an $8.9 million Ponzi scheme in Ohio, Kentucky and southeastern Indiana.
The Indianapolis-based company did not admit to any liability in the agreement with the Indiana Securities Division, which plans to distribute the settlement funds to victims of the fraud who agree to sign a release agreement in favor of OneAmerica.
The agreement, filed Oct. 17, says OneAmerica agreed to the settlement "to avoid the expense and uncertainty of litigation and the potential impairment of its goodwill." A OneAmerica spokeswoman the company does not comment on legal matters.
The company disputed the state's claim it failed to supervise Jerry Smith of Brookville, a OneAmerica "registered representative" from 2005 to 2008. A federal judge in 2013 ordered Smith, who entered into a plea agreement, to serve more than five years in prison and pay $5.4 million in restitution for his role in a Ponzi scheme led by Jasen Snelling of Cincinnati.
Snelling, who also reached a plea agreement with federal prosecutors, was sentenced to 10 years in prison and ordered to forfeit $5 million and pay another $5.3 million in restitution.
Federal prosecutors said investors were promised returns of 10 percent to 30 percent, and often dug into retirement accounts to invest, but Smith and Snelling spent most of the money on their own lavish lifestyles.
Valerie Kroeger, a spokeswoman for Indiana Secretary of State Connie Lawson, said Smith took advantage of his position of trust as an insurance agent to convince friends and neighbors in Franklin and Dearborn counties to invest in funds under the names CityFund Advisory and Dunhill Investments. In reality, they routed the money into their own bank accounts.
"He knew these people, and they trusted him," Kroeger said. "He took advantage of that."
Smith still could face additional penalties at the local level. He's awaiting trial on multiple counts of criminal securities fraud in Franklin County.
During the period Smith was a "registered representative" of OneAmerica, investor losses in Indiana were about $2.1 million, according to the company's agreement with the Indiana Securities Division.
The Snelling-Smith fraud cost investors in Indiana a total of about $4.5 million, Kroeger said.