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Paper Trail Showed Claim for Scuttled Yacht Involved Fraud, Cigna Alleged By Martin Berg Before the Principe Di Pictor was even built, the luxury yacht had been at the center of complex web of financial transactions. Though DeGeorge and his attorneys deny he engaged in any fraud, documents filed by Cigna's lawyers lay out the plan that U.S. District Court Judge J. Spencer Letts found DeGeorge and his companies concocted. DeGeorge ordered a new, 76-foot yacht from Azimut, a manufacturer of high-quality recreational boats, in June 1992. He agreed to pay a final purchase price of $1.9 million, and take delivery two months later. At the time, DeGeorge was president, chief executive officer, chief financial officer and sole member of the board of directors of Polaris Pictures. On July 26, DeGeorge assigned the contract to order the yacht to a mysterious Swiss-based, Panamanian corporation called Continental Pictures. Cigna attorneys contended Continental was linked to DeGeorge, but defense lawyers said there was no link. The price attached to the yacht, via the assignment, jumped to $3.62 million, according to Cigna attorneys, meaning that in theory, Continental would pay DeGeorge that amount for the yacht. As a result of that agreement, Cigna lawyers said, the purchase price of the boat had risen from $1.9 to $3.62 million. Though the boat was now supposed to be bought by Continental, less than a month later, on Aug. 24, DeGeorge agreed to sell the yacht to a man named Jacob Wizman. According to the "memorandum of agreement," Wizman was to buy the yacht in January 1993 for $3.62 million. A week later, on Sept. 1, DeGeorge entered into another agreement, Cigna attorneys claim, this time with the man who wound up in the dinghy with DeGeorge - Paul Ebeling. According to that agreement, Tridon Corp., of which Ebeling was chief executive officer, would acquire all outstanding shares of Polaris stock - and the yacht - from DeGeorge, in a swap for Tridon stock. Polaris Pictures had never actually produced a movie, but it owned $170,000 worth of scripts, including "The Tool Box Murders II," "Hystero," and "Brass Magnum," according to a private letter DeGeorge wrote Ebeling on Sept. 1. "Good screenplays today can bring over a million," DeGeorge wrote. "Perhaps with a little polishing, one of these could be a hit." In closing DeGeorge noted that the letter was "not intended for publication nor is it to be relied upon by anyone." The Polaris-Tridon agreement also contained an unusual reversion clause - which stated that if either Polaris or Tridon were unable to meet their obligations under the deal, all of Polaris' shares and assets would revert to DeGeorge. Ten days later, on Sept. 11, DeGeorge incorporated U.S. Inbanco, which was to be the "lender" financing purchase of the yacht, and mortgagee. U.S. Inbanco also had a breach of warranty endorsement on the yacht, meaning that even if the owner of the yacht was found to have engaged in some kind of fraud, Inbanco could still collect on an insurance policy. Cigna's lawyers contend that Inbanco never had more than $2,000 in the bank. In late September, according to Cigna, DeGeorge called a Ft. Lauderdale-based Cigna agent, asking for information about insuring a customized yacht. Identifying himself as an attorney for Polaris, DeGeorge didn't mention Continental, Wizman or Inbanco, according to Cigna's lawyers. Then on Oct. 21, DeGeorge's movie company, Polaris, agreed to purchase the yacht from Continental for $3.62 million, with Inbanco to serve as the mortgagee. The following day, the Ft. Lauderdale insurance agent faxed an insurance binder to Polaris and Inbanco. On Oct. 29, DeGeorge made his final payment to Azimut for $1.9 million. "All of these transactions, which had the practical impact of pumping up the vessel's value from $1.9 million to $3.62 million occurred before the vessel ever left the Azimut yard, and none were ever disclosed to plaintiff," Cigna's attorneys contended. Four days later, the yacht, now christened Principe Di Pictor, took off from the coast of Italy. DeGeorge testified that he disclosed all of the information, including his prior yacht losses and the nature of the transactions, in conversations with the Ft. Lauderdale agent. But Ebeling, who said he filled out the insurance application, claimed Cigna never asked for the specific information on the application. In closing arguments in the trial last year, Polaris attorney Gerald L. Kroll, of Beverly Hills' Ward, Kroll & Jampol, told U.S. District Judge J. Spencer Letts that DeGeorge did nothing to disguise or distance himself from the transactions surrounding the yacht. "He paid his own money to order the yacht, his name is on the original documents with Azimut. He called [the insurance agent] himself ... He went to Italy and dealt with Azimut. He's on the boat when the boat goes down. "It doesn't make sense that that rings of anything but someone who's involved in an honest transaction, a legitimate transaction; otherwise, why be there? Why put your name in a document? It doesn't make sense," argued Kroll. Letts found no evidence of any cash transaction between Polaris and Continental or Polaris and Inbanco in connection with the yacht. Instead, he found, "the transaction was 'financed' by a series of sham notes and agreements issued by Polaris, Continental and Inbanco, as to which no evidence was introduced that any of these companies had the assets to pay the notes or honor the agreements." Polaris, Letts ruled, "was placed between the principals of this fraud as a diversion in order to disguise the identity of the person who would get the money in the event of the loss - namely, the lawyer-conspirator," DeGeorge. He also was suspicious of the "unusual" reversion clause. DeGeorge "was the principal of Polaris and had the power to cause a declaration of inability to pay debts at any time for any reason," he wrote. "The court finds this clause to be powerful evidence of deception and of a conscious plan to defraud Cigna by temporarily distancing the lawyer-conspirator from Polaris until the insurance proceeds had been paid." |
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