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Con artist linked to ‘micro nation’ guilty of insurance scam that stole $700,000 from customers

Photo Credit: Cliffview Pilot

ONLY ON CLIFFVIEW PILOT : A scam artist tied to a “virtual nation” that claims “ecclesiastical sovereignty” similar to Vatican City was convicted by a New Jersey jury for his role in swindling victims out of $700,000 in premiums to an insurance company that didn’t exist. Some of those conned told jurors they had to sell their businesses when claims weren’t paid.

The “official” seal of The Dominion of Melchizedek

Federal jurors in Camden convicted Ronald Allen of conspiracy to commit mail and wire fraud after a seven-day trial — thanks, in part, to testimony by a former accomplice, Gilbert Morgan, 62, of Houston.

Morgan pleaded guilty on Sept. 22, 2008, helped federal prosecutors build their case against Allen and then testified during the trial in a bid to lighten his  eventual prison sentence. U.S. District Court Judge Jerome B. Simandle scheduled Morgan’s sentencing for Jan. 28.

Allen, 62, of North Hollywood, just outside of Burbank, has been linked to the Dominion of Melchizedek (DoM), a “micro nation” known for large-scale banking and trading frauds throughout the world, CLIFFVIEW PILOT has found.

Created in 1986, the DoM is based on the Biblical legend of Melchizedek, known as a priest-king, and claims Jerusalem as its homeland. It has published its own Bible, claimed sovereignty over areas of the world that already belong to other countries and saw its founders convicted and imprisoned for a host of financial frauds.

Although an early news report dubbed it the first “online nation,” the U.S. Securities and Exchange Commission labeled the DoM “non-existent.” Hundreds of investors in various parts of the world have lost money in purported investment, fantasy passport and employment scams run by several “banks” licensed by Melchizedek, authorities in several countries have reported.

Federal prosecutors said Allen claimed to be the president of Universal Pacific Insurance Company Ltd., a corporation that was listed on the Belize International Stock Exchange after purportedly being created in Fiji. The company didn‘t have a license to sell insurance in the U.S. and, in fact, a sham, they said.

Allen recruited Morgan in early 2004, they said. Over the next nine months, Morgan — who specialized in selling commercial general liability policies to bars, nightclubs, and restaurants — sold customers liability insurance in the name of Universal Pacific, even though he knew the company was bogus and didn’t have the ability to pay any claims, U.S. Attorney Paul J. Fishman said.

He even sold to customers of other agents with whom he developed relationships, Fishman said.

Some of those customers lived or operated out of New Jersey, he said.

Allen even tried convincing the president of a legitimate insurance company to go into business with him, federal authorities said. Even though a deal was never made, Allen told Morgan he was authorized to sell insurance in the company’s name “in light of his pending acquisition of the company,” then directed Morgan to do the same.

This continued “after the company sent Morgan a cease and desist letter, telling him he was not authorized to sell insurance backed by the company,” Fishman said.

Eventually, Allen told Morgan simply to “switch all the businesses that had bought policies in the legitimate company over to Universal Pacific,” he said.

From March through December 2004, Morgan collected $692,000 in premiums for worthless policies he sold, federal authorities said. He gave Allen $366,000, which he then spent on himself; $123,700 was directly withdrawn in cash from ATMs, they said.

Several unwitting purchasers testified during Allen’s trial that they thought the coverage they were paying for was legitimate but didn’t know it was bogus until claims arose and Pacific didn’t pay.

Some victims said they were “forced to sell their business to cover the claims,” while others spoke of having to pay out of pocket.

Others involved in selling the bogus policies have, like Morgan, pleaded guilty in the hopes of receiving leniency.

They include John Petrillo, 56, of Hammonton, N.J., a former principal in a company enlisted by Allen; he is serving a 40-month federal prison term and must pay more than $618,000 in restitution. Another accomplice, Thomas Kulig, 35, of Little Egg Harbor, N.J., is serving a 366-day sentence, with a $16,900 restitution order attached.

Still in the wind is Thomas Grubb, 56, of Voorhees, N.J., who skipped a court date in November 2008 and is now a wanted fugitive.

Fishman credited special agents of the FBI with making the case, which was prosecuted by Assistant U.S. Attorneys Eric M. Schweiker and Sarah M. Wolfe of the U.S. Attorney’s Office Criminal Division in Trenton.

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