(from left) Travus Pope, and Suzanne and Jim Foglio
Jim and Suzanne Foglio and business partner Travus Pope hope to move from victims of embezzlement to protectors of assets. The founders of Capital Shield Insurance Services, based in Fort Myers, spun their experiences into a first-of-its-kind embezzlement insurance for investments.
“It is a very personal crime,” says Foglio, the company’s CEO. “Somebody takes advantage of your trust.”
Foglio and his wife, Suzanne, lost more than $1 million when he says a business partner in New Jersey took their money about 12 years ago.
“It was a horrible time. You don’t sleep because you have a knot in your stomach the whole time. You feel like you want to throw up 24 hours a day,” he says. “This was a person that we trusted. You totally feel violated.”
The idea
After a three-year investigation, the man was convicted, but had filed for bankruptcy so there was no money to recoup. When the Foglios sold their insurance agency and moved to Southwest Florida to retire two years ago, the experience clouded how they viewed their financial picture.
“We thought to ourselves, ‘Wow, this money has to last us the rest of our lives,’” he says. “One of our biggest fears was: What if somebody stole it?”
Then one day, Pope, a long- time friend, told them he had just been embezzled. In his situation, a half-million-dollar film investment with an international distributor went wrong; the case remains unsolved.
Government and industry have imposed new regulations, monitoring technology and transparency in recent years, especially in the wake of the $65 billion Bernie Madoff embezzlement scandal. The number of securities and investment fraud crimes dropped by 18.4% between 2013 and 2017; nevertheless, these financial crimes still occur regularly. There were 230 securities and investment fraud offenders, with a median loss of more than $2 million in 2017, according to the United States Sentencing Commission. The Southern District of Florida was among the top five districts for securities and investment fraud offenders in fiscal year 2017. And earlier this year, the Woodbridge Ponzi scheme case was settled for $1.2 billion in a Florida federal court.
The Federal Deposit Insurance Corporation covers the loss of deposits (up to $250,000) at insured financial institutions and banks and the Securities Investor Protection Corporation covers the loss of cash and securities at member brokerage firms if a firm goes bankrupt, with a limit of $500,000.
Capital Shield protects a client’s investable assets managed by registered advisers and fund managers. It’s available for individual investors with more than $1 million in liquid assets in the case of embezzlement by investment advisers, fund managers, asset managers or other securities industry professionals. The Capital Shield policy covers up to $10 million.
“We couldn’t believe that the product didn’t exist in the marketplace, especially after Madoff,” says Pope, who is president of Capital Shield and has lived in Southwest Florida for 15 years.
Neither Pope’s nor the Foglios’ losses would have been covered by this insurance, but their experiences were the driving force to create the product.
The launch
They began offering Capital Shield in March. Capital Shield is underwritten by a large national carrier on excess and surplus lines, a market that provides coverage for unique risks.
For an individual investor to insure $3 million, the premium would be $4,500 annually.
When a loss is reported by an individual investor, the carrier’s claims staff immediately moves into action, Pope says. If the loss is covered, they say the claim will be paid at indictment, which removes the costly and time-consuming process, and waiting for potentially a lengthy trial, to see if the fund can be recovered.
Each investment adviser or manager is listed and covered up to the coverage limit on one Capital Shield policy, instead of buying policies to cover each one. “It’s really protecting your whole ecosystem of investments,” Pope says.
What’s next
The company recently signed a national distribution deal with Dallas-based MarketScout,
an insurance distribution and underwriting company.
Pope and Foglio are training agencies and agents around the country about the product. They are also contacting associations, such as in professional sports, that could offer Capital Shield as part of their insurance product pool.
“It’s like an umbrella policy for your financial assets,” Pope says. “Should anything happen to your nest egg, it is a wonderful resource.
