Arthur J Gallagher & Co, and its subsidiary Artex Risk Solutions, will fight the class action lawsuit filed against them as it has “no merit”, according to a statement from the company.
On 10 December, a group of plaintiffs seeking class status filed a suit against a group of defendants including Artex and Gallagher, accusing them of being part of a massive captive insurance strategy conspiracy.
The suit, which was related to the companies’ 831(b) captive business, alleged that the defendants conspired to design, promote, sell, implement, and manage illegal tax-advantaged captive insurance strategies.
Additionally, it claimed that the defendants entered into undisclosed business arrangements with each other and formed a nationwide referral network to funnel clients business to them.
The plaintiffs allege that the defendants unlawfully abused their positions of trust, confidence, and prestige by fraudulently inducing those clients to pay substantial fees for insurance, legal, accounting, tax, and actuarial advice, and services in connection with the strategies.
In a statement, Gallagher said: “Gallagher and Artex are aware of the recent filing of a class action lawsuit relating to our 831(b) micro-captive business.”
“We have disclosed the ongoing Internal Revenue Service audit and related customer litigation involving our 831(b) micro-captive management business in our Securities and Exchange Commission filings and to our clients.”
“This class action lawsuit appears to be related to the IRS audit. We believe it has no merit and will deal with it accordingly.”
“Gallagher and Artex have successfully defended individual claims involving similar allegations.”
The statement also referenced the legality of 831(b) captives as part of the Internal Revenue’s code for decades” and noted that “Gallagher and Artex have diligently and consistently striven to comply with the legal requirements in forming and managing captive insurance companies”.