A. The Terms of the Agreement
Mr. Burke was an agent for, and sold insurance policies issued by, the
U.S. Life Insurance Co. (U.S. Life). In early 1985, Mr. Burke entered into an
agreement under which U.S. Life would issue group life insurance policies to
the Metropolitan Police Conference (MPC), which represented 38 Long Island
Village police departments, police officers' benevolent associations, and
other police and transit worker organizations.
Pursuant to his agreement with U.S. Life, Mr. Burke collected premiums
from the MPC and deposited the funds into a premium account (MPC premium
account) that he had established for the MPC at Marine Midland Bank in
Setauket, New York. Under his agreement with U.S. Life, Mr. Burke was
entitled to a 15-percent annualized commission, which he was permitted to
withdraw from the MPC premium account prior to the receipt of all premiums
that were due. Commissions were transferred from the MPC premium account to
the expense accounts of the Burke Insurance Agencies. After withdrawing his
commission, Mr. Burke was required to remit the balance of the premiums in the
MPC premium account to U.S. Life. Mr. Burke had no authority to appropriate
U.S. Life premium funds in excess of his commissions. Between May 1985 and
May 1987, Mr. Burke collected more than $3 million in premiums from the MPC.
B. Mr. Burke's Misappropriation of MPC Premium Account Funds
During the years at issue, JoAnn Romano was the office manager of the
Burke Insurance Agencies. As such, she supervised the administrative staff,
managed in-house property and casualty sales, served as a liaison to
representatives of police groups and insurance companies, and handled banking
matters as well as the payroll, accounts payable and receivable, and premiums
that were received in the office.
Both Ms. Romano and Mr. Burke had signature authority over the MPC
premium account and the Burke Insurance Agencies' expense accounts. When Mr.
Burke wanted cash, he would usually arrange for office workers at the Burke
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