Phoenix Fund businesses receive $2.9 million

The state Insurance Department is distributing more than $2.9 million to 643 small businesses that were defrauded in an insurance scam.

The payout announced Friday is the second time that the Insurance Department has returned money to former members of the Phoenix Fund, a Charlotte-based self-insured employers group that was established to cover workers compensation liabilities. In 2009 the Insurance Department returned $6.5 million to the employers.

The Phoenix Fund was defrauded by Thomas G. Reitz of Alpharetta, Ga., who collected premiums for reinsurance coverage -- coverage designed to limit exposure -- that, it turned out, never existed. Reitz pleaded guilty to mail fraud and money laundering in 2007 and was sentenced to 70 months in jail after the Insurance Department uncovered the scam during a routine investigation and took over operation of the Phoenix Fund.

The businesses were defrauded of $19.7 million. The Insurance Department succeeded in recovering $18 million, which it said enabled it to pay the fund's "obligations" and return money to the businesses. Clarification of those obligations wasn't immediately available.

"Throughout this years-long process," Insurance Commissioner Wayne Goodwin said in a prepared statement, "the Department of Insurance has been committed to helping return the money to which these employers are entitled."