A federal jury in Seattle has issued a $19.3 million verdict against three people and a company for siphoning off millions of dollars owed to a Bellevue insurance carrier, state officials said Tuesday.

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A federal jury in Seattle has issued a $19.3 million verdict against three people and a company for siphoning off millions of dollars owed to a Bellevue insurance carrier, state officials said Tuesday.

“You cannot do this in Washington state and get away with it,” Insurance Commissioner Mike Kreidler said in a statement. “This was the worst sort of predatory behavior by people who clearly had no qualms about misrepresenting the facts to get what they wanted.”

The jury verdict, reached Friday, found Danny Pixler, Anthony and Sheri Huff and Midwest Merger Management liable for a combined $19.3 million to Cascade National Insurance Co., Kreidler’s office said.

Cascade National offered auto and commercial-trucking coverage to about 4,600 policyholders in Washington and five other states in 2004 when it failed to meet financial requirements under state law, Kreidler’s office said. The insurer also was licensed to sell coverage in Oregon, Alaska, California, Mississippi and Louisiana. The Bellevue insurer got in trouble a year after it began providing workers’ compensation coverage in California.

Investigators discovered the defendants gained control of Cascade National and collected workers’ compensation premiums from about 140 business clients, covering nearly 15,000 California workers. The defendants put those premiums out of reach of Cascade National, even though the insurer is obligated to pay all covered claims to injured workers, Kreidler’s office said.

Cascade National was placed in receivership in 2004 by Thurston County Superior Court. The following year, a judge declared the insurer insolvent and ordered it liquidated. Kreidler’s office filed suit in 2006 against the Huffs, Pixler and their company, alleging they had defrauded Cascade National.

According to Kreidler’s office, Pixler is in federal prison serving a five-year sentence for conspiracy to commit wire fraud, while the Huffs and Midwest Merger Management are both based in Kentucky.

“When insurers collapse, the ripple effects can hurt policyholders, other insurers and taxpayers,” Kreidler said in a statement. “Recovering this money helps protect them.”

Money recovered as a result of the lawsuit will be used to reimburse the insurance guaranty fund that has paid workers’ compensation claims for Cascade National. Claim holders won’t be affected, and their claims will still be paid.

Of course, winning a judgment is one thing while collecting is another.

“Right, and that’s always a long process,” said attorney Victoria Vreeland, who represented the Office of the Insurance Commissioner. “I’m sure they will appeal, but we will continue to pursue that and pursue execution on the judgments. We will trace and find assets that are maybe hidden.”

“Here in Washington is the first time there has been a civil-jury verdict against them individually. It should help the other cases. There’s been a sense for many years that these defendants had sort of gotten away with things. And there’s finally a verdict against them and hopefully it’ll be the beginning of the end for their enterprises.

“In the workers’ compensation insurance industry, their names are becoming well-known,” Vreeland said.

Attorneys for the defendants could not be reached for comment Tuesday.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com

Mark Rahner: 206-464-8259 or mrahner@seattletimes.com