National General Holdings Corp. is facing a class-action lawsuit over its alleged role in a "fraudulent" collateral protection insurance scheme with Wells Fargo & Co.
The lawsuit claims that between Aug. 6, 2015, and Aug. 9, 2017, National General CEO and co-Chairman Barry Karfunkel and CFO Michael Weiner mislead investors and failed to disclose the company's involvement in the scheme.
National General allegedly coerced thousands of customers to pay for unwanted, "redundant, unnecessary and overly expensive" collateral protection insurance in the scheme. The insurer was also allegedly reporting revenues and earnings results that were "artificially inflated by illegitimate proceeds" from the scheme.
The lawsuit was filed in the U.S. District Court for the Central District of California.
The California Department of Insurance on Aug. 8, 2017, announced that it will look into claims that Wells Fargo and National General Insurance improperly charged customers for auto insurance. National General was an underwriter of the auto insurance.
National General and Wells Fargo did not immediately respond to S&P Global Market Intelligence's requests for comments.