Beverly Hills Man Convicted In Insurance Fraud

March 4, 2002

A Beverly Hills man was convicted today on federal charges related to an elaborate insurance fraud scheme in which he purchased a $1.9 million yacht, engaged in a series of sham transactions to drive up the paper “value” of the vessel to more than $3.6 million, and then sunk the vessel to collect on an inflated insurance policy.

Rex K. DeGeorge, a 65-year-old lawyer, was found guilty this afternoon by a federal jury in Los Angeles. After a 2_-week trial that included less than two days of deliberations, the jury determined that DeGeorge was guilty of conspiracy, three counts of mail fraud, seven counts of wire fraud and five counts of lying to a court hearing a civil lawsuit related to the sinking of the yacht.

DeGeorge becomes the third defendant convicted in the scheme that led to the sinking of the Principe di Pictor. Previously in this case, Paul A. Ebeling, 62, of St. Louis, previously pleaded guilty to conspiracy, mail fraud, wire fraud and perjury. Additionally, Gabriel Falco, 36, of Amagansett, New York, previously pleaded guilty to misprison of a felony.

The evidence presented at trial showed that DeGeorge purchased a 76-foot motor yacht from Italy’s Azimut S.p.A for $1.9 million in 1992. Because DeGeorge previously was involved in the loss of three other vessels -- which made it likely insurance companies would not issue a policy on a boat he owned -- and because he wanted to artificially inflate the value of the yacht, DeGeorge and Ebeling engaged in a series of sham transactions to “sell” the boat for ever-increasing prices. The ultimate owner of the boat was Polaris Pictures Corporation, a film company controlled by DeGeorge and Ebeling. After being told the final “value” of the boat was $3.675 million, the Cigna Property and Casualty Insurance Company agreed to insure the boat for $3.5 million.

On November 7, 1992, DeGeorge, Ebeling and Falco took the boat on its maiden voyage. Off the coast of Naples, Italy, the men used power tools to cut holes in the hull of the boat, causing it to sink. When the three men were found by the Italian Coast Guard floating in lifeboats, they told Italian authorities that the boat was taken over by drug runners, including “Captain Andrea Libovich,” who damaged the boat and fled in a speedboat.

DeGeorge and Ebeling caused claims to be filed with Cigna, but the insurance company refused to pay after it determined the two men made false statements in relation to the policy. During the course of ensuing litigation, DeGeorge and Ebeling allegedly gave false testimony and caused false documents to be filed in United States District Court in Los Angeles.

Prior to the sinking of the Principe di Pictor, DeGeorge collected insurance money on three other boats that he claimed were accidentally lost at sea. According to court documents, DeGeorge in 1970 reported that his 43-foot yacht, the Tutania, was stolen by Peruvian coffee merchants who were on the boat after claiming they were interested in purchasing the boat. An insurance company paid $43,000 to settle DeGeorge’s claim.

With the proceeds of this first insurance settlement, DeGeorge purchased a 57-foot racing yacht called the Epinicia, court documents show. In 1976, DeGeorge and Ebeling were on the yacht off the coast of Italy when it sunk. The two men used a dinghy to motor ashore, and the lost boat was never reported to the police or naval authorities. The insurer of the Epinicia, Lloyd’s of London, initially declined to pay DeGeorge’s claim, but the insurance later paid $194,000 after DeGeorge filed a $5 million bad faith lawsuit.

The third yacht lost was a 43-foot Gulfstar that sunk off the coast of Los Angeles in 1983 after what DeGeorge said were a series of suspicious explosions. He did not report this loss to maritime authorities, but he did make a claim with an insurance company that paid $255,000 after DeGeorge again threatened legal action against the insurer that was not inclined to pay the claim.

As a result of today’s conviction, DeGeorge faces a maximum possible penalty of 80 years in federal prison. United States District Judge Lourdes G. Baird is scheduled to sentence DeGeorge on May 13

Judge Baird is scheduled to sentence Ebeling and Falco on April 29.

"The conviction of Rex DeGeorge demonstrates that not only loose lips sink ships, so did Mr. DeGeorge,” stated William V. Hall, Acting Inspector in Charge, U.S. Postal Inspection Service, Southern California Division. "Postal Inspectors will continue to investigate insurance fraud schemes conducted through the U.S. Mail in hopes of reducing fraudulent claims, as well as reducing the resulting costs absorbed by other policyholders."

This case is the product of an investigation by the United States Postal Inspection Service, which received assistance from the Federal Bureau of Investigation.

Go Back