The Montana Commissioner of Securities and Insurance has added $155,000 to the tally of fines racked up by an individual surety provider accused of violating insurance statutes in eight states.
Montana had previously fined Dennis Lyon $645,561 for supplying bid bonds and a performance bond without a license and with unverifiable backing assets, in 2004 and 2010. The state issued a permanent cease-and-desist order against Lyon in 2007. Similar orders prohibiting Lyon from selling bonds also exist in Texas, Oklahoma, Florida, Nevada, Washington, Maryland, and Georgia.
A portion of Montana’s most recent fine, levied in October, includes $148,000 in restitution for Fort Belknap Tribal Construction on the Fort Belknap Indian Reservation, which paid bonding costs and fees to Lyon’s unlicensed individual surety, Native American Funds Management Services.
It provided a performance bond on a contract to build an expansion to Fort Belknap College, the Aaniih Nakoda College. The commissioner alleges that Lyon, whose legal name is Robert Joe Hanson, received nearly $150,000 from the Gros Ventre and Assiniboine Tribes to provide the bonds.
A press release from the commissioner, Monica J. Lindeen, says Dennis Lyon also is known as Chief Joe Blue Eyes.
The college sought payment on the bond in June 2011; state records indicate the surety did not pay.
Lyon has yet to pay any fines in Montana. Neither he nor Fort Belknap Tribal Construction could be reached for comment.
Lucas Hamilton, communications director for the commissioner, says that the fines represent the limit of the state’s ability to punish Lyon, since they cannot revoke a license he never had in the first place. Hamilton adds that it is difficult to root out such violations without tips from concerned consumers.
“There’s no real proactive way we can get ahead of him,” Hamilton says of Lyon.
Individual surety bond fraud on federal contracts has recently regained the attention of the U.S. Congress, where the House of Representatives last May passed the Security in Bonding Act of 2012. Known as H.R. 3534, the act proposes to set tighter standards for the types of assets that may be used to back an individual surety bond. Action in the Senate could occur in the spring or summer.
For contractors seeking a surety bond, Hamilton recommends calling a state department of insurance to verify that the person selling the product is licensed.
“It would have made a big difference had we gotten that call before the Fort Belknap reservation went ahead with surety bonds.”