A former surety manager who for two years diverted payments on bond claims to himself is now starting a 20-month prison sentence.

A federal judge in New Haven, Conn., sentenced James Keating, 52, of Paoli, Pa., in late January to imprisonment, followed by three years of supervised release, for defrauding his former employer, Allied World Insurance Co., of more than $1.4 million. Keating had pleaded guilty in July to wire fraud.

Judge Victor A. Bolden also ordered Keating to pay restitution of $1.2 million, which represents the loss to Allied World minus $220,000 previously repaid as part of a civil judgment.

According to federal prosecutors who had arrested Keating last year, he was an assistant vice president who handled surety bond claims for Allied World. He later had the same duties working at U.S. Fire Insurance Co., a subsidiary of Crum & Forster.

"All surety bond claims were handled through Allied World’s offices in Farmington, Connecticut," said acting U.S. attorney Mark H. Silverman. 

Keating operated three shell companies between 2017 and 2021, federal prosecutors said.

One of the shell companies billed Allied World for unnecessary claims work that was not performed, prosecutors said. Another solicited and received kickbacks from Allied World vendors without the knowledge of his employer. Keating also caused these vendors to use another company in which he had an undisclosed ownership interest.

In arguing that Keating, who is 51 years old, should only be sentenced to probation, his attorney cited his "chronic dissociative symptoms" and "tendency towards hyper-focused, goal-directed behavior" as factors to consider. Those factors explain "how someone who has lived an otherwise law-abiding life could have come to rationalize his conduct," they wrote in a memo to the court.

Prosecutors, in seeking a prison sentence, argued to the judge that Keating's use of the fraudulently obtained funds included credit card payments, landscaping at his house and $72,000 spend at a golf club near his home.