Microcaptive ‘Promoter Penalty’ Is Unconstitutional, Brief Says

The penalties imposed on Pittsburgh insurance firm HDH Group Inc. for allegedly creating a microcaptive insurer for its employees that was secretly a tax shelter are unconstitutional because were imposed without a jury trial, the firm told a federal court.

After the US Supreme Court’s decision in SEC v. Jarkesy, the Seventh Amendment requires a jury trial before a fraud penalty is imposed, HDH told the US District Court for the Western District of Pennsylvania on Thursday.

A microcaptive insurance arrangement lets a company create an affiliated entity to serve as an insurer if it can’t find appropriate products ...