CHICAGO--Near North Insurance Brokerage Inc. owner Michael Segal improperly diverted hundreds of thousands of dollars from a trust account to make loans, gifts and political contributions to Chicago politicians, federal prosecutors alleged Thursday in a court filing.

Details of the filing were reported by Crain's Chicago Business, a sister publication of Business Insurance.

In documents filed as part of Mr. Segal's upcoming trial in April on federal fraud and racketeering charges, prosecutors said he for years maintained a $5 million to $7 million deficit in a trust fund that insurance brokers are required to hold on policyholders' behalf. The missing funds went toward operating expenses, business expenses "and other personal expenses," prosecutors charged.

According to the filing, in 1996 a "loan/gift" of $139,500 went to Chicago Alderman Burton Natarus, a longtime friend of Mr. Segal and an associate of George Dunne, a Democratic official who also was Mr. Segal's former business partner.

Mr. Natarus was not available for comment late Thursday.

Another $50,000 "loan/gift" went to Dan Ross Associates, a consulting firm operated by former U.S. Rep. Dan Rostenkowski, D-Ill. Mr. Rostenkowski, reached by phone, said he received the money but it was a payment for consulting work he did for Near North in 1996, not a loan.

A spokeswoman for Near North confirmed that "Mr. Rostenkowski was a consultant for us." "If there was a loan to (Mr. Natarus), it was made with the expectation that it be repaid," she said.

The federal filing further charges that Mr. Segal directed Near North employees to make political contributions on his behalf. The largest single amount--$7,000 over two years--went to City Council Finance Committee Chairman Edward Burke. Mr. Burke was not immediately available for comment Thursday. Smaller contributions went to Cook County Board President John Stroger, Mayor Richard M. Daley and others, prosecutors said.

Mr. Segal, who stepped down as chief executive officer of Near North last year, has pleaded innocent to all charges. He released a statement saying there is "nothing new" in the filing. "As we have said all along, this case involves complicated technical regulatory issues which we are anxious to address in court," the statement said.