Tax-Deferred Annuity Investment Scams
09/06 - PA - Two men posed as lawyers to trick seniors into making questionable investments in a $3.5 million scam, authorities said.
Brian J. Newmark, 34, of Havertown, Delaware County, and another man allegedly worked to defraud two elderly victims from 2001 through 2004, according to an indictment filed this week in U.S. District Court for the Eastern District of Pennsylvania.
'It's sad to think that this goes on," said Richard Lloret, the assistant U.S. attorney prosecuting the case.
According to the indictment, Newmark controlled businesses called Estate Planning Advisors, Ben Consulting and Financial Funding Services that ran out of an office in Havertown.
They sold financial products such as tax-deferred annuities, including one that purported to provide a gift to a charitable organization, tax benefits and an income stream to elderly people with substantial wealth.
In the summer of 2001, the pair met with two elderly people, who are identified only as "AW" and "TW" in the indictment, to persuade them to transfer millions of dollars to a Tennessee corporation purported to be a charity in exchange for tax-deferred annuities.
The two defendants used letters and business cards to create the impression that they were lawyers, or employed by lawyers.
Neither man is an attorney.
Morgan Stanley, the brokerage firm that handled many of AW and TW's assets, urged them not to transfer the money.
But the pair, representing themselves as attorneys for AW and TW, eventually persuaded the victims, and then Morgan Stanley, to turn over $3.5 million.
As a result of the exchange, Newmark and his businesses earned about $230,400 in commissions.
In a civil suit filed in 2003 by the two seniors in federal court, the accused denied representing themselves as lawyers.
Lloret said the victims have recovered some of their money as a result of the suit, but he wasn't sure how much.
The accused are charged with mail and wire fraud. Newmark also is charged with making a false statement under oath.
If convicted, Newmark faces up to 85 years in a prison and a fine of up to $1.25 million.
His alleged accomplice faces a maximum sentence of 80 years in prison and a $1 million fine.
Neither man was in custody this week. Lloret said pretrial detainment in federal cases is generally reserved for people charged with violent crimes.
This isn't the first time the two men have found themselves in legal trouble.
In 2004, John N. Wight and Newmark's three businesses were among several defendants named in a civil lawsuit filed by the Pennsylvania attorney general's office.
That lawsuit said hundreds of Pennsylvanians, many between the ages of 70 and 80, had been tricked into buying expensive or unnecessary estate planning products.
Barbara Petito, deputy press secretary for the state attorney general's office, said that case is ongoing.
A judge issued a ruling barring the defendants from various activities, including selling living trusts and using laymen to offer legal advice.
By Brian Callaway Of The Morning Call