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Viatical Settlements Investment Fraud


Our Future Benefits, Not Yours

02/00 - Several companies and individuals who helped market to investors about $9 million worth of life policies that had been "clean sheeted" or obtained by hiding an insured's terminal illness from 53 life insurers were charged collectively with 240 counts of grand theft, organized fraud and dealing in stolen property.

Future First Financial Group Inc., a viatical settlement provider, and Future First's vice president, William F. Sweeney, 51, each were charged in one indictment with 81 counts of grand theft and one count of organized fraud in connection with the marketing of fraudulently obtained policies valued at $6.9 million.

Wanda Tappan, 56, the president of Life Benefit Services Inc., a viatical settlement broker; Bruna Coveleski, 54, the company's vice president; Stan Coveleski, 55, the company's chief financial officer; and, Joel Seidman, 44, a client representative, each were charged in a second indictment with one count of organized fraud, and a total of 72 counts of dealing in stolen property in connection with the sale of about $2.5 million in fraudulently obtained policies.

Last October, the officers of Justus Viatical Group, were indicted on numerous charges of organized fraud, grand theft and insurance fraud relating to some $3 million in fraudulently obtained policies which were bought by the company's two officers, and then resold to investors for some $2 million.

Future First in some cases paid the insured only 12% of the face value for policies it bought. For helping arrange the sale of just one policy for $122,746, Life Benefits was paid a $48,510 commission.


An Educated Guess Offsets Mutual Benefit

05/01 - Dr. Clark Carlton Mitchell, 43, a Miami Beach doctor working for Fort Lauderdale-based Mutual Benefits Corporation, one of the country's largest viatical settlement providers, has been charged with 25 counts of organized scheme to defraud and communications fraud for allegedly lying about conferring with the personal physicians of terminally ill policyholders before assessing their life expectancies. If convicted, he faces up to 150 years in prison and as much as a $130,000 fine.

Estimation of life expectancy is key in an investor's rate of return in a viatical investment and an improper calculation can be devastating to an investor. As a result, two dozen elderly investors may have been misled in their decisions to invest a total of $350,000.Many of the investors purchased the viatical settlements as part of a retirement plan.

Mutual Benefits was linked to the arrests a year ago of eight men on charges of submitting false information on eleven life insurance applications to get more than $1.1 million worth of coverage from various insurers.

The eight were then linked by investigators to the purchase of a total of 47 policies worth $4.9 million from 32 different insurance companies, which were then sold to viatical settlement providers, primarily Mutual Benefits, for more than $700,000.

Investigators said these policies first were "warehoused" with brokers and then marketed by Mutual Benefits to investors after the two-year "contestability period" had lapsed. These provider-companies then marketed the fraudulently obtained policies to unsuspecting investors.

Seven of the suspects are charged with one count of grand theft and one count of dealing in stolen property. They're identified as Ralph Cahall and Richard Fraher Jr., Anthony Marano, Guy Leopold, Albert Esposito Jr., Joel Seidman, and Edward Hoseclaw. The eighth was charged with an organized scheme to defraud and four counts of grand theft. 05/00

Mutual Benefits lost a court challenge to prevent the insurance department from examining its records where a preliminary review by the department indicated "obvious fraud" in life insurance applications on file with the company.

In Florida, there are eight viatical provider companies and about 90 brokers licensed to buy life insurance from policyholders for resale to investors, who then become the beneficiaries.

To date, the insurance department has executed seven search warrants and seized more than 1,000 viatical settlement files, representing more than $76 million worth of life insurance policies that investigators suspect were fraudulently obtained.

Anyone with information about this case or any possible viatical fraud scheme in Florida should call the Department of Insurance Fraud Hotline at 1-800-378-0445. A reward of up to $25,000 is offered for information leading to a conviction.


 


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