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
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
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
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.