An investigation by the US Federal Bureau of Investigation now running into its fifth year had another in a series of sequels in early January when four men were charged in a Florida court for their alleged role in a life insurance fraud in which more than 28,000 victims lost a total of $837 million.
In a statement the US Department of Justice (DOJ) said two of the defendants, Steven Steiner and Joel Steinger, were founding principals of Mutual Benefits Corporation (MBC), a Florida-based company that sold viatical and life settlement investments through an international network of sales agents.
The other two defendants, Florida-based attorneys Anthony Livoti and Michael McNerney, had close working relationships with MBC which was shut down by federal regulators in May 2004.
According to the indictment MBC’s sales agents and marketing materials falsely promised investors safe investments in secure life insurance policies.
In reality, stressed the DOJ, “MBC was engaged in wide-scale fraud”.
Specifically, the DOJ alleges that Steinger was the principal in charge of most major decisions made at MBC.
“Steinger hired doctors who could be pressured to adopt false life expectancies, allowing him to buy low-value policies and immediately resell those policies to investors at a higher price by claiming that the insureds covered by the policies were near death,” the DOJ explained.
Of the two attorneys the DOJ’s indictment suggest that Livoti played a particularly key role.
“Livoti was MBC’s premium trustee, who held millions of dollars of investor money in accounts under his control,” noted the DOJ.
“Instead of protecting the money entrusted to him, the indictment alleges Livoti used money collected from more recent investors to pay premium obligations on older policies as part of a ‘Ponzi’ scheme. Prior to being shut down, MBC raised some $1.25 billion from more than 30,000 investors.
If convicted, the defendants will join MBC’s former president Peter Lombardi who was sentenced to 20 years imprisonment in 2007 and a medical doctor, Clark Mitchell, who was sentenced to 10 years imprisonment in 2006.
Mitchell admitted to in assisting MBC present investors with fraudulently low life expectancies.
According to the DOJ, investors were sent letters and affidavits which falsely claimed the doctor completed a review of the insured’s medical condition to determine the life expectancy assigned to the policies. Mitchell signed more than 5,000 of these fraudulent letters and affidavits.