MBC Admit Role in $875 Million Ponzi
The US Department of Justice, Southern District of Florida issued a Press Release, regarding Mutual Benefit Corporation's insurance fraud, a $875 million ponzi scheme.
"Traina and Wiggins were employee-managers at Mutual Benefits Corp. ("MBC"), a viatical and life settlement company that was closed by federal regulators in May 2004. Traina and Wiggins each pled guilty to an Information charging one count of conspiracy to commit securities fraud, in violation of 18 U.S.C. ยง371 in connection with MBC's billion dollar securities offering. Pursuant to the terms of their respective plea agreements, both defendants face up to five (5) years' imprisonment. Traina and Wiggins also agreed to be jointly responsible for approximately $830 million in restitution payable to MBC investors. Sentencing is scheduled for May 8, 2007."
There are several important observations about this fraud.
First, "according to the Information, MBC sold investment interests in viatical and life settlements through an international network of sales agents. A viatical or life settlement is a transaction in which an investor purchases an interest in a terminally ill or elderly person's life insurance policy death benefit in return for a lump-sum cash payment. An investor in a viatical or life settlement realizes a profit if, when the insured dies and the policy matures, the policy benefit is greater than the price paid for the policy. The longer an insured lives, the more premium payments must be made to prevent the policy from lapsing and becoming worthless."
There is no obvious something for nothing, or too good to be true about this set-up.
Only a very sophisticated investor would realize the inherent fraud in viatical insurance - a person with Aids or HIV could obtain a number of low payout insurance policies, and never have to take a medical test. Further, who could predict that new medical drugs would keep these individuals alive for a lot longer than they wre "worth" for insurance purposes.
Second, there is virtually no chance that $875 million is going to be repaid to the insurance investors.
Third, in this ponzi scheme, the regulators have failed to talk about how "it was too good to be true". Well, if this ponzi scheme doesn't have that as an essential characteristic, then maybe, just maybe no ponzi schemes self announce themselves as too good to be true!
Technorati Tags: mbc, ponzi scheme, mutual benefit corporation, traina, wiggins, us department of justice, viatical, plea agreements, pled, securities fraud, insurance fraud, southern district of florida, investment interests, billion dollar, restitution, imprisonment, department of justice, regulators
Comments
pl. send more informations on your law point of view
Posted by: suresh sharma | February 21, 2008 7:14 AM