TAG | Rothstein fraud in Florida
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In a May 18th., 2011 article in the Miami Herald, Jay Weaver reports that a prominent attorney whose fortune rose with a Fort Lauderdale viatical insurance company at the center of a $1.25 billion investment fraud case pleaded guilty Wednesday to a single conspiracy charge, marking a major development in the long-running prosecution of executives and others at Mutual Benefits Corp.
Fort Lauderdale attorney Michael McNerney, 62, admitted that as its lawyer, he helped the now-defunct company lure thousands of investors worldwide into buying dubious life insurance policies held mostly in the names of people dying of AIDS.
Weaver goes on to say that McNerney’s role was part of an alleged investment scam lasting from 1995 to 2004 that authorities say rivals the $1.2 billion Ponzi scheme of disbarred Fort Lauderdale lawyer Scott Rothstein, convicted last year of selling fabricated legal settlements in a separate criminal case. The Mutual Benefits and Rothstein cases rank as Florida’s largest fraud prosecutions.
The McNerney guilty plea to mail-and-wire fraud conspiracy, which carries up to five years in prison, marks the 10th person to be convicted in the Mutual Benefits prosecution in Miami federal court. He will be sentenced Aug. 26 before U.S. District Judge Adalberto Jordan. With his plea, McNerney avoided a potential sentence of up to 20 years. As part of his deal, McNerney will cooperate with prosecutors on how the alleged life settlement racket was directed by Mutual Benefit’s senior executives
The Miami Hearld reports that the two top executives of the company, Joel Steinger and brother Steven Steiner, along with another Fort Lauderdale lawyer Anthony Livoti, are scheduled to stand trial in early 2013 — but that date could be moved up with McNerney’s plea. He was scheduled to go to trial by himself early next year. Steinger and Steiner were planning on using a defense based on their reliance on McNerney’s legal counsel for all their business decisions regarding Mutual Benefits’ sale of some 30,000 viatical insurance policies to investors who lost about $837 million. But that defense may be in danger now that he has pleaded guilty to being a player in the alleged conspiracy.
It was reported that McNerney, a 1973 graduate of the University of Florida College of Law, admitted that he not only encouraged investors to buy the questionable viatical policies, but he also provided “legal cover” for Steinger and others to perpetuate the alleged fraud, according to a “factual statement” filed with his plea agreement.
Wednesday, McNerney confessed that he schemed with other executives at Mutual Benefits by misleading investors about the life expectancy of insured beneficiaries; the use of funds raised from investors; the risks associated with the investments in viatical settlements; and the payments of insurance premiums on those policies.
“This is a major breakthrough in the prosecution’s case because it shows the defendants were not relying on the advice of an independent attorney,” said Ryan O’Quinn, a former federal prosecutor and Securities and Exchange Commission attorney, who had been involved in the case since 2004. “It shows Michael McNerney was a knowing participant in the fraud, standing side by side with the co-defendants.”
The Herald article goes on to say that in January 2009, the U.S. attorney’s office unsealed the sweeping 25-count fraud indictment against Steinger, identified as Mutual Benefits’ principal executive, brother Steiner, the company’s founder, as well as McNerney and Livoti. The indictment, alleging a conspiracy to commit wire fraud and money laundering, was filed nearly five years after state and federal regulators shut down Mutual Benefits. The company was placed in receivership.
The company, Mutual Benefits, bought life insurance policies of AIDS patients and the elderly and sold the policies to investors, who stood to collect benefits when the insured died. Mutual Benefits promised investors the investments were “safe.” But prosecutors alleged Steinger hired doctors to attest to life expectancies for the insured. By claiming the beneficiaries were near death, prosecutors alleged, Mutual Benefits could sell low-value policies at a higher price. But the longer the insured lived, the more premium payments had to be made to prevent the policy from lapsing and becoming worthless.
According to Jay Weaver of the Miami Herald, prosecutors further alleged that Mutual Benefits was a massive Ponzi scheme, using money from newer investors to pay premium obligations on older policies.
If you or a family member have purchased policies through Mutual Benefits, Corp, or other viatical companies, and become the victim of the life-expectancy predicitons, contact an insurance fraud attorney for a free consultation on how to recover your investment losses. To speak with an attorney, call 888-760-6552, or visit stockmarketlawsuit.com.
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