GALLAGHER APPLAUDS SIGNING OF VIATICAL LEGISLATION
Bill a Response to Investor Abuse and Fraudulent Activity
Florida’s Chief Financial Officer Tom Gallagher today joined Gov. Jeb Bush who signed into law a measure that will better protect consumers from fraudulent viatical companies. The new law will define viatical settlements as “securities” and place regulatory authority over the viatical industry with the Office of Financial Regulation. Viatical settlement providers match those who want to sell their life insurance policies at a discount with investors willing to buy the rights to those policies.
“Our purpose in pushing for this legislation was to allow us to effectively root out and prosecute the fraudulent operators in this industry,” said Gallagher, who at the bill signing stood with investor victims Arnold and Alice Romanus from Port Charlotte. The Romanus’ had personally invested thousands with Mutual Benefits Corporation, which was shut down last May by state and federal regulators and is now being charged with investor fraud and racketeering. “No longer will Floridians be duped out of their hard earned savings because of pie-in-the-sky promises made by dishonest viatical operators.”
The bill was sponsored in the House by Rep. Dudley Goodlette, of Naples, and in the Senate by Sen. Rudy Garcia, of Hialeah. “Too many Floridians have lost thousands of dollars, or worse, some of them have been robbed of their life savings,” Goodlette said. “This is a valuable consumer protection which is why the House passed it unanimously, and the Senate gave it overwhelming approval.”
The legislation will require investments in viatical settlements to be subject to Florida securities statutes. For investors, the new law would mean access to company information. Promises made to investors would also have to be documented and approved by state regulators, and a determination of the investment’s suitability would have to be considered, including the purchaser’s financial and tax status, and the purchaser’s investment objectives.
Additionally, to better protect investors from fraud, the bill requires individuals who estimate the life expectancies on policies purchased by investors to be registered with the Office of Insurance Regulation.
Viatical settlement companies would also be required to provide regulators the names of the life expectancy providers it has used. The legislation would also require brokers selling viaticals to be licensed with the Office of Financial Regulation.
It is estimated that viatical fraud has cost investors $2 billion since 1996. Before today’s bill signing, Florida had been only one of four states not to have regulated viatical investments as securities. The average age of those defrauded by viatical companies is 70 and the average amount swindled is $40,000.
Arlene Kaplan, a Ft. Lauderdale woman getting ready to retire, lost more than $15,000 of her life savings after investing in Mutual Benefits Corporation. Kaplan’s 85-year old mother was also bilked out of $20,000 by the same company.
Mutual Benefits Corporation also bilked Lincoln Emery from Naples out of more than $15,000 plus administrative fees. Emery said he was told by the company that they were licensed and approved by the state of Florida.
Lillian Herndon and her late husband Ernest of Orlando, invested $20,000 with Wm. Page & Associates, one of the country’s oldest viatical companies. At the time of their purchase in 1995, they were told that the insureds in both cases had only 24 months to live. Ten years later, Ms. Herndon continues to pay premiums to keep from losing her investment. She believes at the outset the investment was misrepresented to her and her husband.