LIFETIME CAPITAL, INC., PRINCIPALS SENTENCED TO COLLECTIVE 22 YEARS IN PRISON ON FRAUD CHARGES
$21 million to be forfeited; restitution expected to surpass $100 million
Florida’s Chief Financial Officer Tom Gallagher announced today that three individuals affiliated with LifeTime Capital, Inc., a viatical company that once operated out of Dayton, Ohio, and South Florida, have been sentenced to a collective 22 years in prison for their roles in a large-scale money laundering conspiracy. The sentences were handed down late Thursday afternoon in the United States District Court, Northern District of Florida.
The convictions stem from an investigation by the Department of Financial Services, Division of Insurance Fraud, which Gallagher oversees, as well as the Office of Financial Regulation’s Division of Investigations and the Federal Bureau of Investigation. The United States Attorney’s Office for the Northern District of Florida prosecuted the charges. U.S. Federal District Judge M.C. Rodgers handed down the sentences.
“Viatical fraud poses a serious financial risk for both consumers and investors, many of whom are senior citizens who invest their life savings in these policies,” said Gallagher, who worked with LifeTime victims to demonstrate the need for legislation to regulate viaticals as a security. That legislation passed this year and Gallagher joined Governor Jeb Bush for the bill signing last week. 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.
“No longer will Floridians be duped out of their hard earned savings because of pie-in-the-sky promises made by dishonest viatical operators,” Gallagher said.
The investigation determined that David W. Svete was the principal owner of the companies used to commit the frauds and launder the money, and that Ron Girardot was one of Svete’s chief lieutenants in the scheme.
The two were found guilty of conspiring to fraudulently obtain money from investors by representing that the viatical contracts were on terminally ill patients and that the investors could not lose. Instead, investigators determined that Svete and Girardot arranged to launder the fraudulently obtained funds through overseas locations to conceal and disguise the nature, location, source, ownership, and control of these funds.
Svete was sentenced to 200 months in prison to be followed by 36 months of supervised probation. As part of the sentencing he is to surrender $21 million in laundered funds.
Girardot was sentenced to 60 months in prison and 36 months of supervised probation. He and Svete will be responsible for restitution to be set later based on a combination of the lost investments and promised returns. The restitution could be as much as $200 million. Svete and Girardot will serve their time in Ohio.
A third defendant, Charme Austin, pleaded guilty prior to the nine-week trial that ended in March and was sentenced to 15 months in prison to be followed by 36 months of supervised probation.
The new viatical law will require investments in viatical settlements to be subject to Florida securities statutes. For investors, this will 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 law now requires individuals who estimate the life expectancies on policies purchased by investors to be registered with the Office of Insurance Regulation.
Viatical settlement companies will also now be required to provide regulators the names of the life expectancy providers it has used. The legislation will 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 the bill signing, Florida had been one of only 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.