Viatical Company Pleads Guilty to Racketeering, Fraud
CONTACT: Tara Klimek or Nina Banister
TALLAHASSEE—Chief Financial Officer Alex Sink and Attorney General Bill McCollum today announced that Mutual Benefits Corp., once the largest viatical settlement company in the country, pled guilty in Broward County Circuit Court to criminal charges of racketeering and numerous counts of investment fraud. The criminal charges filed by the Office of Statewide Prosecution were a direct result of the investigation conducted by the Department of Financial Services, Division of Insurance Fraud. The Florida Office of Insurance Regulation has revoked the company's certificate of authority.
The viatical industry frequently involves the discount purchase of life insurance policies from an insured individual who has been diagnosed as being terminally ill. Investors become named beneficiaries and upon death of the insured are paid the full amount of the policy. The profit is based upon the projected life expectancy of the insured. Fraudulent life expectancies issued by Mutual Benefits left many investors with false expectations and investments that could not meet their advertised terms.
“Thousands of investors were financially harmed by the extensive fraud perpetrated by this company, and I am pleased that our investigation has resulted in criminal and civil actions that reflect the serious nature of these crimes,” said CFO Sink. “We will continue to do all we can to protect Floridians and to aggressively pursue anyone who seeks to defraud our citizens.”
Today’s plea concludes a lengthy joint investigation by the Attorney General’s office and the Department of Financial Services, Division of Insurance Fraud. The Department of Financial Services began investigating criminal allegations against Mutual Benefits in 1999. Authorities discovered that during the bidding process for the policies, principals of the company were setting the life expectancies of the insured persons prior to any medical review and sending backdated life expectancy letters to the investors. As a result of this fraudulent scheme, policies were not maturing as promoted in marketing materials and investors were not realizing the investment return promised by Mutual Benefits. The company sold policies worth more than $1 billion to over 30,000 investors worldwide.
“This company intentionally defrauded thousands of people, offering the ‘once-in-a-lifetime’ deal,” Attorney General McCollum said. “My office and the Department of Financial Services share the common goal of protecting the citizens of our state. I thank them for partnering with us to bring this company to justice.”
The U.S. Attorney’s Office filed criminal charges against Peter Lombardi, the president of Mutual Benefits, who was sentenced to 20 years in prison earlier this year. Federal charges were also filed against Clark Mitchell, the doctor who falsified the life expectancies. Mitchell pled guilty and faces up to 10 years in prison. He is scheduled to be sentenced later this month. Victim restitution is being handled by a receiver who will be monitored by a federal district judge.
In February of 2000, the Fifteenth Statewide Grand Jury issued a report on the viatical industry which led to broad legislative changes regulating the industry in the State of Florida, primarily geared to consumer protection. Since that time, there have been sweeping changes in the operations of viatical settlement companies licensed in the State of Florida.
The Department of Financial Services, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance. Anyone with information about this case or any other suspected fraud case is asked to call the department's Fraud Fighters Hotline at 1-800-378-0445. A reward of up to $25,000 may be offered for information leading to an arrest and conviction.
As a statewide elected officer of the Florida Cabinet, Chief Financial Officer Alex Sink oversees the department of Financial Services, a multi-division state agency responsible for management of state funds and unclaimed property, assisting consumers who request information and help related to financial services, and investigating financial fraud. CFO Sink also serves as the State Fire Marshal.