Volume 2 Number 14
April 4, 2005





Arlene Kaplan, a resident of Ft. Lauderdale getting ready to retire, lost more than $15,000 of her life savings after investing in the nation’s largest viatical settlement provider, Mutual Benefits Corporation, which was shut down last May by both state and federal regulators and is now being charged with investor fraud and racketeering.  Kaplan’s 85-year old mother was also bilked out of $20,000 by the same company.

Patrick Burke, a retired Army Lt. Colonel from Pensacola, was swindled out of $65, 000 by Lifetime Capital Inc., whose principals were convicted just last month of two dozen charges ranging from money laundering to mail fraud.  More than $120 million was misappropriated in this case.

Viatical providers, like Mutual Benefits and Lifetime Capital, buy life insurance policies for less than the face value and resell them to investors who seek to make money upon the insured’s death. By selling a policy for a percentage of its face value, the insured can get cash now for medical, living or other expenses. The tradeoff is giving up a bigger payoff at death for one’s beneficiaries.

Arlene Kaplan, Patrick Burke and countless others who have lost millions of dollars by unwittingly investing in fraudulent viatical settlements are the reason that Florida’s Chief Financial Officer Tom Gallagher is pushing for legislation for stricter regulation of viatical settlements.  

The legislation, House Bill 1437 by Rep. Dudley Goodlette and Senate Bill 2412 by Sen. Rudy Garcia, would require investments in viatical settlements to be regulated as a “security.” For investors, this would mean access to company information, any promises made to investors would 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.  The legislation would also require the broker and sales agent selling viaticals to be licensed.

 “Hundreds of Floridians who have invested their hard-earned money – sometimes their entire life savings – in viaticals have been financially devastated because of outright fraud or inadequate disclosures,” said Gallagher.  “Fraud will flourish in this industry if unethical companies aren’t stopped. We need to take aggressive steps to protect investors.

Gallagher warned that the viatical industry is now targeting seniors who may be willing to sell their life insurance policies to investors at a discount. The potential loss to investors since 1996 is as much as $2 billion. The average age of the investor defrauded is 70 years old and the average loss is $40,000.

Currently, 46 states regulate viaticals as securities. 

Gadsden, Florida's fifth county, was formed in 1823. It once ran from Georgia to the Gulf of Mexico, from the Suwannee River to the Apalachicola River. Quincy, the county seat, was incorporated in 1828. The courthouse,above, was built in 1912.