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Viatical Provider Indicted on Federal Fraud Charges

8/5/2002

Emergency Order


TALLAHASSEE - The Florida Department of Insurance has issued an emergency order prohibiting the top executives of Kelco, Inc., a Kentucky-based viatical settlement provider, from doing business in Florida pending the outcome of criminal fraud charges.

The department issued the order after 47 federal indictments were handed down in Lexington, Kentucky, last month charging Kelco and its executives Stephen L. Keller, Robert Grant Sutherlin and Sterling Keith Drach with multiple counts of mail fraud, wire fraud and money laundering.

Following the indictments, the Kentucky Department of Insurance suspended the viatical settlement provider licenses of both the company and its executives. Without their licenses, neither the company nor the executives can buy insurance policies in Kentucky, although they can buy policies in other states where they are licensed.

In response, Florida regulators issued an emergency order to protect consumers by preventing Kelco executives from doing business in the state. The emergency order will remain in effect until the criminal charges have been adjudicated.

Keller, Sutherlin and Drach pleaded not guilty when they were arraigned on July 17. Their trial is set for February 2003.

Viatical settlements are agreements in which existing life insurance policies may be purchased by viatical settlement providers and re-sold to investors. The life insurance policies are sold for a percentage of the face value, and the investor collects the death benefit when the insured dies.

Investors may wish to consult an attorney to decide what actions may be appropriate to protect their investments. They are also welcome to call the Department of Insurance Helpline at 1-800-342-2762. Visit www.fldfs.com and click the link to "News Releases" to view an on-line copy of the department's emergency order.