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Gallagher Shuts down Viatical Settlement Provider for Fraudulent Business Practices

5/23/2002

Immediate Final Order


TALLAHASSEE - Florida Treasurer and Insurance Commissioner Tom Gallagher announced today that the Department of Insurance has stopped a Ponte Vedra Beach-based viatical settlement provider from doing business in Florida for fraudulent business practices and misrepresentation to investors.

Under an order issued on May 17, the Department revoked the license of Future First Financial Group, Inc. for failing to report to its investors or to Department regulators that life insurance policies in which it had bought and sold interests had been procured through fraud or misrepresentation.

"It's appalling that Future First was systematically misleading its investors," Gallagher said, "particularly since many of them were senior citizens."

Following a 1999 investigation by the Department, Future First and its then-vice president, William Sweeney, were each charged by a statewide grand jury with 81 counts of grand theft and one count of organized fraud in the marketing of policies valued at $6.9 million. They are awaiting trial on those charges.

The Department's charges against Future First are based on the company's practice of reselling to investors the policies of individuals who had apparently lied about their medical conditions on their insurance applications. The company did this during the policies' contestability period, usually two years, during which an insurance company can rescind a policy because of fraud committed during the application process. Future First misled investors who had specified that their funds be invested in non-contestable policies, instead placing the money in contestable policies and increasing the risk. If an insurance company rescinds a policy into which an investor's money has been placed, the investment is worthless.

Future First, licensed in December 1997, did not notify investors or Department regulators of the fraudulently obtained policies until after the company became the target of a state investigation in 1999.

Gallagher's decision to revoke Future First's license was based on the number of repeat violations and the sustained period of time over which they occurred. He said the company's failure to report fraudulent insurance applications to the Department in a timely manner was also grounds for revocation.

Under the revocation order, Future First must immediately proceed to conclude its business affairs. The company may not solicit, advertise or write new business. The Department retains jurisdiction over Future First until all contracts have been fulfilled, cancelled or have expired. Future First may continue to maintain and service existing policies, subject to the approval of the Department.

The state of Florida has regulated viaticals since 1996. 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 their attorney to decide what actions may be appropriate to protect their investment. They are also welcome to call the Department of Insurance Helpline at 1-800-342-2762.