Articles Posted in Life Settlements

Two Texas Men Sentenced For $100 Million Life Settlement Scam that Bilked Over 800 Investors

Published on: October 4, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Adley Abdulwahab and Christian Allmendinger, both principals of A&O Resource Management Ltd., must now serve decades prison for their involvement in a $100M life settlement scheme. Both defendants are from Houston, Texas. The Texas State Securities Board, the SEC, the IRS, the U.S. Postal Inspection Service, the FBI, and the Virginia Corporation Commission all investigated this life settlement scam. Over 800 investors in the US and Canada were defrauded
Allmendinger, who is vice-president and co-founder of A & O, was orderd to serve 45 years in prison, while Abdulwahab, who is part owner of A & O and a hedge fund manager is to serve 60 years. Both men were indicted on 18 counts. Also pleading guilty to the life settlement scheme was ex-A & O president David White and four others.

According to the US Justice Department, investors, who wanted conservative investments, were misled into thinking that investing in A & O was a no-risk, safe bet when in fact, it was a “sham.” Among the victims were hundreds of retirees who lost their savings because they invested in A & O. Almendinger and Abdulwahab used investors’ money to pay for expensive cars, luxury homes, and extravagant jewelry.

Abdulwahab and Allmendinger both marketed A & O life settlement investment products to investors. Per the court, the principals misrepresented A & O’s prior success to investors, while also exaggerating its size as a business. Abdulwahab also not only lied about his credentials but also did not disclose that he had pleaded guilty to a Texas felony charge of forgery of a commercial instrument.

When state regulators started looking into A & O’s financial instruments, the fraudsters made up a bogus sales transaction to “sell” the company to shell corporate entity Blue Dymond and Physician’s Trust, also a shell corporate entity. While the sale ended Allmendinger’s ties with the life settlement scam, Abdullah and his co-fraudsters still secretly controlled and continued the financial scheme until September 2009. The majority of the investors were seniors and most of them lost everything they’d invested. For many, this was their entire retirement.

It is unfortunate when an investor loses money because he/she was the victim of financial fraud. Recently, the North American Securities Administrators Association added securitized life settlement contracts on its list of practices and products that are a threat to investors. In many instances, schemes involve “worthless paper” that doesn’t keep up enough assets so that there is a guaranteed fixed return in a fixed time period.

Texas Fund Managers Sentenced Over Life-Settlement Scheme, The Wall Street Journal, September 28, 2011
Life settlements just one more potential scam in recent troubled times, San Diego Source, September 6, 2011
Principals Of A&O Entities Sentenced In Virginia For $100 Million Fraud Scheme, Justice.gov, September 28, 2011

Financial Scammers Are Now Using YouTube, Facebook, LinkedIn, Twitter, and Other Websites to Target Investors, Warns Texas Securities Commissioner, Stockbroker Fraud Blog, September 22, 2011
Ex-UBS Financial Adviser Pleads Guilty to Defrauding Private Fund Investors, Stockbroker Fraud Blog, July 13, 2011
AIG Trying to Get More Investors to Buy Life Settlements, Institutional Investors Securities Blog, April 26, 2011 Continue Reading ›

Ex-UBS Financial Adviser Pleads Guilty to Defrauding Private Fund Investors

Published on: July 13, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Steven T. Kobayashi has pleaded guilty to money laundering and wire fraud. The former UBS financial adviser is accused of bilking his private investment fund investors. As part of his plea agreement, he will pay $5,431,600 in restitution and serve a 65-month prison term.

Per the criminal charges, beginning in 2006 Kobayashi, who regularly made financial trades authorized by clients whose account he had access to, started transferring some of these funds into his own bank accounts without the investors’ “knowledge or authorization.” In some instances, clients gave their authorization because they were told the withdrawals were necessary to make investments. On other occasions, he forged their signatures on authorization forms.

Earlier this year, the ex-UBS adviser settled SEC securities fraud charges. The agency says that Kobayashi set up Life Settlement Partners LLC, which is a fund that invested in life settlement polices. He was able to raise millions of dollars for the fund from his UBS customers. However, he also started using the money to pay for prostitutes, expensive cars, and pay off gambling debts.

The SEC says that to try and pay back the fund and investors before they discovered his misconduct, he convinced several other UBS clients to liquidate securities and transfer to the proceeds to entities under his control. This allowed him to steal more money from the investors. Kobayashi settled the SEC charges without denying or admitting to them.

Related Web Resources:
Ex-UBS Adviser Pleads Guilty To Charges He Bilked Private Fund Investors, BNA Securities Law-Daily, June 10, 2011
Ex-UBS Advisor Faces Criminal Charges, in Life Settlement Case, On Wall Street, March 3, 2011
SEC CHARGES FORMER UBS FINANCIAL ADVISER WITH DEFRAUDING LIFE SETTLEMENT FUND INVESTORS, SEC.gov, March 3, 2011

More Blog Posts:
Texas Securities Fraud: Planmember Securities Corp. Registered Representatives Accused of Improperly Selling Life Settlement Notes, Stockbroker Fraud Blog, June 27, 2011
Life Settlements or Viaticals should be Considered “Securities,” Recommends the SEC to Congress , Stockbroker Fraud Blog, August 8, 2010
AIG Trying to Get More Investors to Buy Life Settlements, Institutional Investor Securities Blog, April 26, 2011 Continue Reading ›

Texas Securities Fraud: Planmember Securities Corp. Registered Representatives Accused of Improperly Selling Life Settlement Notes

Published on: June 27, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Brokers Kris Bradford Rhoden and Jimmy Wayne Freeman Jr. are accused of Texas securities fraud and of bilking investors of millions. The two registered representatives allegedly took part in the improper sale of life settlement notes. They are also accused of lying to their employer, PlanMember Securities Corp, about the sales. Now, Texas State Securities Board says the two men are facing $100,000 fines and license revocation.

Between June 2008 and February 2009, the two men allegedly sold note agreements that were supposedly backed by life insurance policies and a 10% simple-interest return guarantee over five years. They also are accused of selling an Immediate Income Investment Plan, which was purported to have been backed by life insurance policies and a five-year, fixed biweekly income account. National Life Settlements LLC, which was shut down by Texas securities cops in 2009 after it sold $30M in bogus promissory notes, was the issuer both products. (A judge later ordered that the investors it defrauded get back about $20 million.)

Now, state regulators are saying that Rhoden and Freeman did not comply with PlanMember’s supervisory procedures, which doesn’t allow private-securities transactions and requires that the broker-dealer approve any securities transactions occurring outside the regular course of business. The two brokers allegedly told Planmember on their compliance questionnaire that they did not sell such products. They are also accused of using their personal email accounts to let PlanMember clients know about the investments, as well as of failing to update their U-4 forms in a timely manner to show that they were marketing the life settlement notes.

Related Web Resources:
Corpus Christi investment advisers face license hearings, fines, Caller.com, June 24, 2011
Two reps could lose securities licenses for selling life settlement notes, Investment News, June 24, 2011
Texas Stockbroker Fraud

More Blog Posts:

Texas Lawyer Pleads Guilty to Involvement in Alleged $100M Life Settlement Scheme, Stockbroker Fraud Blog, December 7, 2010
Three Houston Men Accused of $103 Million Texas Securities Fraud Involving Life Insurance Scam that Victimized at Least 800 Investors, Stockbroker Fraud Blog, September 7, 2010
Life Settlements or Viaticals should be Considered “Securities,” Recommends the SEC to Congress, Stockbroker Fraud Blog, August 5, 2010 Continue Reading ›

AIG Trying to Get More Investors to Buy Life Settlements

Published on: April 26, 2011 | by Shepherd Smith Edwards & Kantas, LLP

American International Group Inc. (AIG) is trying to get credit-ratings firms and investors to get behind the sale of life settlements, which are securities backed by the life insurance polices of older people. Per the insurer’s recent proposal, a subsidiary of AIG’s Chartis property casualty unit would collateralize notes valued at $900 million with 1,157 policies. AIG would like to sell $250 million to outside investors.

So far, AIG’s efforts have been met with resistance. It doesn’t help that Standard & Poor’s won’t rate the securities, which could help rally investors. In fact, S & P’s March report emphasizes the securities “unique risks.” It doesn’t help that some critics call these securities “collateralized death obligations,” “blood pools,” or “death bonds” because they pay off upon the insured’s death.

Investors who buy life settlements are betting that the benefits they get upon the insured’s death will be greater than the cash they’ve paid for both the policy and its premiums. However, due to the 2008 credit crisis or because some of the insured ended up living longer than expected, many life settlement investors have lost money on these securities. Securities lawsuits have followed and the market has stayed depressed. AIG says that as of the end of 2010, it has paid over $177.8 million to settle 479 claims. In exchange, it received the policies. Per AIG’s financial filings, the insurer has about $18 billion in anticipated death benefits. That’s more than 1/3rd of the approximately $45 billion in these benefits that have changed hands in the last decade.

The Wall Street Journal reports that generally, life insurers consider investor ownership of policies—especially involving those betting on someone’s death—as not good for the industry. There are even some insurance companies that have gone to court claiming that they were misled buy buyers who said they wanted policies for estate planning when, in fact, they actually wanted to flip them for investors.

Our institutional investment fraud law firm are dedicated to helping investors recoup their losses.

AIG Tries to Sell Death-Bet Securities, The Wall Street Journal, April 22, 2011

Seniors Beware: What you should know about life settlements, FINRA

Life Settlement Securitizations Present Unique Risks, Standard and Poor’s

More Blog Posts:
Texas Lawyer Pleads Guilty to Involvement in Alleged $100M Life Settlement Scheme, Stockbroker Fraud Blog, December 7, 2010

Life Settlements or Viaticals should be Considered “Securities,” Recommends the SEC to Congress , Stockbroker Fraud Blog, August 5, 2010

Securitization of Life Insurance Settlements Might Lead to Next Financial Crisis, Say Lawmakers, Stockbroker Fraud Blog, September 27, 2009

Texas Lawyer Pleads Guilty to Involvement in Alleged $100M Life Settlement Scheme

Published on: December 7, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Texas attorney Russel Mackert has pleaded guilty to charges related to his involvement in an alleged $100 million life settlement fraud scheme that targeted over 800 investors. A number of the investors that Mackert scammed were retirees.

The Department of Justice says that Mackert, who was the attorney for a number of A & O entities, issued material misrepresentations, such as false statements, to investors about A&O Resource Management Ltd. and the related entities. This included making misstatements about the use of and safekeeping of investors’ money and the risks involved with the company’s products. Mackert is accused of marketed over $100 million of fraudulent investments to over 800 victims in the United States and Canada. Investors suffered over $19 million in financial losses.

Mackert has admitted to facilitating the false sale of A & O and making up a fictional person to play the role of the company’s representative. He also has admitted that he failed to let investors know that most of their investments were being used for purposes totally unrelated to the buying and maintaining of life settlement portfolios. He smuggled the cashiers’ checks outside the country in an attempt to open offshore bank accounts for hiding the ill-gotten gains.

The criminal charges against Mackert include smuggling $10 million in undeclared cashier’s checks outside the US and criminal information alleging conspiracy to commit mail fraud. Mackert is facing a maximum 5 years behind bars on the smuggling conviction and 20 years on the conspiracy charge. He also faces a $250,000 fine for each count.

Related Web Resources:
Lawyer in A&O Case Enters Guilty Plea in $100M Scam, The Life Settlements Report, November 24, 2010
Lawyer for A&O Entities Pleads Guilty for His Role in $100 Million Fraud Scheme Involving Life Settlements, US Department of Justice, November 23, 2010
Institutional Investor Securities Blog
Continue Reading ›

Three Houston Men Accused of $103 Million Texas Securities Fraud Involving Life Insurance Scam that Victimized at Least 800 Investors

Published on: September 10, 2010 | by Shepherd Smith Edwards & Kantas, LLP

In an indictment unsealed in federal court, Adley H. Abdulwahab, Christian M. Allmendinger, and David C. White were charged with running a life insurance scam and stealing $103 million from at least 800 investors in the United States and Canada. Their Texas securities scheme allegedly involved the sale of “bonded life settlements” that guaranteed 10-20% returns. All three men are principals of A&O Resource Management Ltd., which is based in Houston.

In the US, A & O is accused of using funds from investors in 37 states to purchase the investments. A life insurance policy is bought by a third party, while the policy owner receives a cash payout. Meantime, the buyer pays the premiums and when the insured passes away, is supposed to collect on the death benefits. However, the Texas State Securities Board does not believe that the bonds purchased by A & O gave investors the returns that they were promised.

According to US Attorney Neil H. MacBride, the defendants defrauded investors for personal gain. The three men are accused of making misrepresentations regarding A & O’s previous successes, office locations, and number of employees, its investment offerings’ risks, and its use and safekeeping of investor money. Abdulwahab and his co-conspirators allegedly made up sham transactions involving A & O selling to two shell corporations once state regulators started examining investor funds.

The three defendants are charged with conspiracy, securities fraud, mail fraud, and money laundering. The Justice Department is seeking the forfeiture of about $103 million from the men.

Life Settlements or Viaticals should be Considered “Securities,” Recommends the SEC to Congress 

Published on: August 5, 2010 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission staff report is recommending that the US Congress define life settlements as securities to make sure that investors of these types of transactions receive federal securities law protection. The SEC says there are several benefits to making such an amendment to securities laws:

• This would clarify life settlements’ status under federal securities law, which would allow the federal government and the states to deal with them in a more consistent manner.
• Life settlement market intermediaries would then fall under the regular framework of the Financial Industry Regulatory Authority and the SEC.
• FINRA and the SEC would have clear authority to police the life settlement market, which could help detect securities fraud and discourage financial abuses.

The Life Settlements Task Force prepared the report, which notes “inconsistent regulation of participants” in the life settlements market and that pools of life settlements and individual transactions “would benefit” from “baseline standards of conduct to market participants.” SEC staff is also recommending that the commission:

• Urge Congress and state officials to think about regulating life expectancy underwriters in a more consistent and significant manner.
• Tell staffers to make sure that providers and brokers are meeting legal standards of conduct.
• Have staff members look for the development of a life settlement securitization market.

It was just in early July that US Senator Sen. Herb Kohl released a General Accountability Office report that found that the inconsistent regulation of life settlements create several challenges:

• Some police owners in certain states are not as well-protected.
• Some individual investors may have a hard time getting enough information about their investments and the risks that may be involved.
• Because laws across states are not consistent, this can pose a problem for some providers and brokers.

Related Web Resources:
SEC Releases Report of the Life Settlements Task Force, SEC, July 22, 2010
Sen. Kohl Says GAO Report Supports Tougher Settlement Regs, LexisNexis, August 2, 2010
Read the Life Settlement Task Force Report (PDF)
Continue Reading ›