Posted on 01/01/2006 6:34:28 AM PST by Calpernia
ping
tattoo
http://www.freerepublic.com/focus/f-news/1379128/posts
Chasing the death dividend
When the U.S. Coast Guard raided a Russian fishing vessel on the Pacific Ocean in 2001, investigators hit a jackpot: more than 12 tons of chalky powder hidden beneath a mountain of frozen squid, the largest haul of cocaine ever intercepted at sea.
At the time, they had no idea they also had tapped in to what federal authorities call another massive deception.
Agents tracing the source of the cocaine and probing possible money laundering eventually seized files that led deep into one of the financial industry's darkest corners: investing in the life spans of old or dying people, transactions known as viaticals.
Based on those records, federal authorities are investigating Mutual Benefits Corp. of Florida and filed a civil complaint two months ago that the Ft. Lauderdale-based viatical seller made false promises of extraordinary profit as it reeled in $1billion from 29,000 investors.
But a Tribune investigation found that Mutual Benefits is just one example of alleged deception in the rapidly growing viatical industry, a loosely regulated, often-misunderstood world that is riddled with fraud.
Dozens of companies selling viaticals maintain stellar regulatory records and have been consistently profitable. But since 1998, more than 100 companies have run afoul of state laws and regulations, records show.
The Tribune reviewed thousands of court files, analyzed government enforcement records from across the country and studied 400 current and defunct companies, piecing together a troubling portrait of an evolving industry.
In a viatical transaction, a person with, for example, a $100,000 life insurance policy might sell it for $50,000--though that figure could be lower or higher--and the investor is entitled to the full amount, minus commissions. The cold calculus is inescapable: The quicker the original policyholder dies, the better the investment.
But those profits often have proved elusive, while the industry has proved resistant to reform.
The Tribune investigation found that:
- Despite the industry's problems, a dozen states have failed to adopt laws restricting viatical businesses. Two dozen other states, including Illinois, rely only on vague regulations that serve to provide haven to troubled companies. Mutual Benefits was banned from doing business in five states but continued to operate in Florida--and in Illinois.
- Since 1995, at least 56 industry executives have been convicted of felonies for activities ranging from elaborate pyramid schemes--companies selling non-existent policies--to recruiting terminally ill patients to apply for multiple policies without disclosing their conditions, state and federal court records show.
- At least half a dozen doctors have been accused of manipulating medical diagnoses in attempts to assure investors that policyholders were near death. In most cases, these doctors delivered life expectancies without consulting with patients or their doctors.
- Companies commonly ply investors with complex contracts that downplay financial risks and obscure key disclosures, more than a dozen state investigations found. Behind advertisements guaranteeing safe and secure investments is the reality that investors may be responsible for premiums if the policyholder lives beyond life expectancy. Over time, that means investors could lose part of their principal.
"This is not a certificate of deposit," said William Scott Paige, the Florida founder of Wm. Paige & Associates, one of the country's oldest viatical companies. "No one can ever accurately predict life expectancy. They can make estimates and projections. But that's all they are."
Viaticals, which got their name from a Latin word meaning "provisions for a long journey," have gained in popularity in the past decade. When executed honestly, the deals can benefit everyone involved.
Policyholders gain a tax-free influx of cash that can be used to feather their last days in comfort, from dream vacations to new medicines.
Investors can receive rates of return double or triple that of safer investments, such as certificates of deposit or mutual funds. And the companies and brokers typically profit by taking a commission out of the money investors pay.
Eager to shed its image of shady deals, the industry now refers to its wares as life settlements. And instead of focusing on terminally ill policyholders, companies have expanded their reach to include most any older person.
But that has not been enough to reform the industry.
"We are very vulnerable to fraud and bad players," said Doug Head, director of the Viatical and Life Settlement Association of America, an Orlando-based trade group. "States don't know how to grapple with us. We are in deep need of standards."
Lawyers for Mutual Benefits say the company ran into problems not because of fraudulent business tactics or low standards in the industry but because regulators were overaggressive, which led to the raid on the company's offices.
"It's not a Ponzi scheme," said Jon Sale, a Miami attorney representing one of the company's officers. "Evidence will show that there's $200 million in escrow to pay [insurance] premiums with, which the company was not required to do."
He also disputed the Securities and Exchange Commission's claim that phony life-expectancy estimates were given to investors before they purchased a policy.
"Of course there are a lot of fraudulent viatical companies," Sale said. "But this isn't one of them."
AIDS afforded opportunities
Viatical companies grew quickly in the 1980s as the AIDS crisis presented an opportunity to buy large numbers of policies from dying patients. Mutual Benefits was founded later, in 1994, but still focused on AIDS patients and rapidly expanded to be one of the nation's largest buyers of benefits.
By the late 1990s, as medical advances prolonged the lives of many AIDS patients, payouts from Mutual Benefits' investments slowed down drastically. But the company didn't reveal this to future investors, according to SEC charges.
The company was formed in the mid-1990s by Leslie and Joel Steinger; their brother Steven, who goes by the last name Steiner; and Peter Lombardi, a family friend, according to a deposition from Steiner last month. All but Steiner have been named in the SEC civil complaint, though his consulting company was included.
The SEC's civil complaint accuses Mutual Benefits of improperly using investors' money. In response to the commission's request, a federal judge froze the company's assets and put it in receivership. The Florida Office of Statewide Prosecution has filed criminal charges of racketeering and investment fraud, while the state's Department of Insurance has suspended the company's viatical license.
The SEC in its complaint questioned the legitimacy of nearly $26 million paid by Mutual Benefits to an array of consulting firms connected to the brothers and Lombardi.
Les Steinger's Rainy Consulting Group received $9 million over four years, while Lombardi's PJL Consulting Inc. got $8.3million, Joel Steinger's Kensington Management Inc. was paid $6.3 million, and Steiner's SKS Consulting took in $2.3million, according to court documents.
Accurately predicting life expectancy is the linchpin of the viatical and life settlement industry. But because the process can be shrouded in secrecy, this calculation often has been the first point of deception.
The life-expectancy factor
George and Rose Bonomo of Plainfield, southwest of Chicago, reviewed the medical analysis provided by Mutual Benefits before investing $100,000 in 1996 on the insurance policies of two HIV-positive men.
They received a letter signed by Dr. Clark Mitchell affirming that the first man was expected to die within a year and the second within three years. The Bonomos are suing Mutual Benefits. Their Chicago attorney, Rick Schoenfield, provided an account of what happened to them.
The medical letters, which are meant to assure investors that life expectancy has been gauged by an independent, comprehensive medical review, held great weight for the Bonomos, Schoenfield said.
In the Bonomos' case, each AIDS patient received a discounted payoff, about 70 percent of their policies' face value, and Mutual Benefits received a commission. If both men died as expected, the Bonomos expected to receive just under a 30 percent return on their investment.
In the late 1980s, an AIDS diagnosis often meant death was swift and certain. By the late '90s, however, medical advances stunted many cases, and viatical companies were put on shaky ground.
Many companies' portfolios crashed because too many patients lived too far beyond expectations, state bankruptcy records show.
In some cases, doctors admitted, they earned fat fees as long as their life-expectancy estimates did not spoil the investment potential of a policy.
This year, as the Bonomos waited for the investment to pay off and couldn't get their phone calls returned, they grew suspicious. On April 30, they filed a civil claim against Mutual Benefits in U.S. District Court in Chicago.
Three days later, government agents seized control of the company, leveling a flurry of accusations, including that Mitchell and other doctors fabricated life expectancies.
With the company now in the grip of bankruptcy, they aren't sure they will collect anything, Schoenfield said.
Federal and state agents charge that Mutual Benefits masked the fact that 90 percent of policyholders, most of whom have AIDS, had lived substantially beyond life expectancy. Mutual Benefits' portfolio was not diversified to offset risks, court records show.
Doctors implicated
But the core problem, government investigators concluded in May, was that about 65 percent of policies purchased by Mutual Benefits were assigned life expectancies that were not based on "any meaningful review or confirmation by an independent physician." In their May complaint against Mutual Benefits, SEC investigators claim Mitchell was one of the culprits.
Mitchell's attorney did not return calls.
This was not the first time Mitchell's name had appeared on questionable medical diagnoses. In 2001, he was charged with 25 felony counts involving fraud based on allegations that he fabricated or manipulated life-expectancy records for Mutual Benefits. Information about the case is unavailable because the file has been sealed, according to court officials.
Government agents also detailed the actions of another physician, Edgar Escobar, who is accused of arbitrarily calculating estimates based on the wishes of Mutual Benefits founder Joel Steinger.
"Substantially all of the life expectancies purportedly assigned by Mitchell and Escobar were in fact determined by [Joel] Steinger," according to an SEC affidavit. The doctors often did not review medical records to confirm diagnosis or plot life expectancy. Instead, they issued "fraudulent life-expectancy figures that had already been designated by [Joel] Steinger."
A third doctor, Anthony LaMarca, was paid to verify life expectancies, according to court records. About 20 percent of his cases were adjusted to shorter time periods considered more acceptable to Joel Steinger, government investigators said in court filings.
In an interview, LaMarca disputed claims that 20 percent of his cases were adjusted, calling the figure closer to 3 percent.
"Those were revised because new medical information was brought to light," he said. LaMarca, who said he has cooperated with the SEC, said his medical reviews were not done on patients who had AIDS or were HIV-positive.
Mutual Benefits is only the most recent company stung by allegations of life-expectancy fraud. Nestled in the ocean resort town of Delray Beach, Fla., Dedicated Resources was one of the darlings of the industry until its sudden and unexpected collapse in 2001. The company blamed unforeseen medical advances for prolonging life spans. Disenchanted investors refused to pay extra premiums to keep the policies active.
Raking in millions
Court records provide a more detailed snapshot of a company that raked in multimillion-dollar salaries for founder Michael Zadoff and other family members, and show fat fees paid to an out-of-state doctor who estimated life expectancies after reading abbreviated medical files sent in overnight mail packets.
Dedicated Resources' medical review of patients consisted of a 30-minute examination of photocopied patient files by Dr. Lon Baratz in Rochester, N.Y., according to depositions filed in a Florida civil suit by disgruntled investors.
Baratz testified that he received $75 to $100 for each assessment. He rendered opinions without talking to the original physician or patient, according to his 2002 deposition in a pending civil case.
Patient files were bundled together by the dozens and shipped overnight to Baratz. Files never included copies of X-rays or other information that would have allowed an independent review. But photocopies of original doctors' medical charts were available, Baratz testified.
From 1993 to 1998, Baratz reviewed about 800 files and was paid about $70,000, according to his deposition in a recent civil case. Baratz was asked by attorneys representing investors to produce his records. Baratz said he shredded everything.
"It just made sense," he said.
Baratz did not respond to a request for an interview.
Viatical industry trade groups have long complained that their industry is unfairly tainted by the media. In 1999, Deborah Rhoades, then vice president of the National Viatical Association, told The Associated Press that fraud is not widespread.
Two years later, Rhoades was convicted in one of Ohio's largest viatical swindles. She had risen to become president of the now-defunct Washington, D.C.-based industry trade group.
Rhoades' case was linked to convictions of 17 other viatical executives, including fellow Ohioan J. Richard Jamieson. His company, Liberte Capital, defrauded more than 3,000 people of $100 million, court records show.
Once the owner of luxury cars and mansions, Jamieson was sentenced to 20 years in prison in December. He was ordered to repay about $92 million for the embezzlement and his role in coaching AIDS victims on how to lie to obtain policies.
Liberte Capital bought policies for pennies on the dollar. Investors were to be paid when the policyholders died. Because of this investigation, 85 insurance companies canceled most of the fraudulent policies. The insurance companies saved more than $25 million; investors lost everything.
The viatical industry's history is stamped by dozens of such fallen companies and executives. Michael Lee Davis founded his own viatical company after he was paroled from prison. He had been convicted in 1981 of murder for his role in a Houston murder-for-hire plot in which a husband, wife and son were killed for their insurance benefits.
Once Davis was freed, he again turned to life insurance to earn money. But he and his viatical company, First American Fidelity Corp., soon ran afoul of the law again.
In 2000, he was convicted of fraud for recruiting 20 people to lie about pre-existing medical conditions to obtain $5 million in policies. Davis used the falsely obtained policies to take money from investors, a Texas court found.
Policyholder scams
Scams in the industry also have involved the original policyholders.
Four years ago, more than 50 FBI and state agents poured into the Lexington, Ky., headquarters of Kelco Viatical and its subsidiary, Genesis Viatical, in an investigation dubbed Operation Clean Sheet.
To secure more policies, Kelco encouraged AIDS patients to get small life insurance policies that did not require medical tests. Kelco bought the policies and resold them to investors who were promised up to 30 percent returns, according to court records.
But the insurance companies learned of the fraud and canceled the policies, leaving investors with no hope of recovering their investments. The crime is known as clean sheeting because policyholders falsely claim their medical records are clean.
The FBI convicted 19 people of the scheme, including the company's top three executives. After being sentenced to 14 years in prison in 2003, Kelco founder Stephen Keller became a fugitive. He was tracked to Panama and arrested by U.S. marshals in February.
Government regulators have struggled to do something as simple as legally define viaticals and life settlements. What has emerged is a confusing latticework of regulations and legal opinions, allowing shady and nimble companies to easily hopscotch across state borders to avoid government investigators.
At the heart of the debate is whether a viatical or life settlement transaction should be regulated as an insurance product or as a security. The viatical industry describes itself as an alternative niche of the mainstream insurance industry, arguing it should fall under the authority of state insurance regulators, which generally are not as aggressive in pursuing fraud as federal agents.
The federal government believes the industry oversteps the traditional insurance market. The government argues that viaticals are clearly investments and should be governed as securities, which have strict federal regulations.
Renewed debate
The debate has been revived by the Mutual Benefits case. Lawyers for the company argued in court that federal securities law did not apply to the firm's deals.
On June 25, U.S. District Judge Federico Moreno sided with the SEC, finding that the investors in policy benefits offered by the company are putting money into a type of security. Mutual Benefits' attorneys immediately announced plans to file an appeal.
Moreno's ruling is at odds with a 1996 decision that resulted when the SEC filed a civil case against Texas-based Life Partners Inc. A federal appeals court sided with Life Partners' argument that it was fundamentally selling an insurance product.
The SEC's case against Mutual Benefits is widely seen as pivotal in the argument over how to regulate the industry. Should the SEC prevail, the federal precedent could be the spark to touch off new, specific state securities laws, said Tanya Solov, director of the Illinois Department of Securities.
Entangled with drug dealers
Mutual Benefits, which is in receivership, has been the focal point of more than a half-dozen Florida investigations in the past decade. But it took a federal investigation into drugs to uncover the business documents that led to the company's downfall.
Carl Villazon, a Florida deputy and forensic accountant on a task force attached to the U.S. Department of Homeland Security, helped raid Mutual Benefits offices in November 2002.
"Specifically, the investigation concerns allegations of laundering of narcotics proceeds through investment-grade viatical and life insurance policies," he wrote in an affidavit unsealed this year in U.S. District Court in Florida.
Since the high seas drug bust in 2001 aboard the Svesda Maru, agents have unearthed an elaborate criminal network of Mexican and Russian crime lords working in collusion with Colombian drug cartels. A trail of cash led to Mutual Benefits, according to court records.
Six cartel members, including one who was a Mutual Benefits contractor, have been indicted for drug dealing and money laundering. Mutual Benefits is named but not charged. Company attorneys say they did not know the foreign-based investment money represented laundered drug proceeds.
In his affidavit, Villazon detailed how the federal task force turned over an array of files and computers to the SEC in March. Armed with the evidentiary windfall, the SEC and Florida regulators took action. Many of the records seized from company files in 2002 were filed in court this year, stripping away the facade of a company on the brink of a financial abyss.
None of the executives or their attorneys would comment on the accusations.
Colombian success story
Court records reveal that Mutual Benefits marketed viaticals in Mexico and South America beginning in 2001. In Ecuador, for example, the company detailed plans to unleash 50 brokers, with the goal of grabbing an estimated $24 million from investors.
Their most successful contractor was in Colombia. Jaime Rey Albornoz, a globe-trotting broker, had the uncanny ability to rake in millions of dollars, as shown by company records submitted as exhibits in the SEC's pending case.
Albornoz was indicted last month as a drug cartel member along with four co-defendants, who are charged with moving millions of illegal drug dollars around the world and into Mutual Benefits investments, according to the federal indictment filed in U.S. District Court in Florida. Prosecutors allege that the cartel planned to profit not only from the legitimate investment results but from the commissions earned by Albornoz.
Co-defendant Rodrigo Jose Murillo also has been indicted in San Diego in connection with the drug seizure aboard the Svesda Maru.
Federal officials have not filed any drug-related charges against officers of Mutual Benefits. But they say their investigation shows that this is the first time suspected drug traffickers have used insurance investment companies as sanctuaries for dirty money.
Almost three years ago, Albornoz was buoyant as he recapped recent successes, including helping sell 1,000 policies valued at $25 million, according to company memos submitted as exhibits to the court.
"Using the words of a Colombian airline, `We must be doing something right,"' Albornoz wrote to Joel Steinger.
Albornoz detailed business meetings in Chile and Toronto, where he reportedly obtained tentative commitments from managers of large mutual and pension funds interested in funneling $100 million into investments.
"The potential is so big," he concluded, "that I do not think we are large enough to handle future demands."
(excerpt)
It is useful to make a distinction between two key activities of organized crime groups; trafficking of illegal goods and the provision of protection and enforcement services, usually to other criminal businesses. The Russian case shows how the agencies (the ‘mafiya’) selling the use of force for protection tend to form the core group of the criminal world. On the other hand, the position of organized crime involved in, say, marketing contraband has a more ambiguous position. The centrality of mafia-type organizations in Russia hinges on the fact that their activities compete directly with a key function of the state, the monopoly of force (Varese 2001: 4-6; Volkov 2002: 21-23).
However, even in the Russian case, one should not exaggerate the domestic protection function as the mafia is also extensively involved in transnational activities. In fact, organized crime has, in recent years, become more diverse in scope, more pervasive in its actions, and much more transnational in its reach. In sum, the ‘transnational criminal today tends to be active in several countries, going where the opportunities are high and the risks are low’ (Williams 2001: 58-60). Not unlike terrorism, the transnational organized crime makes efforts to benefit from the weak legal and bureaucratic capacity and flawed politics of weak or failed states (Williams 2002: 169-74).
(snip)
Within Europe, most of the women working as prostitutes come from Russia and other countries of the former Soviet Union. The number of sex migrants in Europe is impossible to determine, but 100,000 is sometimes given as a conservative estimate.
A higher estimate is reached if one believes that 50,000 Russian women are lured every year to the sex business abroad. On that basis, one may even suggest that the number of foreign sex workers in the EU varies between 200,000 and half a million. Ukraine seems to be a major source of sex migrants as 20 per cent of the trafficked migrants from there are women, while the corresponding figure for Lithuania is 7 per cent and Poland 9 per cent (Weir 2001; Salt and Hogarth 2000: 71-73; Global Report 1999: 225-27). The higher level of living and the Roman Catholic culture in Lithuania and Poland may explain the difference.
The estimation of the number of women trafficked for the sex industry is made even more difficult by the fact that women may come to a country for brief stints by a legal visa, go back home for a while, and return again. Those staying in prostitution business for longer periods of time may have originally entered the country legally to work, nominally at least, as maids, entertainers, waitresses, or secretaries (on problems to estimate trafficked migrants, see Salt and Hogarth 2000: 29-43).
(snip)
Is the Odessa Mafia related to the ODESSA Network?
I saw the tattoo listed, interesting.
So basic, not that different from reading Native American
Pictographs and Petroglyphs.
I also see that it went off like a wildfire, once Clinton was in office. Yes, I noted that it existed prior to clinton taking office.
You have posted a thread that is very interesting and more
people need to read, well done.
Ping, Calpernia has put together a thread that will make you wake up and ask where you were while it happened all around you.
The posts in comments will pull much of it into a complete package.
Excellent thread to read.
ODESSA was the supposed NAZI escape network, and the Odessa Mafia would probably refer to the region it originates in, Odessa Ukraine.
ODESSA was more than a NAZI escape network. It also tied into the financial network established by Francois Genoud.
And I understand the Odessa region referenced by the Odessa Mafia. But I'm also wondering if it was a dual reference.
The Brighton Beach area of New York City became the hub for Russian organized crime in this country during the mid-1970s. There, Russian criminals developed a working relationship with the La Cosa Nostra (LCN) which allowed them to establish fuel tax fraud schemes in certain areas of New York. The LCN forced the Russian criminals involved in these frauds to pay a large portion of their proceeds as a "tax" to operate.
SNIP
Odessa Mafia - The Odessa Mafia is considered the dominant Russian organized crime group in the United States. This group established itself in the Brighton Beach area of New York City between 1975 to 1981. In the early 1980s the Odessa Mafia sent two sub-groups to San Francisco and Los Angeles with their leadership remaining in Brighton Beach. The San Francisco Bay Area Odessa Mafia group, unlike their southern counterpart, appear to be highly structured and well organized.
SNIP
In New York, the LCN and Russian organized crime figures have formed working relationships in areas of fraudulent fuel tax schemes. The LCN is believed to have forced the Russians to pay tribute on the profits they made on these schemes.
SNIP
On September 8, 1993, several Russian crime figures were arrested in St. Augustine, Florida for conspiracy and intent to import 800 kilos of cocaine. These subjects were attempting to establish a drug distribution route from Florida to Detroit and New York. It is believed groups of Russian organized crime figures in Los Angeles and New York were part of this operation. The Russian group was dealing with Costa Rican drug traffickers and had plans to smuggle a large quantity of cocaine from Colombia to Italy aboard a vessel. The Russian group was dealing with the Sicilian Mafia in this venture.
Your question on Odessa see's the Network a reality for a time period [Post WW-2/cold war]... with slotting for the transfered.
Odessa Mafia would be seen as hubed out of Newyork with satellite's in say San Fransisco,LA,Chicago and New Orleans [Port/commerce]
The Odessa players in New York are short period aswell.
Many are bumped off by each other..or are bumped off at the behest of Moscow or Euro-Russian Capo's.
The Russians prey on each other wholesale.
They are sent/recieved to U.S.
If they show up in the U.S. without an overseer.....life expectancy is short.
Shift:
The Ex Nazi pipeline is one of methodical businessman class and ties to Gov.
The Russian crime systems are mutlifold in numeric over German.....and are sloppy.
as mentioned.....the Russians do each other broad daylight anywhere.
Ex Nazi imperative is very low key and seldom acted or acts without layered support.
Russian crime sells weapons...even Generals in the Soviet Military.
yet much of what they sell is crap.
The Germans however deal in quality.
German consortiums built many of Saddams bunkers and military instillations.
so well did they build...that after Gulf War 1....U.S. went into R&D mode...as muni's used in the war on these facilities were nominally effective.
some facilities had upper cases collapse.....with lower intact.
Germans build things well.
some of that German technology knowledge was applied in Syria to protect their missile fire chain.
newer gen penetrators by U.S.and Israel will punch in deeply to destroy these now.
but a short while ago.....it wasn't so.
Germany enjoys knowledge brokering now....hence their pleasure in allowing Chi coms to drop in and buy up business's or hang around and pay for defined technology at a premium price.
And a Happy New Year to you.
Calpernia has always done a wonderful job on research.
She is the best.
This could prove to be an interesting google, check out what
it turns up.......
http://www.google.com/search?client=googlet&q=Is%20the%20Odessa%20Mafia%20related%20to%20the%20ODESSA%20Network%3F
Please, check your Freep mail...........
Wow, interesting is a very mild adjective for this.
Thanks for the research, Cal.
Thanks, Granny, for the ping.
Great work Cal.
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