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Viatical principals to pay $25M
The Securities and Exchange Commission obtained a $25 million settlement against the principals of viatical- settlement company Mutual Benefits Corp.
The three former principals of Mutual Benefits Corp. have agreed to pay $25 million to settle charges that they defrauded 31,000 investors in the sale of more than $1 billion in life insurance policies, the Securities and Exchange Commission announced Thursday.
Brothers Joel and Leslie Steinger, identified by the SEC as Mutual Benefits' ''de facto principals,'' and company president Peter Lombardi, agreed to the settlement without admitting or denying the allegations.
Lawyers for the Steingers and Lombardi declined to comment. The settlement, approved by the SEC's five-member commission in Washington, still must be approved by U.S. District Judge Federico A. Moreno in Miami.
The settlement comes a year and a half after the SEC obtained a court order allowing it to seize Mutual Benefits' assets and place the company in receivership. The state also filed criminal charges against Mutual Benefits, formerly based in Fort Lauderdale.
Mutual Benefits purchased the life insurance policies of the sick and elderly and then sold the policies to investors.
Regulators allege the company defrauded investors by using bogus life expectancies in determining when the insured would die and using new investors' money to pay off earlier ones.
Lawyers for the Steingers and Lombardi maintained the insurance investments Mutual Benefits sold were not securities subject to SEC regulation. Moreno disagreed, a ruling upheld on appeal. The matter was then appealed to the U.S. Supreme Court, but the parties have agreed to drop it as part of the settlement, said SEC regional director David Nelson. ''We're pleased with the settlement,'' Nelson said. ``We think it's a good result, given that at the beginning of the case we had no guarantees we would be vindicated on the (securities) issue.''
The $25 million will go into the court's registry and it will be up to Moreno to decide how it is disbursed. Alise Johnson, an SEC lawyer involved in the case, expects it eventually will go to the receivership.
Just how much Mutual Benefits' investors have lost still has yet to be determined. That's because some investors have collected on their investment, while others are still awaiting a return.
''I don't think it's going to be a significant catastrophe'' for investors, Nelson said. ''I think a significant amount of the $1 billion that people invested will go back to investors.'' Nevertheless, he said the precise amount isn't known yet.
Miami resident George Braddock, whose parents invested with Mutual Benefits, said the settlement doesn't convince him that its principals did anything wrong.
'All I know is in my parents' experience, the company did what it said it was going to do,'' Braddock said. ``I'm not willing to concede that the government has done a good deed yet.''
Braddock's parents reinvested with Mutual Benefits after getting the promised returns on their initial investment.
Under terms of the settlement, Joel and Leslie Steinger each agreed to turn over $9 million and pay civil penalties of $500,000. Lombardi agreed to turn over $5.88 million and pay a $120,000 civil penalty.
The three also agreed to the entry of an injunction against future violations of securities laws. That comes seven years after the SEC obtained a similar injunction and collected about $900,000 from the Steingers to settle earlier charges involving Mutual Benefits.
Meanwhile, the three men and related parties still face lawsuits brought by the receiver, Miami lawyer Roberto Martinez, and unhappy investors.
Source: Miami Herald
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