State sued in viatical scam
© St. Petersburg Times
Four investors victimized by a viatical investment scam sued the Florida Department of Insurance Tuesday for failing to crack down on a fraud that cost investors $117-million.
The suit, filed in Palm Beach County Circuit Court, says the department failed to act even after its own investigators had conclusive evidence of wrongdoing by American Benefits Services Inc. and Financial Federated Title & Trust. The scam unraveled in the summer of 1999, when the FBI stepped in and began seizing assets. Many of the principals of the two companies were sentenced to federal prison terms.
The lawsuit says the department's failure to act is "possibly" due to a concerted effort the companies made to curry influence with state officials, including then-insurance commissioner, Bill Nelson, who now represents Florida in the U.S. Senate. Company representatives met numerous times with department officials and even were consulted about potential changes in state law regulating viatical investments.
Viaticals are life insurance policies purchased at a discount to their death benefit from people who are terminally ill. When the insured person dies, the policy pays off. But in this scam, very little of investors' money went to buy policies.
American Benefits Services marketed the Financial Federated investments through a network of agents with promises of high returns and little risk. Most of the investors were retirees looking for income. The plaintiffs named in the lawsuit -- Patricia Patterson of Clearwater, John Bandre of Delray Beach and James and Patricia Zetler of Jupiter -- are all in their 60s. The suit asks for class-action status for all investors in the scam.
Although the department began looking at the scheme in 1998, it did not issue a cease and desist order until June 1999. Bandre, the Delray Beach investor, said the department told him that American Benefits was in good standing before he invested $160,000 in April 1999, about $55,000 of which was lost.
Department of Insurance officials said they would not comment on the lawsuit until they have had an opportunity to review it.
-- Helen Huntley can be reached at firstname.lastname@example.org or (727) 893-8230
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