Mutual Benefits Corp., once the largest viatical settlement company in the country, has pled guilty in Broward County Circuit Court to criminal charges of racketeering and numerous counts of investment fraud. The criminal charges filed by the Office of Statewide Prosecution were a direct result of the investigation conducted by the Department of Financial Services, Division of Insurance Fraud. The Florida Office of Insurance Regulation has revoked the company’s certificate of authority.
The plea in March concluded a lengthy joint investigation by the Attorney General’s office and the Department of Financial Services, Division of Insurance Fraud. The Department of Financial Services began investigating criminal allegations against Mutual Benefits in 1999. Authorities discovered that during the bidding process for the policies, principals of the company were setting the life expectancies of the insured persons prior to any medical review and sending backdated life expectancy letters to the investors. As a result, policies were not maturing as promoted in marketing materials and investors were not realizing the investment return promised by Mutual Benefits. The company sold policies worth more than $1 billion to over 30,000 investors worldwide.
The U.S. Attorney’s Office filed criminal charges against Peter Lombardi, the president of Mutual Benefits, who was sentenced to 20 years in prison earlier this year. Federal charges were also filed against Clark Mitchell, the doctor who falsified the life expectancies. Mitchell has pled guilty and faces up to 10 years in prison. Victim restitution is being handled by a receiver who will be monitored by a federal district judge.
In February of 2000, the fifteenth statewide grand jury issued a report on the viatical industry that led to broad legislative changes regulating the industry in the State of Florida, primarily geared to consumer protection. Since that time, there have been sweeping changes in the operations of viatical settlement companies licensed in the State of Florida.