Those of us in the compliance division, who were hard at work to ensure that no dirty money was placed through the firm, saw no evidence that this highly successful company was engaged in improper and illegal business practices which constituted fraud. The artfully concealed transgressions, according to US law enforcement and regulatory agencies, were many:

• The owners had the company's consulting physician, who wrote the life expectancy evaluations, unethically and illegally reduce, in his professional opinion, the number of years that many of the insured were expected to live. This often increased the value of the life insurance investments, as they would ostensibly mature earlier, and with a higher return.
  

• The owners had the firm's senior financial professionals transfer funds escrowed for future premium payments to their use and benefit.
  

• The owners, whose prior felony convictions and regulatory sanctions prohibited them from ownership in the firm, used the company's president as the official owner, whilst illegally retaining beneficial ownership.

Many of the investors lost their funds, or had their recovery greatly reduced to a small fraction of their original investment. Furthermore, the expenses of a complicated receivership have taken their toll on any cash recovered. To the investors, it is a financial horror story.

What happened to the fraudsters? In this case, the Securities and Exchange Commission, and Florida regulators, took their case to the US Attorney, and securities fraud indictments followed shortly thereafter. Here's a sampling of the sentences handed down to date:

• The president, the alleged front-man for the owners, pled guilty, but still received a 20-year sentence. Since he must serve a minimum of 85% of that time, he will not be getting out anytime soon.
  

• The chief financial officer drew a 5-year sentence, and was ordered to make restitution in the amount of $471m.
  

• The doctor was sentenced to 10 years, and ordered to make restitution of $355m.
  

• The president of a related company was sentenced to 5 years, with $ 826m restitution.
  

• The office manager drew 5 years, and $ 826m.
  

• A senior manager also received 5 years, with $826m.

 Thus far, two of the senior sales staff have been convicted of tax evasion. it seems many of the top producers at the firm had set up personal corporations to pay their expenses, and much of what they wrote off was improper.


  What of the owners, you ask? They have been indicted, as has the firm's attorney. One of the owners reportedly has terminal cancer. We will discuss them next week.


And what about yours truly?  Cast adrift, one of the senior sales staff asked me to be his personal compliance officer, in a spin-off targeting high net-worth investors overseas. It was to be a short-lived business arrangement, for he was later shot to death in his home. How and by whom, you ask? Tune in next week for the details of a lesson we can all learn from.  

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