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Three Men Charged with $100 Million Fraud Involving Life Insurance Investments

Vigilant investors insist on a professional due diligence investigation of any unregistered investment. But this is especially important with life settlement investments.

Federal prosecutors have indicted three men in an alleged scheme that has become common.  The scheme involves life insurance settlements in which the owners of life insurance policies receive a cash payout and transfer ownership of the policy to investors who continue making premium payments and receive the death benefit when the insured dies.  While there are, no doubt, people who seek to capitalize on this model legitimately, the field is infested with innumerable con men and bunglers who have, and will, cost investors hundreds of millions in losses.  According to Bloomberg:

Three Houston-area men were charged with stealing $103 million from at least 800 investors in a scheme based on death benefits from life insurance policies.

In an indictment unsealed today in federal court in Richmond, Virginia, Christian M. Allmendinger, 39, Adley H. Abdulwahab, 35, and David C. White, 40, principals at Houston- based A&O Resource Management Ltd., are accused of selling “bonded life settlements” guaranteeing returns of from 10 to 20 percent, Robert Elder, a spokesman for the Texas State Securities Board, said in an interview.

A&O used money from investors in 37 states to buy the investments, in which life insurance policies are sold to a third party. The policy owner gets a cash payout, while the buyer of the settlement investment pays the premiums to maintain the policy and collects the death benefit when the person insured by it dies.

A&O bought a limited number of bonds, “but we don’t believe the bonds delivered the promised returns to investors,” Elder said. Neither the bonds nor the underlying life insurance policies “existed in any number that they could possibly pay off their investors,” he said.

The men are charged with mail fraud, conspiracy, money laundering and securities fraud, and forfeiture of about $103 million is being sought from the three, according an e- mailed statement from the Justice Department.

Vigilant investors insist on a professional due diligence investigation of any unregistered investment.  But this is especially important with life settlement investments.  You need to know everything you can about the people behind the investment.  Do they have the experience to make the venture a success?  Have their prior business enterprises ended in bankruptcy?  Have they ever been accused of fraud?  Do they really have the educational credentials they claim?  If you invest without getting independent verification of the answers to these, and other, important questions, you would do just as well to take your nest egg to Las Vegas.  You’d have a better chance at a profit, and have more fun.

Vigilant investors take sensible precautions with their nest egg.  Those who think they are too smart to fall victim to an investment scam often learn the hard way that intelligence alone is not enough.

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