Investors reach $10M settlement
VIATICAL INSURANCE
An investor lawsuit over the collapse of Fort Lauderdale’s Mutual Benefits Corp. has yielded a $10 million settlement with the firm’s lawyers.
BY PATRICK DANNER
[email protected]
Investors who claim they were defrauded in the purchase of life-insurance policies from the now defunct Mutual Benefits Corp. have reached a $10 million settlement with the firm’s lawyer.
The deal with Fort Lauderdale-based Brinkley, McNerney, Morgan, Solomon & Tatum would mark the first major settlement between more than 29,000 Mutual Benefits investors and about 50 defendants connected with the viatical-settlement provider.
In agreeing to settle, Brinkley McNerney denied any wrongdoing. It said in a recent court filing that it only settled to avoid additional court costs.
The settlement must be approved by a judge. The law firm’s insurer would be on the hook for the entire $10 million.
Michael W. Brinkley, a name partner for the firm and lawyer for Mutual Benefits, couldn’t be reached for comment.
‘’We’re pleased the matter has been amicably resolved, and we look forward to proceeding with the remainder of the case,'’ Michael Hanzman, a Coral Gables lawyer for the investors, said. Roberto Martinez, the court-appointed receiver, also was part of the settlement negotiations.
Other defendants in the case include individuals identified as principals of Mutual Benefits, sales agents and trustees for the investors’ money.
Mutual Benefits was the nation’s largest viatical-settlement company before it was shut down in May 2004 by regulators who allege it was an elaborate Ponzi scheme.
Viatical- and life-settlement companies buy at a discount the life insurance policies owned by the terminally ill and elderly in need of cash. The companies then sell the policies to investors, who collect the death benefits when the insured people die.
The Securities and Exchange Commission alleges Mutual Benefits used false projections in determining how long the insured people would live.
With many living longer than expected, the SEC claims Mutual Benefits paid the premiums with money raised from new investors. Lawyers representing Mutual Benefits in the SEC action dispute the allegations.
Investors accused Brinkley McNerney with negligence in its representation of Mutual Benefits. They charged the law firm ‘’breached its duty by failing to ensure that Mutual Benefits and insider defendants were not supplying false information'’ to investors, according to the suit.
The suit didn’t provide any details, but Brinkley McNerney had advised Mutual Benefits that the insurance investments it sold were not securities subject to federal or state oversight.
A federal judge overseeing the Mutual Benefits case ruled last year the SEC had the authority to regulate the investments, a ruling upheld by a federal appeals court in May.
Westport Insurance Corp. and Liberty Surplus Insurance Corp., Brinkley McNerney’s insurers, will pay $7 million and $3 million, respectively, to settle the investors’ suit.
‘’It appears they had $10-million worth of coverage and every dollar is going to be turned over,'’ said Warren Trazenfeld, a Miami lawyer who specializes in suing attorneys. ‘’It simply doesn’t get any better than that for plaintiffs.'’ He is not involved in the investors’ suit.
The investors’ attorneys are seeking fees of no more than $3 million, as well as reimbursement for expenses.
Source: Miami Herald
