Mutual Benefits Viatical Settlement Fraud
US Attorney Reports Doctor Pleads Guilty To Role in $956 Million Securities and
Health Care Frauds
R. Alexander Acosta, United States Attorney for the Southern District of Florida,
and Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of Investigation
(”FBI”), announced today the guilty plea of defendant Clark Mitchell before United
States District Judge Paul C. Huck in Miami. Clark Mitchell, a medical doctor once
associated with Mutual Benefits Corp. (“MBC”), pled guilty to securities fraud in
connection with his role in a viatical and life settlement scheme in which 28,000
investors lost approximately $956 million, in violation of 15 U.S.C. §§ 78j(b) and
78ff(a), 17 C.F.R. §240.10b-5, 18 U.S.C. § 2. Mitchell also pled guilty to
conspiracy to commit health care fraud in connection with his employment at
Community Healthcare/CenterOne, Inc (“CenterOne”), a South Florida AIDS clinic, in
violation of 18 U.S.C. §371. Pursuant to the terms of his plea agreement, Mitchell
faces a prison sentence of 10 years and a fine of over $5 million. Mitchell also
agreed to be responsible for approximately $367 million in restitution payable to
MBC investors, and more than $500,000 of restitution for the health care fraud.
Sentencing is scheduled for March 7, 2007.
According to the facts admitted by Mitchell, MBC’s principals directed an
international network of sales agents and marketing directors who fraudulently
induced investors to purchase interests in viatical and life settlements through a
series of material misrepresentations concerning the safety and security of the
investments. A viatical or life settlement is a transaction in which an investor
purchases an interest in a terminally ill or elderly person’s life insurance policy
death benefit in return for a lump-sum cash payment. An investor in a viatical or
life settlement realizes a profit if, when the insured dies and the policy matures,
the policy benefit is greater than the price paid for the policy. The longer an
insured lives, the more premium payments must be made to prevent the policy from
lapsing and becoming worthless.
MBC’s sales agents and marketing materials falsely led investors to believe that
MBC’s policies were safe by claiming that an “independent” state-licensed physician
would determine a life expectancy after evaluating the insured’s health condition.
Instead, fraudulently low life expectancies figures on thousands of policies were by
dictated by MBC’s principals to doctors, including Mitchell. Investors were then
sent letters and affidavits which falsely claimed that the doctor completed a review
of the insured’s medical condition to determine the life expectancy assigned to the
policies. During his association with MBC, Mitchell signed more than 5,000 of these
fraudulent letters and affidavits.
MBC also misled investors by promising to escrow enough money to pay for anticipated
insurance premiums. However, given the fraudulently low life expectancies dictated
to Mitchell by MBC’s principals, MBC compensated for insufficient premium reserves
by creating an unsustainable ”Ponzi” scheme that used premium funds from recently
sold policies to pay premium obligations on older policies that failed to mature.
In connection with his guilty plea to conspiracy to commit health care fraud,
Mitchell also admitted that from 1996 through May 2001, while he served as Medical
Director of an AIDS clinic called CenterOne, he and others fraudulently inflated
Medicare bills by more than $500,000 by falsely claiming that AIDS patients received
more extensive treatments than had actually been provided at the clinic.
Victims/investors may obtain information concerning this case, or submit victim
impact statements concerning this case at www.usdoj.gov/usao/fls/VictimWitness.html.
Mr. Acosta commended the investigative efforts of the FBI and the Southeast Regional
Office of the Securities and Exchange Commission. The matter is being handled by
Assistant United States Attorney Andrew K. Levi and Special Assistant United States
Attorney Ryan Dwight O’Quinn.
Source: Press Release
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