Life settlements scammers get longer jail sentences than Enron’s Skilling

Two Houston men have been sentenced to spend more than 45 years in prison for their role in a massive life settlements fraud scheme.

Two Houston men have been sentenced to spend more than 45 years in prison for their role in a massive life settlements fraud scheme.
Christian Allmendinger, a co-founder and vice president of A&O Resource Management Ltd., and Adley H. Abdulwahab, a hedge fund manager and part owner of A&O, were sentenced to 45 years and 60 years in federal prison, respectively, on Sept. 27 and 28 in the U.S. District Court in Richmond, Va.
The slate of charges against the duo includes conspiracy to commit money laundering, securities fraud and mail fraud.
The case goes back to 2004, when Mr. Allmendinger and another man founded A&O, according to the U.S. attorney’s office in Richmond and the Justice Department.
The firm offered individual investors whole and fractionalized interests in so-called bonded life settlements, which were supposedly backed against longevity risk with a reinsurance bond.
These bonds were positioned as fixed-maturity investments with a term of four to seven years and marketed as providing a guaranteed minimum compounded annual rate of return of 10% to 12%.
Mr. Abdulwahab, who eventually became a partial owner of A&O, entered the picture when his marketing company, CA Houston Investment Center, or HIC, and independent insurance agents who weren’t securities licensed began selling the investments, according to the suit. A&O paid HIC and the agents a commission of 10% of each bonded life settlement purchase, authorities said.
Some 800 investors, most of them elderly, bought up the investments, and A&O raked in some $100 million in clients’ dollars.
Securities and insurance regulators became suspicious in 2006, concerned that the firm was offering unregistered securities. Federal enforcement agencies said the men set up a phony series of sales of A&O itself in 2007 to place greater distance between themselves and regulators’ scrutiny of the firm. The transactions ended Mr. Allmendinger’s and Mr. Abdulwahab’s ownership interests in A&O, according to law enforcement agencies.
A&O went into bankruptcy in September 2009, due to failure to pay down the premiums on its underlying insurance policies.
Mr. Abdulwahab filed an appeal of the sentence last week.
“The sentence is harsh and effectively a life sentence,” Mr. Abdulwahab’s attorney, Charles Gavin, wrote in an e-mail. “On the other hand, the victim impact testimony was powerful, and your heart has to go out to those folks who lost so much. Judge [Robert E.] Payne clearly intended to relay a message of deterrence.”
Mr. Allmendinger also will appeal the sentence, said his attorney, Barry J. Pollack.
“We believe the judge was incorrect,” he said. “Mr. Allmendinger had left the company years before it went into bankruptcy. The sentence was extraordinarily harsh, and we didn’t think it was warranted based on his role in the A&O business.”