A Rhode Island attorney who allegedly masterminded the use of VAs with lucrative death benefits to wager on the lives of the terminally ill is now facing federal fraud charges.
The attorney, Joseph A. Caramadre, president and chief executive of Estate Planning Resources, and one of his employees, Raymour Radhakrishnan, have been charged in a 66-count indictment. Those charges include, among other things, mail and wire fraud, identity theft and money laundering.
The duo were the subject of an investigation by the U.S. Attorney's Office, the Federal Bureau of Investigation, the U.S. Postal Inspection Service and the criminal investigation unit of the
Internal Revenue Service.
Federal authorities claim that from 1995 through August 2010, Mr. Caramadre used a strategy to purchase annuities using the names of sickly and elderly people with short life expectancies as annuitants. At worst, investors who were owners of the annuity would receive a guaranteed return of their principal, but they were able to profit on death benefits once the annuitant died — regardless of any investment losses in the VA.
The men allegedly sought people with no more than six months to live. Federal authorities claim that Mr. Caramadre obtained the identity information of AIDS victims in state compassion centers during the mid 1990s but also used information from his practice's own sickly or elderly clients. The men also allegedly searched for potential annuitants through ads in the Rhode Island Catholic newspaper claiming that a “compassionate organization” and a “church benefactor” were providing a $2,000 cash gift to terminally ill people, according to the indictment.
Authorities claim that when opening accounts, Mr. Radhakrishnan and Mr. Caramadre forged the sickly annuitants' signatures or obtained them through misrepresentations.
Since neither of the men was securities-licensed, the VA purchases were allegedly processed through broker-dealers LifeMark Securities Corp., The Leaders Group Inc. and Fortune Financial Services Inc., and a trio of affiliated reps. Neither the broker-dealers nor the reps are defendants in the indictment, although the three brokers are listed as unnamed and unindicted co-conspirators.
The indictment also alleges that Mr. Caramadre and Mr. Radhakrishnan, beginning in 2007, participated in the purchase of more than 200 annuities, deposited at least $125 million in investors' proceeds into the VAs and fraudulently obtained more than $15 million from the carriers.
The two also allegedly used death put bonds — corporate bonds able to be jointly owned by two people with rights of survivorship — as part of the scheme.
Federal authorities are seeking the forfeiture of Mr. Caramadre's property allegedly derived from the scheme, including a 2009 Cadillac Escalade, a 2005 Rolls Royce Phantom and a 2007 Mercedes-Benz S550.
Separately, Mr. Caramadre, Mr. Radhakrishnan, the reps and the broker-dealers are in litigation against some of the insurers that had issued the variable annuities. The Securities and Exchange Commission has also pursued Mr. Caramadre, Mr. Radhakrishnan and two of the reps in court on the same matter.
Through spokesman Gregg Perry, Mr. Caramadre maintained his innocence.
“It is Mr. Caramadre's opinion that this case was crafted and conceived by overzealous prosecutors and federal agents who were lead astray by an insurance industry upset it got beat at its own game with products they designed and offered to the investing public,” Mr. Perry wrote in an e-mail.
“Anyone who knows Mr. Caramadre understands he did not and could not take advantage of anyone, let alone terminally ill individuals.”
Calls to Mr. Radhakrishnan's attorney, Jeff Pine of Pine & Cantor, were not immediately returned.
Both James Thompson, general counsel for The Leaders Group, and spokeswoman Michelle Christie of Fortune Financial Services declined to comment.
A call to LifeMark was not immediately returned.
