Lawyer bet on terminally ill to gain their death benefits: U.S. Attorney

Caramadre faces indictment over alleged scheme that purportedly sought out those with less than six months to live; lawyer says 'insurance industry upset it got beat at its own game'
JAN 04, 2012
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.

Latest News

JPMorgan tells fintech firms to start paying for customer data
JPMorgan tells fintech firms to start paying for customer data

The move to charge data aggregators fees totaling hundreds of millions of dollars threatens to upend business models across the industry.

FINRA snapshot shows concentration in largest firms, coastal states
FINRA snapshot shows concentration in largest firms, coastal states

The latest snapshot report reveals large firms overwhelmingly account for branches and registrants as trend of net exits from FINRA continues.

Why advisors to divorcing couples shouldn't bet on who'll stay
Why advisors to divorcing couples shouldn't bet on who'll stay

Siding with the primary contact in a marriage might make sense at first, but having both parties' interests at heart could open a better way forward.

SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives
SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives

With more than $13 billion in assets, American Portfolios Advisors closed last October.

William Blair taps former Raymond James executive to lead investment management business
William Blair taps former Raymond James executive to lead investment management business

Robert D. Kendall brings decades of experience, including roles at DWS Americas and a former investment unit within Morgan Stanley, as he steps into a global leadership position.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.