“Viatical Fraud Rampant,” Grand Jury Concludes
  ‘Aids Scandal’ Story Goes National

Atty General ButterworthDateline... February 4, 2000...On the heels of a front page story in last week’s Express, revealing ongoing viatical fraud in Florida, the Office of the Statewide Prosecutor announced on Friday that “fraud and corruption are rampant in the  viatical industry.”  

Statewide Prosecutor Melanie Ann Hines published the findings of the first report of the Statewide Grand Jury which was impaneled last summer to review a variety of financial crimes including insurance fraud.

The report concluded that if the fraud continues unabated, the entire industry may become jeopardized. Indictments issued.

In its report,  the Grand Jury found that a large number of terminally ill patients were applying for and receiving life insurance policies by not reporting their illnesses, a policy known as cleansheeting. These fraudulently obtained policies were eventually sold to investors with the knowledge and complicity of, and sometimes even encouragement from some life insurance agents, viatical brokers, and viatical settlement providers.

The Grand Jury also issued indictments charging five individuals and one corporation in the viatical industry with multiple counts of Grand Theft and Dealing in Stolen Property. The policies viaticated had a face value of almost $7 million.  This follows sealed indictments charging two South Florida viatical settlement providers with Grand Theft and filing false claims last October.

To date, the Office of the Statewide Prosecutor has returned three Indictments charging seven individuals and one corporation with 155 felony counts relating to criminal fraud in the viatication of life insurance policies belonging to the terminally ill. The face value of these policies is approximately $12.7 million.

The state investigation revealed what law enforcement officials, insurance regulators, and industry observers have been saying for some time. Fraud in the viatical settlement industry is rampant; as much as 40-50% of the life insurance policies viaticated by viatical settlement providers may have been procured by fraud.    . 

In censuring the industry, the Grand Jury declared that “As a result, one of the most vulnerable groups in society, the terminally ill, will lose a vital option to mitigate their financial burdens. The victims of this fraud are not just insurance companies and their legitimate customers who end up paying as a result of this fraud through reduced profits and higher premiums. Victims also include investors, who stand to lose their investment when policies are canceled or lapse.”

The panel will continue to meet throughout the year, and “numerous more criminal charges are likely to follow”, according to one attorney defending a number of AIDS patients. It was only last week that Circuit Court Judge Cohn allowe the Statewide Prosecutor access to patient medical records here in South Florida.  The story was broken exclusively by the Express.

Read the Article from Issue 1... AIDS Scandal

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