Senior crusades against viatical sales
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Senior crusades against viatical sales
When Gov. Jeb Bush signed a bill Thursday to stiffen penalties for con artists who sell fraudulent “viatical” investments, 68-year-old Port Charlotte retiree John Romanus and his wife, Alice, were among the VIPs standing by his side.
For Romanus, the bill represents a major breakthrough in a seven-year crusade.
A viatical is an instrument that allows investors to buy interests in the life insurance policies of terminally ill people. The term comes from a Latin word for giving travelers or soldiers money before they set out on a long journey.
The people who sell their policies are known as “viators.” They receive a payment that represents a discount off the full amount of their policy based on their life expectancy.
The viatical services provider becomes responsible for paying the premiums of the policy. The provider then sells interests in the policy to investors.
The investors get a return that pays off after the person dies.
Swindled
The crusade started the day Romanus realized he had been swindled out of $25,000 on what was supposed to be a risk-free investment.
The couple later found out the company that sold them the interest in the life insurance policy had hired a doctor who falsified reports for people who weren’t actually close to death. So, the Romanuses never got their money.
The rip-off was particularly painful because Romanus and his wife ran an income tax accounting firm. Alice Romanus, as a federal enrolled agent, had the credentials “to teach IRS agents the law,” her husband said.
But, he said he and his wife were thrilled to be invited to the bill-signing ceremony, which was held at the Harborside Event Center just prior to the governor’s monthly cabinet meeting.
Half done
The bill, HB 1437 sponsored by state Rep. Dudley Goodlette, R.-Naples, and Sen. Rudy Garcia, R.-Hialeah, defines viatical investments as “securities” and places regulatory authority over the viatical industry with the Office of Financial Regulation instead of the Office of Insurance Regulation.
The move beefs up state requirements, rules of conduct and prohibited practices.
The governor’s meeting was held in Fort Myers as part of Bush’s program to bring state government to the people.
“Oh, I loved it,” Romanus said. “My job’s half done, so most of the public will be protected now.”
“Now all I have to do is get my case into court and get criminal charges filed,” he added.
Seized
Romanus, a disabled U.S. Army veteran, has worked since 1998 to get civil damages and criminal prosecution of his financial planner, Herman E. “Skip” Jaehne of Venice, and the viatical services provider Mutual Benefits Corp., which had offices throughout South Florida.
On May 4, the federal Securities and Exchange Commission seized MBC pending a securities fraud investigation.
Jaehne, who connected Romanus with MBC, could not be reached at his Venice residence for comment.
The Florida Department of Insurance fined Jaehne $1,000 and placed him on probation for six months in 2001 for improper advertising of viatical investments. However, Jaehne is currently licensed in the state to sell variable annuities, according to Bob Lotane, spokesman for the Department of Financial Services.
Put off
Romanus invested $25,000 in 1997 and was supposed to receive a 12-percent profit after 18 months. He said he realized he’d been had after the 18-month period came and went.
“I was put off and put off and put off,” he said.
Romanus said he filed the first complaint against Jaehne and MBC. The complaint sparked a state investigation. He also provided information on Jaehne’s history of complaints to the Florida Department of Insurance.
“I brought him down,” Romanus said. “I’ve been stopping him from doing everything he was doing.”
Romanus is also one of 140 people who sued MBC. He said he was negotiating a settlement when the SEC seized the company’s assets.
Now, he expects to collect “10 cents on the dollar,” he said.
Stonewalled
Meanwhile, State Treasurer Tom Gallagher was waging his own battle against MBC and other alleged unscrupulous viatical providers. He tried to get the Legislature to shift the oversight of the industry to the state’s securities regulation office.
“We got stonewalled after MBC hired some high-priced legal talent” to lobby against that measure, Lotane said.
In fact, in 2004, MBC’s lobbyists succeeded in getting legislators to pass a law specifically calling for oversight to be provided solely by the office of insurance, Lotane said.
The bill signed Thursday reversed that legislation.
“No longer will Floridians be duped out of their hard-earned savings because of pie-in-the-sky promises made by dishonest viatical providers,” Gallagher said Thursday.
The new law gives investors access to company financial information, said Gallagher. Also, promises made to investors now have to be approved by state regulators.
In addition, the bill requires the doctors who estimate the life expectancies to be registered with the state insurance office.
One more battle
Romanus’ crusade has at least one more battle. Next November, he’s scheduled to testify for the federal government in an investigation that may result in criminal charges against MBC officers.
Romanus said he amassed a file 9 inches thick, worked 1,000 hours and spent more money than he can tally to stop the fraud.
“I didn’t want them to get away with scamming people, especially elderly people, out of their life savings,” Romanus said. “The way I looked at it, if I didn’t do it, most people wouldn’t and it wouldn’t get uncovered for another 10 years.”
You can e-mail Greg Martin at [email protected].
