“US CHARGES COSTA RICA FIRM WITH BOND FRAUD OF OVER $670 MILLION”                                           

FROM THE - JOURNALS of Monte Friesner ~ Financial Crime Consultant for WANTED SA ~

Friday January 21, 2011 >

WANTED SA has learned today that the Provident Capital Indemnity Ltd, its president and outside auditor are facing U.S. criminal charges for allegedly misleading investors in a $670 million life insurance settlement bond scheme.

The Costa Rica-based insurer, its president Minor Vargas Calvo, and outside auditor Jorge Luis Castillo were charged with committing wire and mail fraud, federal prosecutors said on Wednesday. The indictment also seeks the forfeiture of more than $40 million from all three defendants.

The Securities and Exchange Commission announced a parallel civil lawsuit against the defendants.

Vargas was arrested on Tuesday at John F. Kennedy International Airport in New York, while Castillo was arrested on Wednesday in New Jersey, said a spokesman for Neil MacBride, the U.S. attorney for the Eastern District of Virginia. Both had been indicted on Jan. 5.

Lawyers for the defendants could not immediately be reached.

In both cases, the men are accused of misleading clients about Provident Capital's ability to make good on its bond obligations on life settlements.

The life expectancy guarantee bonds were marketed as a way to alleviate risk for investors in life insurance policies, when insured people live beyond their life expectancies.

U.S. officials allege that Provident Capital misled clients about numerous issues, including the assets backing the bonds, the company's credit rating, the availability of reinsurance to cover claims on the bonds, and whether its financial statements had been audited.

"PCI is accused of lying to investors across the globe to sell more than half-a-billion dollars worth of 'guaranteed' bonds which turned out to be worthless," said U.S. Attorney Neil MacBride in a statement.

The bonds met a need in transactions where a life insurance policy owner sells the policy to investors in exchange for a percentage of the policy's value.

When the policy owner dies, investors can reap the full death benefit from the policy. The longer the insured person lives, the less money investors can make. Life settlement companies in some cases will pool together life settlements into securities and sell them to investors.

According to the indictment, Provident Capital began selling these so-called "life expectancy bonds" to investors in 2004. Prosecutors and the SEC charge that the company pledged to help investors mitigate the risk of losing money on the life settlements by promising to pay the death benefit if the people insured by the policy lived beyond their life expectancy.

Over the course of several years, U.S. officials said the company issued nearly 200 bonds backing life settlement offerings.

Several of the officials with WANTED SA did issue warnings to various Law Enforcement Agencies concerning Provident Capital from 2005 to present day in the Republic of Panama, Federation of Russia and also in Canada.

WANTED SA kindly thanks Westlaw, Arutz Sheva, Associated Press, and all the Parties, Press, Journalists, Law Enforcement and Securities forces who have contributed to this article and their sincere opinions and statements.

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