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Univ. of Toledo College of Law

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Monday, March 12, 2007

SEC Charges in Viatical Case

On Nov. 17, 2006,  the  SEC filed  a  complaint  against  ABC Viaticals, Inc. (ABC), and its former President, Keith LaMonda and his brother,  Jesse  LaMonda,  for  their  roles  in  the  fraudulent and unregistered offer  and  sale  of  life settlements. With the consent of the parties,  Judge  Solis  entered  an  order  granting   a   preliminary injunction, an asset freeze, the appointment of a receiver, and  other relief.  In its complaint, the SEC alleges that from at least June 2001 through November 2006, ABC raised  at  least  $100  million  from  over  4,000 investors worldwide from the sale of life settlements with  guaranteed returns from 27%  to  150%.  ABC  claimed  that  investor  funds  were controlled by an independent escrow agent, that  funds  sufficient  to pay premiums for the life expectancy of the insured were segregated in a  separate  escrow  account,  and  that  financial  guarantee   bonds purchased by ABC would "fix" the date and  amount  of  the  investor's return. The complaint, however, alleges that the LaMondas exercised de facto control over all funds held by its escrow  agents,  never  fully funded the escrow accounts to pay premiums on the  policies,  siphoned millions of dollars of  investor  funds  into  their  own  pockets  or entities they controlled, and used a bonding company  that  they  knew would not perform when bonds came due. The complaint  further  alleges that the LaMondas never disclosed to investors that in July 2005  they were indicted for their role in the fraudulent sale  of  viatical  and life  settlement  investments  through  Accelerated   Benefits   Corp. (Accelerated Benefits), or the fact that they and Accelerated Benefits were the subject of at least seven state regulatory actions  based  on their sales of viatical and life settlement investments.

On March 7, 2007, the jury in the LaMondas' criminal  trial  convicted Keith and Jesse LaMonda on all counts charged, including mail and wire fraud, for their role in selling viatical and life settlements through Accelerated Benefits. The LaMondas face up to 30 years in  prison  and over $100 million in criminal restitution.   

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