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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, January 7, 2009

Principals and Attorneys Indicted in Alleged Viatical Settlements Fraud

On January 5, 2009, the United States Attorney for the Southern District of Florida announced the Indictment of Joel Steinger, Steven Steiner, Michael McNerney and Anthony Livoti, Jr., in connection with their involvement with Mutual Benefits Corp. ("MBC"), a viatical and life settlement company that raised more $1.25 billion from over 30,000 investors worldwide from October 1994 through May 2004. According to the 25-count Indictment, Steinger and Steiner, two of the founding principals of MBC, and attorneys McNerney and Livoti, participated in a wide-scale fraud involving the sale of these investments, falsely promising investors "safe" and "secure" investments when they knew that MBC had, among other things, improperly acquired policies, pressured doctors to rubber-stamp false life expectancy figures, and mismanaged escrowed premium funds in a "Ponzi" scheme fashion. The Indictment charges the defendants with conspiracy, mail fraud, wire fraud and money laundering in violation of 18 U.S.C. ยงยง 1341, 1343, 1349, and 1956(h); the criminal case has been filed in the United States District Court for the Southern District of Florida.

The SEC halted MBC's on-going fraud through an emergency action filed in May 2004. The SEC's case named as defendants, among others, Joel Steinger and Steven Steiner. The SEC's complaint alleged that MBC and the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In the SEC's action, both Joel Steinger and Steven Steiner each consented to entry of a Final Judgment of Permanent Injunction and Other Relief, entered by the District Court on December 6, 2005 and April 10, 2007, respectively. In addition to being enjoined from further violations of the federal securities laws, under their respective final judgments, Joel Steinger was ordered to pay disgorgement in the amount of $9 million and a civil penalty in the amount of $500,000, and Steven Steiner was ordered to pay disgorgement in the amount of $3,925,000.

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