Fines and Penalties for Viatical Settlement Fraud

Viatical settlement fraud involves deceptive practices in the sale or purchase of life insurance policies to third parties. These fraudulent activities can have severe legal consequences, including hefty fines and imprisonment. In this article, we will delve into the specifics of viatical settlement fraud, the legal framework surrounding it, and the associated fines and penalties.

Understanding Viatical Settlement Fraud

A viatical settlement is a financial transaction in which a life insurance policyholder sells their policy to a third party for a lump sum payment that is less than the death benefit but more than the cash surrender value. This transaction is often sought by terminally ill patients who need immediate funds for medical expenses or other needs. However, the industry is rife with potential for fraud, which can take several forms:

• Misrepresentation of Health Status: Policyholders may conceal their true health status to get a higher payout.
• False Documentation: Providing false information or documents to facilitate the settlement.
• Theft of Proceeds: Unauthorized control over the settlement funds.

Legal Framework and Definitions

The legal framework for viatical settlement fraud varies by state but generally includes stringent regulations to prevent and penalize fraudulent activities. For instance, in Montana, viatical settlement fraud is defined under Montana Code Annotated 33-1-1304, which outlines various fraudulent acts, including misrepresentation and theft of proceeds.

Fines and Penalties

The penalties for viatical settlement fraud can be severe, reflecting the gravity of the offense. Here are some examples from different jurisdictions:

Montana

In Montana, the penalties for theft of viatical settlement proceeds are categorized based on the value of the property involved:

• For property valued at $1,500 or less: The offender can be fined up to $1,500, imprisoned for up to six months, or both.
• For property valued over $1,500: The fine can go up to $50,000, with imprisonment for up to 10 years, or both.
• For offenses involving a common scheme: The penalties are similar to those for higher-value theft, with fines up to $50,000 and imprisonment for up to 10 years.

Washington

In Washington, viatical settlement fraud can lead to criminal prosecution under the Securities Act of Washington. Violations can result in felony charges, particularly if the fraud involves making misleading statements or material omissions in the sale of viatical settlement contracts.

Ohio

Ohio law also outlines severe penalties for fraudulent viatical settlement acts. These include:

• Presenting false information: This can lead to charges of fraud if the false information is related to the application, underwriting, or claims process.
• Theft or embezzlement: Misappropriating funds from a viatical settlement provider or policyholder can result in significant fines and imprisonment.
• General fraudulent activities: Employing schemes to defraud in the business of viatical settlements can lead to severe penalties, including imprisonment and substantial fines.

Case Law and Legal Precedents

Several cases have set precedents in viatical settlement fraud, highlighting the courts' stance on such offenses. For example, in United States v. Leonard, the defendants were convicted for orchestrating a scheme that defrauded investors by misrepresenting the life expectancies of insured individuals. The court imposed significant fines and lengthy prison sentences, underscoring the seriousness of the crime.

Conclusion

Viatical settlement fraud is a serious offense with substantial legal repercussions. The fines and penalties vary by state but generally include hefty fines and long-term imprisonment. At Spodek Law Group, we understand the complexities of these cases and are committed to providing robust legal defense for those accused of viatical settlement fraud. If you or someone you know is facing such charges, contact us at 212-300-5196 for expert legal assistance. Our experienced attorneys are here to help navigate the legal landscape and ensure the best possible outcome for your case