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Wednesday, March 5, 2008

UPDATE on Jailed $1 Billion Scam Lawyer (MORE, CLICK HERE)

Jailed Lawyer Faces More Heat From SEC in $1 Billion Scam
Daily Business Review by John Pacenti - March 4, 2008

FORT LAUDERDALE - Last year attorney Stephen Ziegler got sentenced to five years and had his law license suspended by the Florida Bar for his role in a $1 billion viaticals fraud through the now-defunct Mutual Benefits Corp.

Federal authorities are not done with him yet, though.

The Securities and Exchange Commission filed a complaint Feb. 15 against Ziegler and two other convicted Mutual Benefits officials: Raquel Kohler, the company's chief financial officer, and Ameer Khan, former president and nominee shareholder of related company, Viatical Services.

The complaints aim to bar the individuals from participating in any type of securities fraud in the future or face the possibility of criminal contempt of federal court. "We only have so many tools in our quiver and we felt this was an important complement to the criminal convictions," said Teresa Verges, assistant regional director in the SEC office in Miami. The way viatical settlements work is that life insurance policies for the dying and elderly are sold at a discount. Investors collect on the difference between the insurance payout at death and the purchase price.

Mutual Benefits started failing when people started living longer than the company projected.

In the end, the company became nothing but a shell for a Ponzi scheme, according to SEC investigators, with top company officials living in luxury while paying off early investors with money that arrived from later customers who were lured with promises of big returns. From 1994 to 2004, the company bilked more than 30,000 investors worldwide of $956 million.

Last year, President Peter J. Lombardi was sentenced to 20 years in prison. Ziegler, Kohler and Khan each are serving five-year prison sentences. Lombardi agreed to pay $1.5 million to the receiver and a $6 million penalty to the SEC. "Ziegler was a substantial participant in the MBC offering fraud," the complaint reads. "He served as a primary securities regulator counsel for MBC." Ziegler falsified documentation in connection with the purchase and assignment of group insurance polices, according to the complaint. He then filed false reports with the state regulators.

Kohler, according to the complaint, helped conceal the fraud and wired investor funds to accounts controlled by MBC's principals. "Kohler also participated in the preparation and filing of false and misleading information with state of Florida regulators to conceal the fact that a convicted felon with a disciplinary history was a controlling principal of MBC," the complaint reads. Khan tracked policies and performed post-investment services for MBC and "was well aware of MBC's misuse of investor funds and helped conceal the fraud," according to his complaint. The SEC has said the company really was run by Leslie and Joel Steinger, whom the SEC permanently barred from violating securities laws in 1998. According to the SEC, the Steingers and their relatives were paid $26 million in consulting fees from MBC.

Now that is what is happening to Ziegler, Kohler and Khan. Both Kohler and Khan have agreed to terms with the SEC but Ziegler has yet to consent to judgment. The SEC is not seeking monetary relief because the defendants have been ordered to pay millions in restitution by the U.S. District Court.

"It's an important message to send given the roles," said the SEC's Verges. "If they ever violated securities law again, we can immediately apply to court for contempt and additional penalties. A judge can refer the matter to criminal contempt. "The complaint isn't good news for Ziegler if he ever wants to practice law again."

Ziegler may reapply to practice law after his prison sentence is up, said Francine Walker, spokeswoman for the Florida Bar. "The process is fairly lengthy where the applicant has to prove rehabilitation under suspension," she said. "It's a process and not automatic."

Walker said the new SEC complaint will find its way into Ziegler's disciplinary file. She said investigators will determine if additional action is required against the attorney.

2 comments:

Anonymous said...

A billion dollars is a lot of money. But some lawyers will sell their soul for twenty bucks!

floridian said...

this rat should be put in a snake pit to visit all his friends

Blog Archive

See Video of Senator John L. Sampson's 1st Hearing on Court 'Ethics' Corruption

The first hearing, held in Albany on June 8, 2009 hearing is on two videos:


               Video of 1st Hearing on Court 'Ethics' Corruption
               The June 8, 2009 hearing is on two videos:
         
               CLICK HERE TO SEE Part 1
               CLICK HERE TO SEE Part 2