United States Attorney Benjamin B. Wagner
Eastern District of California
THREE PLEAD GUILTY IN VIATICAL INVESTMENT SCHEME BASED IN SHASTA COUNTY
|FOR IMMEDIATE RELEASE||
Friday, July 20, 2012
Docket #: 2:07-cr-0366 GEB
SACRAMENTO, Calif. — Barbara Eberle, 65, and Robert Eberle, 73, both formerly of Chico, and Mark Wolok, 47, of West Bloomfield, Mich. pleaded guilty today in federal court to securities fraud, United States Attorney Benjamin B. Wagner announced.
The defendants were indicted on August 22, 2007 for a fraud scheme that involved life settlement insurance contracts or viaticals. A “life settlement” or “viatical settlement” is a transaction in which a person sold the death benefit of his or her life insurance policy to a third party in return for a lump sum cash payment, which represented a discounted percentage of the policy’s face value. The insured was usually ill or elderly and would sell his or her interest in the insurance policy to a company. That company would resell the interest to investors, in whole, or as fractional interests. The return on the investment depended on the length of time the ill or elderly person lived, with a greater return the sooner the insured person died. If the insured person did not die, there was no return on the investment. The life expectancy of the insured person was to be estimated by a medical doctor, after a review of the insured person’s medical records.
According to court documents, Donald Neuhaus and his daughter Kimberly Snowden operated a number of businesses for the purpose of acquiring viaticals and life settlements from insured people and marketing these viaticals and life settlements to investors. They had sales people working on their behalf, including Robert and Barbara Eberle, who sold fractionalized interests in these viaticals.
Robert Eberle owned Lexus Financial in Chico with his wife Barbara Eberle. Robert and Barbara Eberle were the primary sales force for Donald Neuhaus. They created marketing materials and sold viaticals and life settlements to investors on behalf of Donald Neuhaus. Robert Eberle also recruited salespeople, such as defendant Robert Koppel, to work as independent contractors selling Neuhaus’s policies.
According to the plea agreements, from 2001 until 2006, the Eberles made material misrepresentations and omissions when selling the life settlement insurance contracts to investors. For example, the Eberles told investors that the investments were safe, secure, and risk-free and that investors were guaranteed high rates of return. As a result of their fraud, investors lost at least $18.4 million.
Also according to court documents, between 2001 and 2004, Wolok, in order to sell these life settlement contracts, sold bonds that purportedly guaranteed that investors would not lose their money. However, the bonding company Wolok ran was a shell company and the bonds were not legitimate. None of the bonds were honored. As a result of his fraud, investors lost at least $17.8 million.
In February 2003, the California Department of Corporations issued a desist and refrain (D&R) order prohibiting Robert and Barbara Eberle and Lexus Financial Group from selling viaticals and life settlements in the State of California. The Eberles changed the name of their company to Eagle and relocated to Nevada.
According to court documents, Donald Neuhaus died in November 27, 2007. The remaining defendants in the case — Kimberly Snowden, 47, of Redding; Clifford Palm, 60, of Citrus Heights, and Robert Koppel, 83, of Roseville, have pleaded not guilty to the charges. Their next court date is August 3, 2012 for a trial confirmation hearing. The charges are only allegations, and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case is the product of an investigation by the IRS-Criminal Investigation with assistance from the U.S. Postal Inspection Service. Assistant United States Attorneys R. Steven Lapham and Lee Bickley are prosecuting the case.
Wolok and the Eberles are scheduled to be sentenced by United States District Judge Garland E. Burrell Jr. on November 2, 2012. The maximum statutory penalty for a violation of securities fraud is five years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
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