Two Indicted in $25 Million Fraud Scheme
|Nov. 20, 2012|
HOUSTON - Charles Craig Jordan and Kelly Taylor Gipson, both 33, have been arrested and charged with conspiracy to commit mail and wire fraud in connection with their life settlement insurance business as well as conspiracy to commit money laundering, United States Attorney Kenneth Magidson announced today along with Lucy Cruz, special agent in charge of Internal Revenue Service-Criminal Investigation (IRS-CI) and Robert Wemyss, inspector-in-charge of the United States Postal Inspection Service (USPIS).
“Illegal activity involving the investment industry has brought financial ruin to many Americans,” said Cruz. “IRS-CI is proud to bring our forensic accounting skills to put a stop to this and other types of financial schemes which prey on honest taxpayers.”
According to the indictment, Jordan, and Gipson, both from the Dallas area, began acquiring and marketing life settlements to investors around the United States and Canada from their Houston office beginning in early 2007. They first operated under the name Secure Investment Services and subsequently under the name American Settlement Associates LLC.
“When unscrupulous people use the mail to defraud, postal inspectors will not hesitate to ensure they are brought to justice,” said Wemyss. “Unfortunately, in these challenging economic times, USPIS has no shortage of fraud schemes to investigate.”
The indictment was returned Wednesday, Nov. 14, 2012. Both were taken into custody just a short time ago and are expected to appear before U.S. Magistrate Judge Stephen Wm. Smith at 2:00 today.
A life settlement is an investment in which a person, who is typically elderly or terminally ill, sells his or her life insurance policy for a cash payment, which is a percentage of the life insurance policy’s face value or death benefit payable by the insurance company upon the insured’s death. Once the insured sells an insurance policy, the insured is no longer responsible for paying the policy’s premiums. To keep the policy in force, the life settlement company must ensure any premiums are paid. All premiums due prior to the death of the insured must be paid, in full and on a timely basis, to prevent additional cost or lapse. Investors who purchase life settlements only realize a profit if the total amount invested in the policy, including the purchase price and any additional premium costs, is less than the amount of the death benefit. A life settlement is not profitable if the expenses of acquiring and maintaining the policy (including the amount of premiums that are paid) are more than the amount of the death benefit paid when the insured dies. Typically, the longer an insured lives, the more expensive it is to maintain a life settlement.
Jordan and Gipson are accused of misrepresenting to investors they would collect sufficient funds to purchase the life settlement policies and ensure their premiums were paid for at least the period of the insured’s life expectancy. The indictment alleges Jordan and Gipson misappropriated investor funds which ultimately resulted in policies lapsing and investors losing their investment.
If convicted, each count carries a possible term of imprisonment of 20 years.
The criminal investigation was led by IRS-CI and USPIS. Assistant United States Attorney Melissa Annis is prosecuting the case.
An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.