Rockwall Resident Sentenced and Ordered to Pay $10 Million in Restitution for Massive Fraud Scheme
|March 6, 2014|
HOUSTON – Kelly Taylor Gipson, 34, has been ordered to federal prison for 48 months and ordered to pay $9,651,660.15 to victims of life settlement investment fraud scheme, announced United States Attorney Kenneth Magidson along with special agent in charge Lucy Cruz, Internal Revenue Service – Criminal investigation (IRS-CI) and Inspector in Charge Robert Wemyss, U.S. Postal Inspection Service (USPIS).
Gipson was accused along with Charles Craig Jordan, 34, of misappropriating investor funds which ultimately resulted in policies lapsing and investors losing their investment. Jordan entered a guilty plea to conspiracy to commit mail and wire fraud, while Gipson pleaded to conspiring to launder the proceeds from the fraud scheme.
Today, U.S. District Judge Lee H. Rosenthal sentenced Gipson to the four-year-term to be followed by three years of supervised release. Jordan was sentenced in December 2013 to 156 months in federal prison. Both were further ordered to pay restitution of $9,661,660.15 to 503 individuals named as victims in the case.
Jordan and Gipson were accused of devising a scheme to defraud investors from around the United States and Canada who invested millions in the life settlement offerings of Secure Investment Services and American Settlement Associates of Houston. Secure Investment Services was a business name utilized by Jordan initially in this scheme.
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 resided in Los Angeles, Calif., and Gipson lived in Rockwall, Texas, while they have been on bond pending the criminal proceedings. While on bond, each are to make monthly payments into the registry of the court towards an anticipated restitution order.
The criminal investigation was conducted by IRS-CI and USPIS and prosecuted by Assistant United States Attorney Melissa Annis.