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Legal Ethics

Jail Isn’t End of SEC Saga for Convicted Lawyer in $1B ‘Ponzi Scheme’

Posted Mar 4, 2008 3:22 PM CDT
By Martha Neil

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After pleading guilty in a $1 billion federal securities fraud conspiracy case last year, Florida attorney Stephen Ziegler was sentenced to a five-year prison term and had his law license suspended.

But that's not the final answer, as far as the U.S. Securities and Exchange Commission's enforcement efforts against him are concerned. Last month the federal watchdog filed a new complaint, seeking a permanent injunction to prevent Ziegler and two co-defendants from potentially violating securities laws in the future, according to the Daily Business Review and a SEC press release.

"We only have so many tools in our quiver and we felt this was an important complement to the criminal convictions," says Teresa Verges. She is the assistant regional director in the SEC's Miami office.

The action, if successful, will make it easier for the SEC to respond swiftly concerning any future securities issue. "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, Verges explains to the Business Review. It will not, however, help Ziegler regain his law license, if he wishes to attempt to do so, she notes.

The two co-defendants reportedly have now settled with the SEC, but Ziegler hasn't yet done so. He served as regulatory counsel for the now-defunct Mutual Benefits Corp. as the viaticals company conducted a fraudulent public offering and eventually became what the Business Review describes as "nothing but a shell for a Ponzi scheme."

Money obtained from those who invested in Mutual Benefits was to be used to buy life insurance policies from individuals with short life expectancies—people infected with AIDS and the elderly—for heavily discounted lump sums that reflected their current value. The company would then pay the premiums, and investors would eventually collect the full proceeds when the insured individuals died.

However, as Mutual Benefits lost money, due at least in part to inaccurate projections about how long the insured individuals would live, those in charge of the company diverted money for their own purposes, according to news reports and a Stanford Law School Securities Class Actions Clearinghouse summary of litigation against Mutual Benefits.

Earlier coverage:

South Florida Business Journal: "Three linked with Mutual Benefits sentenced"


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