White-Collar Crime

Trial Begins for Estate Planning Lawyer Who Bought Annuities for the Dying; Was His Idea Legal?

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Updated: Trial has begun–and, much sooner than expected, ended–for a Rhode Island estate planning attorney who was federally indicted (PDF) last year after being accused of making $15 million or more, with the help of others, by defrauding dying individuals into allowing insurance investments to be made in their names that paid third parties a benefit after their demise.

Attorney Joseph Caramadre and his employee and co-defendant, Raymour Radhakrishnan, didn’t make opening statements Tuesday in their Providence trial and were planning to present their theory of the case later, the Associated Press reported.

They had pleaded not guilty, but after several days of testimony took a plea Monday morning in which each man pleaded guilty to one count each of wire fraud and conspiracy. They could get as much as 10 years under a plea agreement when they are sentenced in February.

As a Pro Publica article published earlier this year explains, Caramadre, who was a certified public accountant before he graduated from law school, is good at reading the fine print. He says he found a legal way to make a mint by exploiting loopholes in the fine print written by insurance companies for the complex financial products they now routinely offer in addition to traditional term life.

As he read the policies for variable annuities, which often include life insurance that pays a death benefit when the annuitant cashes in his or her chips, they allowed a third party to serve as the investor purchasing the policy, the article explains. Meanwhile, as he read Rhode Island law, the investor in a variable annuity wasn’t required to have an insurable interest in the annuitant’s life.

Eager to sell what they expected to be profitable products, insurance companies didn’t require medical exams, although they did limit the age of annuitants. Some didn’t even require a signature, only a social security number and date of birth for the annuitant.

Advertising in a Rhode Island publication, Caramadre offered to pay $2,000 each to individuals who were dying. At least 150 got the money, Pro Publica says. Those who agreed to serve as annuitants got more, between $3,000 and $10,000. The lion’s share of the money routinely went to the third-party investor in the variable annuity, however.

The attorney said he did nothing wrong. But insurers, who took a loss when their variable annuities didn’t perform as they had predicted during the financial crisis of recent years, complained to federal prosecutors. The government contended that Caramadre and Radhakrishnan, who handled most of the conversations with individual annuitants, misrepresented to them how their identities would be used and even sometimes forged signatures, the article reports.

Caramadre had also contended that the FBI and federal prosecutors tainted witness testimony by misrepresenting the situation to them. The article links to depositions, for readers who want to see for themselves what was said.

Civil suits filed by insurers against Caramadre making similar arguments in federal district court in Rhode Island have not gone well for the plaintiffs, Pro Publica notes. Since the insurers wrote the contracts at issue, they are deemed to have been aware of their own provisions, a judge said.

A subsequent question-and-answer post by Pro Publica provides additional details.

Updated on Nov. 19 to include and accord with news of Monday plea.

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