Life settlement fraud leads to prison sentences, almost $10 million in restitution

by Eric Pearson

The U.S. Department of Justice has announced that Kelly Taylor Gipson has been ordered to federal prison for 48 months and ordered to pay $9.6 million to victims of a life settlement investment fraud scheme. Gipson was accused along with Charles Craig Jordan 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 guilty conspiring to launder the proceeds from the fraud scheme. 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 to 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 and Gipson were accused of misappropriating the funds entrusted to them by investors which ultimately resulted in the insurance policies lapsing. Thus, the investors lost their investment in the life settlement.

Problems with a life settlement investment?

State and federal laws regarding life settlements have been designed to protect investors from fraud and other abuses on the part of the companies that sell these policies. Almost every state treats life settlements as “securities” under state law. Most states expressly include life settlements in their statutory definition of securities, either directly or as part of the definition of an investment contract. In several other states, state courts or state regulators have found life settlements to be a security under an investment contract analysis.

In recent years, new laws regulating life settlements have been enacted and prior laws have been modified. It is important to make sure a life settlement transaction has been and is being handled consistently with governing law. A life settlement transaction may be governed by the law of the state where the investor lives, the state where provider is based, or even some other state. Make sure your life settlement is being handled appropriately.

Heygood, Orr & Pearson is one of the most experienced law firms in the country in handling life settlement related litigation. The firm has represented well over 100 investors, life settlement companies and/or brokers.

Our firm has filed numerous lawsuits on behalf of investors in life settlements who, according to the suits, were misled about the value of life settlements investments that they purchased. These lawsuits were filed on behalf of investors located nationwide.

If you or someone you know has been the victim of wrongful conduct on the part of a life settlement broker or provider, then you need a sophisticated and knowledgeable law firm such as Heygood, Orr & Pearson to represent you. For more information and a case evaluation that will help determine your legal rights, please contact us by calling toll-free at 1-877-446-9001, or by following the link to our free case evaluation form.

by Eric Pearson

Eric Pearson is a licensed attorney and a partner at HO&P who handles commercial and personal injury lawsuits. Eric has been selected to the Super Lawyers List, a Thomson Reuters publication.