Judge Rules Against Mutual Benefits In Favor of SEC

A federal magistrate judge late today upheld findings by the U.S. Securities and Exchange Commission (SEC) that Mutual Benefits Corporation (MBC), the nation’s largest viatical settlement company, engaged in violations of securities law and defrauded investors.

The Florida Department of Financial Services (DFS) and Office of Insurance Regulation (OIR) cited many of the same allegations in administrative charges filed against the company in May.

“This recommended order goes a long way toward protecting Florida investors by upholding the hard work of SEC investigators and the actions they took,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees DFS. “That in turn lends itself to upholding the findings of state regulators and our aggressive pursuit of those intent on taking advantage of our citizens.”

Kevin McCarty, Commissioner of the Office of Insurance Regulation, agreed and commended both his investigative staff and the SEC for their incredible investigative work.

Barry L. Garber, U.S. Magistrate Judge for the Federal District Court for the Southern District of Florida, recommended granting the SEC’s motion for preliminary injunction to stop MBC from continuing its operations in light of these troubling findings by the SEC:

* 90 percent of MBC viators had lived beyond life expectancies.

* 74 percent of policies have a negative escrow balance.

* MBC misused investor funds by paying, in a Ponzi-like fashion, the insurance premiums on older policies with new investors’ monies.

* MBC has been subject to cease and desist orders from at least five state regulatory agencies.

* Joel Steinger, defacto CEO of MBC, has a prior criminal conviction for wire and mail fraud.

* The Steinger brothers have extensive disciplinary histories.

* The defendants and relief defendants paid themselves millions of dollars pursuant to undisclosed consulting agreements.

* MBC was selling interest in group policies without converting them into individual policies prior to purchase and was not disclosing the corresponding risk of investing in group policies.

U.S. Judge Frederico A. Moreno will issue a final ruling on MBC’s motion after hearing responses to Magistrate Judge Garber’s findings.