Alleged Leader in Florida Fraud Competent for Trial

The alleged leader of an $800 million South Florida insurance fraud scheme was found competent to stand trial Wednesday despite severe pain from a spinal cord ailment that requires him to take powerful drugs including morphine.

U.S. District Judge Robert Scola issued his ruling at a hearing Wednesday for 63-year-old Joel Steinger. Steinger was the top executive at Mutual Benefits Corp., which prosecutors say was a massive fraud scheme in which some 34,000 investors lost more than $800 million.

Steinger, seated in a wheelchair during the hearing, said he needs surgery to correct the spinal problem and complained loudly it would be unfair if he’s forced to stand trial in September without the operation. Steinger said he cannot control his bowel movements or bladder and takes enough morphine “to choke a horse.”

“I can’t concentrate for five minutes because I’m all hopped up on drugs,” Steinger told the judge. “And you’re asking me to defend my life in a trial under these conditions? Do you think that’s fair, your honor? I don’t.”

Scola, relying on a report by Bureau of Prisons mental health and drug experts, said there was no evidence to indicate Steinger suffered from mental problems or could not understand and take part in a trial. Assistant U.S. Attorney Karen Rochlin agreed.

“Simply put, the defendant is competent,” she said.

The judge also said it’s not within his power to order surgery for Steinger at the University of Miami, as he has requested, rather than at another hospital. Steinger is being held without bail until his trial and most of his assets were frozen long ago.

“I wish I were the king of the world, but I’m not,” Scola said.

Steinger was a founder and chief executive officer at now-defunct Mutual Benefits, which sold investments in life insurance policies held by people with chronic ailments such as AIDS and cancer. The policyholder would sell the policy on an investor for a cash payment lower than its ultimate value, and the investor would get paid the larger amount when the policyholder died.

The problem, according to federal prosecutors, was that Mutual Benefits consistently lost money because it failed to accurately predict how long policyholders would live and gave false information about its track record to thousands of investors. The failing business became a classic Ponzi scheme in which money from new investors was used to pay older investors, according to a grand jury indictment.

Steinger and his younger brother Steven Steiner – they spell their last names differently – and others were originally indicted in 2008 on a 25 separate fraud and conspiracy charges, each of which carries a maximum 20-year prison sentence. Each defendant has pleaded not guilty.

Steinger and his brother are also charged in a separate indictment for allegedly defrauding a variety of insurance companies with bogus health claims. That case would go to trial in Fort Lauderdale federal court after the Mutual Benefits case.

Meanwhile, a court-appointed receiver has distributed more than $118 million in money that was recovered to thousands of Mutual Benefits investors around the world.