Two Florida Insurance Scam Artists Lose Mail Fraud Appeal

Feb 5, 2009

Insurance Journal--February 5, 2009

By Walter Putnam

Two men sentenced to federal prison for cheating investors out of more than $100 million in an insurance scheme have failed to convince an appeals court that they were unfairly convicted of mail fraud.

The 11th U.S. Circuit Court of Appeals on Monday overturned its own 1996 ruling in finding against David W. Svete and Ron Girardot, who ran companies in Dayton, Ohio, and South Florida.

A federal jury in Pensacola, Fla., found Svete and Girardot guilty in 2005 of fraud and other crimes through sales of viaticals, life insurance policies on people supposed to be terminally ill.

The insured remained alive, and more than 3,000 investors — many over 65 — lost money in LifeTime Capital Inc. and other companies run by Svete and Girardot, according to court documents.

U.S. District Judge M.C. Rodgers sentenced Svete to more than 16 years in prison and Girardot to five.

Through viaticals, a terminally ill person receives money from an investment company, which becomes the beneficiary of the dying person’s life insurance policy. When the person dies, the company makes a profit.

Investors in the trial of Svete and Girardot testified that sales agents made false statements regarding things such as the life expectancies of the insured and the risks associated with the investment.

Svete and Girardot argued that a “person of ordinary prudence” would not have fallen for the scheme. They wanted the judge to instruct jurors that mail fraud required such a victim.

Instead, he followed normal instructions that fraud was a plan “intended to deceive or cheat someone out of money or property by means of false or fraudulent pretenses, representations, or promises.”

On appeal, Svete and Girardot cited the 11th Circuit’s 1996 ruling in United States vs. Brown. In that case, involving Florida real estate deals, the court reversed convictions of defendants who had “approved and promoted lies about the investment potential” because the prospective investors could have easily discovered the truth from other sources.

Monday’s opinion noted that other circuits and legal scholars had rejected the reasoning in Brown, but it acknowledged that a three-judge 11th Circuit panel felt bound by the Brown ruling when reversing Svete and Girardot’s mail fraud conviction last year.

The court sent the appeal back to the panel to decide other issues, including whether there was enough evidence to establish a money laundering conspiracy and if losses and restitution were correctly calculated by the district court.