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Financial 'gatekeeper' in $670M insurance industry scam enters guilty plea in Virginia
RICHMOND, Va. (AP) ' A man who cooked the books for a $670 million insurance industry scam pleaded guilty Monday to charges he helped mislead thousands of investors worldwide.
Jorge Luis Castillo, 56, Hackettstown, N.J., entered pleas in U.S. District Court to conspiring to commit mail and wire fraud in U.S. District Court. He is scheduled for sentencing May 22 and could receive up to 20 years in prison and fined up to $250,000.
Castillo, who originally was scheduled for trial in 2012, will assist the government's prosecution of Minor Vargas Calvo, 60, the president and majority owner of Provident Capital Indemnity Ltd., a Costa Rican company. He is scheduled for trial in February. He has pleaded not guilty to similar charges.
The government called Castillo a "gatekeeper" for Provident. As a certified public accountant, he cast himself as an "outside auditor" and falsely reported a rosy financial picture for the company, which had a global client base.
"This is truly an international fraud in scope," U.S. Attorney Neil H. MacBride said in a conference call after Castillo entered his plea. "As a result of Mr. Castillo's crimes, a lot of people lost life savings to life settlement companies because of the worthless guarantees that Mr. Castillo helped create.
"He was paid by PCI to cook the books and provide these fraudulent statements," MacBride said.
Provident sold bonds guaranteeing funding for companies that buy life insurance policies from insured people at less than face value and collect the benefits when those people die.
The life settlement market began in the late 1970s, when AIDS patients sought to sell their life insurance policies for cash to pay for treatment, experimental drugs, and for routine bills when they lost their jobs.
Today, the market is focused primarily on older people without life-threatening diseases, but who no longer need or want life insurance or who need to cash in the policies for a fraction of the death benefit.
The Securities and Exchange Commission has filed a civil complaint against Provident and its principals. A court has frozen Provident's assets and blocked the defendants from doing business.
The government said Castillo burnished Provident's financial indicators to falsely give the company an air of legitimacy and provide investors "with peace of mind to invest millions and millions and millions of dollars," MacBride said.
Castillo acknowledged he never performed an audit of Provident's financial statements and that he created statements he claimed to have audited.
Provident sold approximately $670 million of bonds based on those false financial statements from 2004-2010.
"As a result of Mr. Castillo's crimes, a lot of people lost life savings because of the worthless guarantees that Mr. Castillo helped create," MacBride said. The investors included large institutional clients and individuals.
While the full extent of the fraud is still being analyzed, MacBride said the government will attempt to return as much money as it can to investors.
Vargas, who is also charged with money laundering, is being held by the government until his trial.