Important note: Information in this article was accurate in 2006. The state of the art may have changed since the publication date.
Miami Herald - December 28, 2006
John Dorschner, jdorschner@MiamiHerald.com
The scheme, developed by officers of Mutual Benefits of Fort Lauderdale, involved luring investors to purchase viatical and life settlement policies on AIDS patients. The patients received lump-sum settlements at the time of their transactions, with investors then collecting on the policies after the patients die.
If a patient lives for a long time with the investor continuing to make the premium payments, such deals can turn out to be financial disasters.
Mitchell and other doctors paid by Mutual Benefits assured investors by calculating fraudulently low life expectancies for AIDS patients on thousands of policies. Between 1995 and May 2001, Mitchell himself signed more than 5,000 fraudulent letters and affidavits, prosecutors charged.
The company raised $1.3 billion from 30,000 investors around the world, according to prosecutors' charges. Total investor losses were $956 million. The company was led by Peter Lombardi, who pleaded guilty in October to one count of securities fraud.
Mutual Benefits also promised investors to escrow enough money to pay the premiums, but that, too, was a fraud, prosecutors said. Instead, the company practiced a Ponzi scheme in which it needed new investors coming in to pay for the older investors' premiums.
Prosecutors also revealed on Wednesday that Mitchell pleaded guilty to one count of defrauding the United States by submitting fraudulent claims to Medicare for treating AIDS patients at the CenterOne Clinic in Fort Lauderdale. Mitchell was medical director of the clinic from December 1996 through May 2001.
Mitchell is scheduled to be sentenced on March 7. He faces up to 10 years in prison and a fine of $5 million. As part of his plea agreement, the former physician promised to be responsible for about $367 million in restitution payments to Mutual Benefits investors.
He is currently in prison on unrelated charges involving defrauding Medicaid, the state-federal healthcare program for the poor.
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