JUDGE RULES AGAINST MUTUAL BENEFITS IN FAVOR OF SEC:

A federal magistrate judge has upheld U.S. Securities and Exchange Commission (SEC) findings 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.

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 used undisclosed consulting agreements to pay themselves millions of dollars; and 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.