"Death put" lawyer pleads guilty

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There's a lot of opportunity in the fine print. That  mindset allowed Joseph Caramadre, an estate- planning lawyer based in Rhode Island, and his associate, Raymour Radhakrishnan, put together a "can't-miss" investment, which was brilliant or fraudulent--- or both.

In exchange for guilty pleas, federal prosecutors will recommend that a judge give them prison terms of no longer than 10 years. Each faced a maximum sentence of 25 years in prison. All for a scheme that basically involved having clients buy variable annuities and listing terminally ill patients as the annuitant. Once the annuitant died, his clients reaped the benefits of the policy.

Until he plead guilty, Caramadre defended his investment strategy as legal. Investment News notes that, "Caramadre did his research and concluded that Rhode Island law did not require that people buying variable annuities have an insurable interest. As imagined by the insurance companies, variable annuities have two participants. There's the investor, the person who puts up the money. That person typically also serves as the annuitant, or the 'measuring life.' If that person dies, the death benefit is paid to the beneficiary, usually a spouse or child. Caramadre realized it didn't have to be that way. There was no requirement that the investor and the annuitant be the same person. In fact, as he read the contracts, the annuitant didn't need to have a relationship with the investor at all. Caramadre or one of his clients could buy an annuity on the life of someone who was not expected to live long and then pocket any profit when that person died…If they chose well, the account went up and they reaped the benefits. If they chose poorly, the death benefit kicked in and they recouped their original investment."

The fine print may allowed for it, but the industry uproar was what you would expect. In the end, there was no reason to think he could do this indefinitely. There are some macabre twists to this. As it turns out, Caramadre paid terminally ill patients for the right to use them as annuitants.

"Prosecutors charge that he instructed participants in the scheme to lie, to steal identity information and to forge the signatures of annuitants in an effort to defraud insurance and bond companies," Investment News reported.

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