Californians Still Waiting for $25M Life Insurance Scam Restitution

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Six years ago, hundreds of residents in Northern California banded together as victims of a massive life insurance scam. They were allegedly scammed out of $25 million in a scheme that was put together by Robert Koppel 10 years ago. However, they’re still waiting for their restitution, even though Koppel was sentenced to three years of probation.

They were told they could “make bets” on when life insurance policyholders would die. It was a morbid and insensitive bet, for sure, but it was also designed so Koppel could make millions. When people think of insurance and annuity scams, they often think of the elderly being targeted and taken advantage of. There are numerous ways the most common insurance scams occur, whether it’s selling elders false policies or creating a policy that’s so rigid and with high penalties and fees that it’s not a good choice for any investor. Koppel’s scheme was unique and played into the gambling desires of his fellow Californians.

There are more and more people joining annuity fraud class action lawsuits, often as policyholders who feel they were bullied or lied to in order to get them to sign a policy. However, for Koppel’s victims, the only silver lining so far is that sentences are finally happening.

Anatomy of a Life Insurance Scam

Koppel was sentenced on Oct. 25, 2013 after he pled guilty to securities fraud. His sentence came on the heels of Mark Wolok, his Michigan partner in the scam who also pled guilty. Wolok was sentenced to a five-year prison term.

Surprisingly, although their plan was morbid, it was actually legitimate. The product was called a viatical settlement, and the concept isn’t necessarily something new. When the HIV/AIDS epidemic came in full force, similar death bets were made. When people already had life insurance policies, they realized the potential cash benefits of them after they died.

This is how these gambles work: the policy holder (aka viator) can sell her interest in the policy in order to get cash. The buyer can then re-sell the policy, either in part or in whole, to any number of investors. The return comes down to how long the viator lives. The sooner a viator dies, the bigger the return, so it’s in the best interest of the investors that the viator dies as soon as possible.

Of course, life expectancy can be estimated by a physician. Once the “date of death” is set, that number is set in stone—if the person lives beyond that date, there’s no return for the investor. So far, this process is all legal, but in this case it was a Redding company, Secure Investment Services (SIS) that made a wrong move. The viaticals were sold under false pretenses, says the U.S. Attorney’s Office and the Securities and Exchange Commission (SEC).

As reported to ABC news, policyholders were never examined by a reputable doctor—or even a “real” doctor.

“A lot of those forecasts as to the life expectancy were just plain off. The holders lived longer than predicted,” the report stated.

That was only the first half of the massive annuities scam.

Buyers were also told that investments “couldn’t miss” since every single policy had a bond backing that would pay the whole death benefit, no matter when the insured died. However, the company who supposedly issues those bonds never even really existed. It took years for the SEC to crack down on this operation, but SIS’s assets were eventually frozen—however, it was too late. Most of the money compliments of the investors were already gone and a lot of it went to bolster the policies of viators who had (unsurprisingly at this point) lived longer than predicted.

Do You Think You’re a Victim of an Insurance Scam?

There are numerous ways a person can be a victim in the insurance/annuities industry. If you think this happened to you, you may qualify for an annuities legal claim. Read more at the Life Insurance, Annuities Fraud Class Action Lawsuit Investigation right now. Once your story is received, an attorney will contact you if you qualify for a free annuities claim review.