Mississippi Litigation Review & Commentary : Mississippi Personal Injury Lawyer & Attorney : Phillip W. Thomas Law Firm : MS Litigation Review & Commentary

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On Friday the hammer fell for five men who pleaded guilty in the A&O Life life insurance fraud scheme. Here is a good A.P. article on the sentencing as printed in the Houston Chronicle. The article describes the scam:

"The impact of this massive fraud on many of A&O's investor victims has been disastrous," U.S. Attorney Neil MacBride said in a written statement after the sentencing hearings. "Hundreds of elderly investors invested their life savings with A&O and saw it all vanish in an instant."

The sentences were:

• Brent Oncale (the 'O' in A&O): 10 years;
• David White (former banker and A&O president): 5 years;
• Eric Kurz (middleman who fed info. to salesmen): 5 years;
• Russell Mackert  (A&O lawyer and front-man): 15 years, 8 months;
• Tomme Bromseth (life insurance agent and A&O salesman): 3 years.

Mackert asked for a shorter sentence based on his being stupid:

These sentences put a smile on my face. Life insurance agents, in particular, should heed Mr. Bromseth's sentence. The take-home is that when you put your clients into a scam, you will be held criminally responsible.

Investors should note that they cannot automatically trust their life insurance agents—particularly when it comes to selling investment products. Many of the victims of the A&O scheme invested because they were buying from their long-time life insurance agent who they trusted. The agents, who earned large commissions from the sales, later claimed ignorance as a defense to the scheme.

This is not the first investment scheme fueled by sales made by life insurance agents. Personally, I would not buy anything except insurance from an insurance agent. They may try to become your investment advisor and put you into mutual funds and other investments. I'd say no. Why?

It's sort of like the adage of don't order steak at a fish house or fish at a steak house. Insurance and investing are different.

Read more about the A&O scam here.

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Wall Street's Most Wanted Report Securities Fraud Blog reports that on Friday a federal court jury in Virginia convicted A&O Life co-founder Adley Abdulwahab for his involvement in the $100 million A&O Life fraud scheme.

According to the government's press release:

 “Today’s quick verdict found Mr. Abdulwahab guilty of a $100 million fraud and stealing the life savings of elderly retirees and hundreds of others who have seen everything they worked years for disappear,” said U.S. Attorney MacBride. “This case, involving victims in dozens of states, clearly demonstrates that a national fraud case can have real implications to everyday people. That is why we created the Virginia Financial and Securities Fraud Task Force last year to go after national cases that impact ordinary citizens on Main Street as well as Wall Street.”

“Mr. Abdulwahab participated in a $100 million fraud scheme, cheating more than 800 victims across the United States and Canada,” said Assistant Attorney General Breuer. “While lying to investors about his education and criminal history, he was off buying fancy cars with their money. Today, a jury let him know that financial crime has consequences, and that investment fraud will not be tolerated.”

“Today’s quick verdict found Mr. Abdulwahab guilty of a $100 million fraud and stealing the life savings of elderly retirees and hundreds of others who have seen everything they worked years for disappear,” said U.S. Attorney MacBride. “This case, involving victims in dozens of states, clearly demonstrates that a national fraud case can have real implications to everyday people. That is why we created the Virginia Financial and Securities Fraud Task Force last year to go after national cases that impact ordinary citizens on Main Street as well as Wall Street.”

“Mr. Abdulwahab participated in a $100 million fraud scheme, cheating more than 800 victims across the United States and Canada,” said Assistant Attorney General Breuer. “While lying to investors about his education and criminal history, he was off buying fancy cars with their money. Today, a jury let him know that financial crime has consequences, and that investment fraud will not be tolerated.”

Five individuals have pleaded guilty in connection with the A&O fraud scheme: David White, the former President of A&O; Brent Oncale, former vice president of A&O; Russell E. Mackert, an attorney for A&O; Eric M. Kurz, a wholesaler of A&O investment products; and Tomme Bromseth, an A&O sales agent in the Richmond area.

A jury convicted Christian Allemindinger in March. The Houston Chronicle reports that sentencing will be in September.

My Take:

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Here is a brief update on what is going on with the A&O Life criminal defendants:

• Adley Abdulwahab: trial set for June 7, 2011
• Christian Almendinger: sentencing August 12, 2011
• Brent Oncale, Russell Mackert, Eric Kurz, Tommy Browseth: sentencing July 22, 2011

I can't imagine Wahab actually going to trial. But I hope that he does, since a conviction at trial may carry a longer sentence than a guilty plea.

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The AP had a short article today on A&O front man Russell Mackert's guilty plea in federal court in Virginia:

RICHMOND, Va. (AP) — A lawyer involved in what authorities say was a $100 million life insurance fraud scheme has pleaded guilty in federal court in Richmond.

Prosecutors say 51-year-old Russell Mackert of Spring, Texas, pleaded guilty Tuesday to conspiracy to commit mail fraud and bulk cash smuggling. He faces up to 25 years in prison and a $500,000 fine.

Mackert was an attorney for A&O Life Funds, which bought life insurance policies from insured people at less than face value and then collected the benefits when those people died. Prosecutors said company officials illegally portrayed investments in their company as risk-free and guaranteed double-digit returns. They say about 800 people throughout the U.S. and Canada were victimized.

Mackert admitted misleading investors and trying to hide $10 million in profits from the scheme in offshore bank accounts.

I have seen the comments where people speculate that Oncale or others might not have to spend any real time in jail. I disagree. The federal court system generally does not work that way. Take for instance Michael Vick serving a year and a half in prison for charges related to dog fighting. That guy may be the NFL MVP this year, but he did time.

I can't say these guys will get the years in prison that cheated investors would like--but I do think that they will all serve time.

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A reader posted a comment today saying to look at the A&O bankruptcy trustee's website. Under recent developments the cite reports that the government has seized personal assets belonging to Abdulwahab, Oncale, White and other defendants:

The Bankruptcy Trustee further understands that (1) defendants Allmendinger, Abdulwahab and White were initially taken into custody, although one or more of the foregoing may have been released pending arraignment and (2) the United States Attorney has seized personal property of multiple of the defendants to secure monetary damages that may be awarded in the future and is seeking to hold such property pending resolution of the criminal counts.

More significant are links to guilty pleas by Russell Mackert and Tomme Bromseth. Mackert pleaded guilty to conspiracy to commit mail fraud and cash smuggling. Bromseth pleaded guilty to mail fraud. They could get up to 20 years in prison, but the government is asking for a downward departure because they are cooperating with the government.

As part of their plea deals Mackert and Bromseth agreed to fully cooperate with the government. The short answer for what that means is that it means that Wahab and the rest are going down. Mackert knows where the proverbial bodies are buried and those guys don't have a prayer of gaining acquittals with Mackert cooperating.

It also means that Mackert committed perjury in this affidavit that he filed in federal court in Mississippi when he was chasing A&O money in the Colson litigation. I raised this issue in January in this post. RJ Stephens did indeed turn out to be just as fictitious as Keyser Soze in the Usual Suspects.  

Without question, Mackert could still be prosecuted for perjury in Mississippi. But I doubt he will be. 

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Here it is: the Wahab etc. A&O indictment. Enjoy.

I'm shocked to see that Blue Dymond and Physician's Trust were fake companies set up by Russell Mackert to try to fool regulators. There was no RJ Stephenson. It was really Wahab—and Mackert knew it.

Way back in May 2009 I wrote this:

In this memorable quote from the movie Wall Street the character played by Michael Douglas tells Bud to call a number and tell the man that Blue Horseshoe Loves Anacott Steel. A&O Life's filing in federal court listing its member partners reminded me of this quote. The only new name identified in the affidavit was Blue Dymond Capital Group, LLC, a citizen of the West Indies. The person signing the affidavit was A&O front man Russell Mackert.

Mr. Mackert claims to have personal knowledge of the facts in the affidavit, but does not explain who he is, how he obtained that knowledge or his relationship with A&O. The affidavit does not mention Adley Wahab, who is presumably the man behind the curtain. Mackert and A&O seem shady--real shady.

Shady. And now indicted.

Here is a link to the Justice Department's press release on the indictment. The defendants include an A&O sales agent and a wholesaler.

The indictment seeks $103 million from the defendants. I believe that money recovered by the government in the case may be used to compensate victims. The victims should discuss this issue with their attorney.

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As reported in the comments section of this blog, Adley Wahab and other A&O cohorts were arrested this morning:

Adley was arrested this morning in connection with A&O Lifefunds. US Marshall's and the FBI raided his home in Spring, Texas at approximately 6:15 CST. He was to go before a judge this afternoon although it has been rescheduled for Friday morning. It was delayed due to Mr. Wahab not having a criminal attorney.

Reports are that those arrested include Wahab, Almendinger, Oncale, White, Kurz and Mackert. I will be searching for an indictment and hope to have a full report tomorrow.

Wahab's history includes falsely claiming that he attended LSU. If you're going to lie, why not claim Harvard or another Ivy League school? Probably because those schools never play for a BCS title.

For new readers of this blog who aren't familiar with A&O and its principals, you can read the entire history here.

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The big news in the A&O debacle last week was this Complaint that the A&O bankruptcy trustee Patrick Collins filed against Adley Abdulwahab, Brent Oncale, Russell Mackert, Christian Allmedinger, Shepard Capital Management (Mackert’s company) and A&O. The Complaint alleges that the defendants stole the A&O investors' money. A while back I asked where did the investors’ money go and stated:

There, as in the bankruptcy proceeding, A&O and Mackert claim that Physician's Trust LLC bought A&O, asked Mackert to manage it and then disappeared. Literally. The supposed owner of A&O paid millions for the company to Adley Wahab and his partners and then disappeared without a trace? And they can't be found? That makes no sense and just defies all credibility. I don't believe it. No one believes it. I suspect that one day the truth will emerge, and I can't wait to hear it.

 The Complaint alleges that the sale of A&O was an “illusion” in response to regulatory investigations in multiple states. “The sale was a sham” and Wahab, Oncale and Mackert maintained control over the A&O financial accounts. The Complaint alleges that at least $37 million was transfered to the A&O principals for their personal use. The Complaint seeks the recovery of these funds.

The Complaint refers to the sale of A&O to Physicians Trust and Blue Dymond as the purported sale of the A&O entities. The Complaint does not state whether Physicians Trust and Blue Dymond are legitimate companies separate and apart from Wahab et al. or whether RJ Stephenson is a real person. At this point, however, there is no credible evidence that Stephenson is a real person or that Physicians Trust and Blue Dymond are legitimate.

No observers of the A&O debacle are surprised by these new allegations. But the allegations raise new questions about the veracity of A&O front man Russell Mackert and whether he committed perjury in connection with affidavits that A&O filed in the Colson litigation in Mississippi.

In this affidavit Mackert testified that the A&O principles sold the company to Physicians Trust and Blue Dymond, whose principal was RJ Stephens. According the Mackert, Stephens then disappeared into thin air like Keyser Söze in the movie The Usual Suspects. As pointed out by wikepedia: “the… use of the name in popular culture is a shorthand reference to being fooled by the actual bad guy into believing in a bad guy that doesn't exist.”

According to the trustees’ Complaint, the A&O sale was a sham—and Mackert knew it. If this allegation is true, then Mackert may have committed perjury in his affidavits filed in Mississippi.

Perjury is lying under oath in a judicial proceeding. An affidavit is sworn testimony under oath in a judicial proceeding. Was Mackert’s affidavit perjury? The United States Attorney’s Office for the Southern District of Mississippi may want to know.