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.

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Forbes has released a new A&O related article, this one focusing on Adley Abdulwahab. Here is a link to the article, which includes a photograph of Wahab.

The article begins with a recounting of the October raid of Wahab’s home, but quickly begins taking shots at A&O investors:

Armed officers from the U.S. Marshals Service swarmed into an elaborately decorated $1.5 million home in Spring, Tex. early one Saturday morning in October. Inside they found Adley Abdulwahab, 34, and his family. The Abdulwahabs were allowed to gather a few personal belongings and then escorted out the door. The house was seized and became part of a tussle among hundreds of victims desperate to recoup anything they can from Abdulwahab's investment scams--ruses so brash and, in retrospect, so unbelievable as to raise doubts about the sanity of investors.

The article suggests that Wahab and A&O front man Russell Mackert funneled the missing investor’s money to Wahab’s off-shore bank accounts:

Where did the other tens of millions of dollars that are missing from A&O and W Financial go? Starting in the summer of 2007 Abdulwahab transferred $12.6 million to an account controlled by Mackert, court documents say. Mackert then funneled millions to Abdulwahab's own offshore accounts, according to these documents. The Securities & Exchange Commission sued Abdulwahab, claiming he fraudulently sold securities through W Financial, and obtained a $15 million judgment against him in October.

The article concludes by calling A&O investors “gullible” for believing that the company would deliver guaranteed returns of 12%.

I disagree with this assessment. How many A&O investors dealt with Wahab? My guess is close to zero. A&O used life insurance agents from across the country who had long standing relationships with clients to sell the "investments.” The investments were not sold by boiler room salesman who were cold-calling suckers. They typically were sold to people who knew and trusted the salesman based on a long-standing relationship.

Many life insurance agents also hold themselves out as investment advisers. Many are licensed to broker sales of securities. This makes the agents even more trustworthy when they reccommend an investment to a long-time client.

I would agree that investors were gullible if they believed in a guaranteed 50% or more, but 12%? That’s not a crazy high number. Particularly when sold by someone who an investor knew and trusted. The agents who sold these policies are much more responsible for the losses than investors, but the Forbes article places no blame on the sales agents.  

Were Bernie Madoff’s investors gullible suckers? Were the Stanford Financial investors suckers? What about investors in WorldCom and Enron?

Or are the SEC and state regulatory systems not doing enough to police investment fraud and protect investors? Isn't that their job?  Did they do their job here in a timely fashion?             

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Here is the bankruptcy trustee's initial report in the A&O debacle. It details irregularities and problems that observers of A&O have come to expect. Some of the noted problems include:

• many of the A&O policies have lapsed.
• there are ownership disputes with many of the policies that haven't lapsed. This means that A&O may not really own the policies.
• Provident Capital probably is not going to pay on the bonds that were supposed to back up the policies.
• there was a bait and switch pulled on investors: they were told that they were getting one type of investment, but actually got something else.

The trustee's website is a great A&O resource and there is not much that I can add from an information standpoint.

From an opinion and commentary standpoint, I am impressed with the efforts of the trustee. If I was an investor I would support the current trustee based on the information that I have seen.

As far as blame, do not buy into Russell Mackert and A&O's attempt to blame this debacle on Prestige Title and Stephen Colson. They are using Prestige and Colson as scapegoats. All indications are that the interpleader case that froze Prestige's funds accelerated A&O's demise rather than caused it. All you really need to know about A&O is that the founder (Adley Abdulwahab) lied about his education in touting A&O as a legitimate enterprise. If this is not evidence of a con man, then I do not know what is.

If I were an investor who has not yet hired an attorney, I would be looking for an attorney who is willing to file suit against the agent who sold me the investment. I continue to believe that agents' errors and omissions policies are the best hope for recovery. In addition, if the government prosecutes and recovers funds in the case, then there could be an avenue for the victims to recover losses from the government. Finally, Russell Mackert and any insurance coverage that he carries could also be a potential target if, as expected, it turns out that the A&O sale to Blue Dymond turns out to be a sham.

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U.S. Bankruptcy Trustee Patrick Collins did not pull any punches at the A&O creditor's meeting last week. You can listen to the entire meeting here. The meeting was over three hours long and Mr. Collins' comments were a small part of it. Among Mr. Collins' comments to the investors:

• you've been screwed;
• you've been lied to;
• some of the A&O policies have already lapsed;
• the lapse of other policies is imminent; and
• there is no money or other assets available to pay premiums on the policies.

Participants by phone included government regulators, including attorneys from the Texas attorney general's office. Discussions were heated at times and sad at others. One woman said she put her kids college fund into these investments and asked if she was going to be able to send her kids to college.

Russell Mackert testified under oath. Among Mackert's testimony:

• he lives in the same subdivision as Abdulwahab ("Wahab") and Mackert's finance is Wahab's wife's aunt;
• Shepard Capital was created for the purpose of acting as custodian of the A&O entities;
• the sale price of A&O to Blue Dymond was close to $3 million;
• Blue Dymond is a Nevis LLC;
• he dealt with RJ Stephenson from Blue Dymond;
• Mackert drafted the sale documents;
• he drafted trustee documents for 10-12 insureds and he was referred by life insurance agents;
• he was trustee for some of the policies;
• he controls A&O Life Funds LP's bank accounts;
• there are a few hundred dollars in the bank accounts;
• in March 2009 they started hearing about Prestige Title's problems;
• the Prestige-A&O relationship pre-dates Mackert's involvement with Shepard;
• the $4.6 million that A&O gave to Prestige to pay premiums was supposed to last for the life of all the policies;
• Mackert filed a police report with the Biloxi police department;
• Shepard hired an attorney in Biloxi [Don Dornan] to represent A&O; 
• Prestige bounced checks for premiums in February;
• Oncale and Almindinger loaned money ($40,000 each) to the company so premiums could be paid;
• Wahab had other legal problems and couldn't contribute;
• under the bond agreements the bond holders were supposed to pay if the insured did not die by a certain date;
• PCI did not pay under any of the bonds;
• 1 bond should have paid out as of today; 
• he described getting the run-around from the bond company; 
• the folks in Mississippi [Stephen Colson] looted the company's funds; and
• the bulk of the investors' money was used to acquire policies. 

Someone said that substantial commissions were paid to insurance agents who brought these policies to the companies. It was also said:

• the paper work is a mess;
• there is a secondary market for these policies where they could be sold;
• Mackert and his lawyer don't know what happened to any money before Mackert got involved; and
• they don't know if there were inappropriate distributions to insiders or brokers.

 Patrick Collins said there was wide-spread fraud here and law enforcement in multiple jurisdictions are looking at this. He can't really say when it started and stopped or who did it.

Mackert said there is an on-going federal investigation involving Prestige's principal [Colson].

It does not take a rocket scientist to see what happened here or where it is headed. The details have not emerged yet, but the big picture is clear. See this prior post regarding where the A&O money went. I'm not buying that all A&O's problems were caused by Prestige and Colson.   

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Things are moving along in the A&O entities bankruptcy proceeding in Chicago. Here is an interesting motion that A&O filed asking the bankruptcy court the allow A&O to borrow from the cash values of the policies in order to pay the premiums. Here is the policy list attached to the motion. According to the motion, A&O's life insurance policies have a face value of $178 million, but cash value of only $3 million. That does not sound like a lot of cash value for $178 million in policies. The motion also states that all of A&O's "reserve funds" for policy premium payments were given to Prestige Title and are now tied up in the Colson litigation.

In the Colson litigation, A&O and Russell Mackert stated that A&O deposited $4.6 million with Prestige Title in February 2008. The money was to be used to pay the premiums on A&O's 57 policies. The monthly premiums on the policies was $120,000. When Colson and Prestige's accounts were frozen in early 2009, there should have been around $3 million left to pay A&O's premiums. At $120,000 a month, that's 25 months worth of premiums left in early 2009. But since we are now deep into 2009, there would still be only around 15 months of premiums left from "all" of A&O's reserve funds--not a lot of time when you are waiting for people to die of natural causes so you can collect the face amount of the policies. So it looks like the Colson litigation only accelerated A&O's implosion rather than causing it.

What was A&O going to do at the end of 2010 when its "investments" imploded? More importantly, where did all the investors' money go? A Forbes article estimated that A&O investors are out tens of millions. A single investor is out $10 million and there are other known individual investors who are out over $1 million. What happened to all that money? Is the bankruptcy trustee going to track it? Is the justice department? 

The second biggest mystery involving A&O after the question of where the money went is: who actually owns A&O?   Judge Sul Ozerden kept asking that question in the Colson litigation and never got an answer before he remanded the case to state court. 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.     

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Forbes published an article today on A&O Life. You can access the article here. The article contains a lot of new information on A&O, including the fact that one investor is stuck for over $10 million. The article states: 

The biggest single lawsuit against A&O so far has been filed by Eric Boutte over a $10 million investment made by a Houston trust created for the benefit of his brother, Allen Boutte, and his family. In another case, Countrywide Financial has been sued because its employees brokered A&O life settlement investments to a customer.

Forbes writer Nathan Vardi even talked to Adley Wahab and Provident Capital Indemnity, the Costa Rica bond company that A&O is blaming for investors not getting paid:

In a statement to Forbes, Eduardo Montero, an executive officer at Provident Capital Indemnity, says the company “has no pending obligations with A&O whatsoever.” In another statement, Minor Vargas Calvo, who has been identified in court documents as Provident's owner, says the company has been unable to make bond payments because it has been unable to identify the beneficiary of the bonds. Calvo says Mackert has not proven that Shepherd Capital Management legitimately represents A&O. “How can (Provident) be blamed of not paying the bond if there is no legitimate beneficiary?” asks Calvo in an e-mail.

Adley Wahab refused to comment, except to say “I sold my interest in the company two years ago.” When asked if he felt remorse for A&O investors Wahab said: “Absolutely.” Wahab's lawyer said his client denied any wrongdoing. Allmendinger's lawyer declined to comment.

The article describes the picture of A&O as "chilling." I suspect that the A&O story will get more interesting for casual observers. For investors, the handwriting is on the wall.

Great job by Forbes writer Nathan Vardi.

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The Meeting of Creditors for the bankruptcy proceeding of the A&O Life entities is scheduled for October 14, 2009 at the Office of the U.S. Trustee, 8th Floor, Room  804, Chicago, Illinois. Here is the Notice. The debtors are required to attend the meeting, but I do not know who may attend on behalf of the A&O entities. Russell Mackert is probably the person who should be there, since his is the only name associated with the entities for the last several months. Keep in mind that in the Colson litigation A&O was unable or unwilling to identify for the Court the owners of A&O, as I discussed in this earlier post. It will be interesting to see how many A&O investors attend the creditor's meeting. 

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I received sad new today for A&O Life investors. Last week the company and related entities filed for Chapter 11 bankruptcy protection in Illinois. Here are the petitions filed by A&O Life and A&O Resources. Also filing bankruptcy were A&O Bonded Life Assets and A&O Bonded Life Settlements. It appears that the companies' creditors are their "investors." Russell Mackert is listed on the forms as being involved in the filings. Needless to say, I am not surprised.

I am not in a position to provide legal advice to A&O investors. However, I can tell you that if I were an A&O investor I would be hiring an investment fraud lawyer in the area where an agent sold me the investment and I would sue the agent(s) who sold it to me. If A&O was a big scam it's going to be like the Madoff scandal where the investors are not able to recover their money from A&O. The agents who sold the policies, however, will likely have insurance coverage that will cover a claim against the agent. If I were an investor, I would also be raising hell with the Securities and Exchange Commission and the Department of Justice.

Here is a list of  people associated with A&O who I believe to be agents who sold the investments for the company. If you are an agent and are on this list and feel like that you are also a victim of A&O, then I am sorry. But you are partially responsible for putting your clients in these investments and in my opinion, you should be held liable for your role. People have gone to jail in Mississippi for acting as agents in what turned out to be investment fraud schemes. What happened here to A&O investors is an example of why agents and brokers carry liability insurance.

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On July 31, 2009 Russell Mackert of Shepherd Capital Management sent a letter to some investors in A&O Life Funds. Here is a copy of the letter. The news is bad. According to Mackert, the company (Provident Capital Indemnity) which issued the payment bonds backing the maturity date of the investment is not paying the investors. This is what happens when a company buys its payment bond from a little known company in Costa Rica. Incidentally, I have heard from investors who have not been paid. The letter does not mention Adley Wahab, but does refer to Prestige Title misappropriating A&O funds.

Mackert goes on to state that the policy backing the investment is in full force and effect, but that premiums are being paid from cash values built up in the policies. In other words, A&O is not paying the premiums. Although Mackert does not explain this, paying the premiums from cash values can be really bad for the policy and can lead to huge premium payments down the road because all cash values have been exhausted. This is particularly true in policies insuring the lives of elderly people, because the premiums on a life insurance policy get more expensive as we age due to shorter life expectancies. It can be sort of like when an adjustable rate mortgage resets at a higher interest rate. I believe that most or all of the A&O policies insure lives of elderly individuals.

Mackert gives the investors 3 options:

1. investors pay a pro rata share of the premiums on the polices (on the policy in this letter the premium is $29,015 every 3 months)
2. sell the policy on the secondary market
3. do nothing and lose the entire investment.

None of the options involve A&O or the related companies paying the premiums: "the company does not have the funds to pay for such premium needs."   

Many, if not all, A&O investors bought the investment from a securities broker or agent. If I were an A&O investor I would be talking to the SEC and other federal authorities, questioning the person who sold me the policy on what was his commission and what due diligence did he do, and trying to hire an attorney. 

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Pursuant to a court order, A&O Life filed another affidavit today regarding the members of the LLC that owns A&O, which is Blue Dymond Capital Group, LLC, which is owned by Physician's Trust, LLC. Here is the affidavit, which was signed by Russell Mackert.

The affidavit states that Brent Oncale and Adley Wahab sold A&O to Blue Dymond in August or September 2007. Incidentally, I also received an email from a Houston lawyer last week who represents Wahab. The email stated that Wahab sold his interest in A&O in the late summer of 2007 and that he has no ongoing managerial or other control with A&O Life Funds LP.

Mackert's affidavit goes on to state that in February 2008, Blue Dymond asked Mackert to assume a managerial/ custodial role for the A&O entities. Paperwork was executed by Mackert's contact at Blue Dymond, R.J. Stephenson. Mackert is now unable to get in touch with Stephenson, which prevents him from identifying the members of Blue Dymond.  

A&O's affidavit raises a dilemma for Judge Ozerden, who appears to be trying to determine if the court has diversity jurisdiction over the dispute. It will be interesting to see what Judge Ozerden does next.

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On Friday A&O Life filed an affidavit identifying the members of Blue Dymond Capital Group LLC. Here is the affidavit, which was signed by Russell Mackert. The affidavit lists Physician's Trust LLC as the sole member of Blue Dymond. Physician's Trust was identified last week in a comment on this blog as an entity affiliated with A&O.

Based on his prior orders, Judge Ozerden may order that A&O identify the members of Physician's Trust.

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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. Their presence in this litigation is bad for Steve Colson, because he was doing business with these shady characters.