Criminal Charges
On October 31, 2012, the U.S. Attorney charged Robert Wertheim with criminal activity. He was one of two co-founders of a premium finance company in New York. On February 26, 2013, Wertheim pleaded guilty and entered into a plea agreement with the U.S. Attorney. Wertheim said that he worked with Imperial, and that he recruited Abraham Kirschenbaum and Maurice Kirschenbaum—brothers who were tax advisers in New York—to identify prospects for the STOLI scheme. Wertheim also said that life insurance applications he and the Kirschenbaums submitted contained false information.
On February 20, 2013, the U.S. Attorney charged the Kirschenbaums with criminal activity. On March 7, 2013, they pleaded guilty and entered into plea agreements with the U.S. Attorney. They described how prospective insureds had been coached to answer questions falsely in the event of calls from insurance companies checking on statements made in policy applications. Sentencing of Wertheim and the Kirschenbaums was postponed repeatedly. (See U.S.A. v. Wertheim, U.S. District Court, District of New Hampshire, Case No. 1:12-cr-136.)
On February 20, 2013, the U.S. Attorney charged the Kirschenbaums with criminal activity. On March 7, 2013, they pleaded guilty and entered into plea agreements with the U.S. Attorney. They described how prospective insureds had been coached to answer questions falsely in the event of calls from insurance companies checking on statements made in policy applications. Sentencing of Wertheim and the Kirschenbaums was postponed repeatedly. (See U.S.A. v. Wertheim, U.S. District Court, District of New Hampshire, Case No. 1:12-cr-136.)
Deferred Prosecution of Maurice Kirschenbaum
On May 22, 2015, the U.S. Attorney filed a motion to dismiss the charges against Maurice Kirschenbaum, who was seriously ill. Attached to the motion was a deferred prosecution agreement under which the U.S. Attorney reserved the right to refile the charges within five years. The judge granted the motion.
Sentencing of Wertheim and Abraham Kirschenbaum
The U.S. Attorney sought probation rather than prison time for Wertheim and Abraham Kirschenbaum in part because of their remorse, and in part because of their past and anticipated future cooperation in the ongoing criminal investigation of Neuman and others at Imperial. On May 27, 2015, the judge deviated downward from the sentencing guidelines and sentenced Wertheim and Abraham Kirschenbaum to serve 18 months in a minimum-security federal prison, followed by two years of supervised release. They were each fined $7,500, and Abraham Kirschenbaum forfeited $1 million to the government. However, the judge delayed for one year—until May 27, 2016—the date for them to report to prison. The judge left open the possibility that prison time might be avoided.
Forfeiture by Former Imperial Employees
As for the ongoing investigation of former Imperial employees, the U.S. Attorney, instead of filing criminal charges, sought forfeiture to the government of a total of $6.5 million—$5 million from Neuman and $750,000 each from Jonathan Moulton and James Purdy. Forfeiture is akin to restitution, and technically is not a fine.
On January 8, 2016, the judge issued final forfeiture orders against Neuman and Purdy. On March 8, 2016, the judge issued a final forfeiture order against Moulton. The three individuals did not admit wrongdoing. [See U.S.A. v. $5,000,000 (Neuman), U.S.A. v. $750,000 (Moulton), and U.S.A. v. $750,000 (Purdy), U.S. District Court, District of New Hampshire, Case Nos. 1:15-cv-526, 527, and 528.]
Moulton is now president and managing member of Edison Risk (Delray Beach, FL), a brokerage consulting company. Biographical information on the company's website (edisonrisk.com) mentions his relationships with American United, Safeco, Transamerica, ING, and Gerber Life, but does not mention his relationship with Imperial.
Probation for Wertheim and Abraham Kirschenbaum
On May 16, 2016, the judge filed perfunctory amended judgments relating to Wertheim and Abraham Kirschenbaum. I have not found in the court filings any motions, any mention of hearings, or any rulings by the judge to explain the reasoning behind the amended judgments. The judge imposed three years of probation instead of the previously imposed 18 months of imprisonment. Thus ended a five-year investigation of STOLI-related activity by Imperial and those associated with the company.
General Observations
The Imperial case is not the only STOLI criminal case that resulted in no one serving prison time. For example, in No. 162 (May 16, 2016) I discussed the unexplained dismissal without prejudice (subject to possible reprosecution) of another lengthy STOLI criminal case. It is hard to believe that the brazen nature of the alleged criminal activity in such cases does not warrant prison time for the defendants.
I wrote about the investigation of Imperial in the May 2012, July 2012, and October 2013 issues of The Insurance Forum. An interesting item in the October 2013 article is a lengthy excerpt from Abraham Kirschenbaum's plea agreement with the U.S. Attorney. I also wrote about the Imperial investigation on my blog in No. 132 (December 11, 2015) and No. 142 (February 8, 2016).
Available Material
I am offering a complimentary 24-page PDF containing the three articles in The Insurance Forum about the Imperial investigation, the forfeiture orders directed at Neuman, Moulton, and Purdy, and the amended judgments relating to Wertheim and Abraham Kirschenbaum. Send an email to jmbelth@gmail.com and ask for the June 2016 package about the Imperial and Wertheim cases.