Friday, August 25, 2017

No. 231: Life Insurance Fraud—A Case Involving Incredible Criminal Allegations

On June 22, 2017, the U.S. Attorney's office in the Southern District of Ohio filed a 33-count grand jury indictment against three individuals, along with a motion to seal the indictment. On August 9 the office filed a motion to unseal the indictment, and the judge unsealed it the same day. Often there are only a few days (the time needed to arrest the defendants) between the filing under seal and the unsealing. In this case extra time was needed to complete the investigation. On August 10 the office issued a press release about the case. (See U.S.A. v. Stevenson, U.S. District Court, Southern District of Ohio, Case No. 2:17-cr-134.)

The Defendants
The defendants are Mitch G. Stevenson, his wife Patricia Stevenson, and their daughter Candace G. Stevenson. The indictment charges each defendant with one count of money laundering conspiracy. The indictment also charges Mitch with twenty-two counts of money laundering, Patricia with two counts of money laundering, and Candace with eight counts of money laundering. Money laundering conspiracy is a crime punishable by up to twenty years in prison. Money laundering is a crime punishable by up to ten years in prison.

On August 10 Patricia and Candace made their initial appearances before a magistrate judge. A private attorney represented Patricia. The magistrate judge appointed a federal public defender to represent Candace. On August 11 Mitch made his initial appearance before the magistrate judge. A private attorney represented Mitch. The defendants were released after their initial appearances. The docket reflects the filing of orders describing the conditions of release and the filing of financial affidavits. However, those documents are not publicly available, at least not yet.

The Policies
In early 2009 West Coast Life Insurance Company issued two life insurance policies on the life of Person A, a Cincinnati resident and relative of the defendants. The policies had a combined death benefit of $2.9 million. Mitch was the initial owner and beneficiary of one policy, for $1.5 million. Person B, another relative of the defendants, was the initial owner and beneficiary of the other policy, for $1.4 million. In early 2011 Patricia became owner and beneficiary of the first policy, and Candace became owner and beneficiary of the second policy. The indictment does not identify the agent who submitted the application, and does not comment on West Coast Life's underwriting.

The Impostor
The application for the policies required Person A's medical history and a medical examination. An examination of an impostor took place on February 6 or 7, 2009, in Sugar Land, Texas, a Houston suburb. The identity of the impostor (she represented herself as a relative of the defendants) is not known. The impostor weighed 176 pounds, and said her address was in Sugar Land. The impostor said she had not been treated for dizziness, diabetes, or high blood pressure, and had not been a hospital patient for five years. The indictment does not identify the physician or paramedic who examined the impostor.

Three weeks before the medical examination of the impostor in Texas, the real Person A was in the emergency room of a Cincinnati hospital. At that time Person A weighed 387 pounds. During the previous two years, Person A had made at least 17 visits to hospital emergency rooms. Also, Person A had been taking medications for diabetes, high blood pressure, and other conditions. On February 6, 2009 (the day of, or the day before, the examination of the impostor in Texas), Person A was in the emergency room of a Cincinnati hospital.

The Death Claims
On January 9, 2012, Person A died at a Cincinnati hospital. On January 25 Patricia and Candace filed death claims with West Coast Life. On January 30 the company issued checks for the death benefits. Each check was about $4,000 larger than the death benefit, perhaps reflecting interest from the date of death to the date of the checks.

Use of the Money
On February 8, 2012, Patricia and Candace deposited the checks into four newly opened bank accounts. On February 21 Candace used a $248,000 cashier's check to buy a 2012 Bentley GT Convertible and registered it in her name. On February 24 Patricia used $700,000 in cashier's checks to transfer funds to Mitch. He and Patricia used some of the money for a land contract for a home in Mason, Ohio, near Cincinnati.

The defendants moved money from bank to bank. The indictment alleges that the transactions were "designed in whole or in part to conceal and disguise the nature, location, source, ownership, and control of the proceeds of criminal activity." The indictment seeks forfeiture of the proceeds derived from the illegal activity.

General Observations
The indictment presents overwhelming evidence supporting incredible criminal allegations. I do not understand how the defendants could have thought they would be able to get away with such a brazen scheme to defraud a life insurance company.

It seems likely the case will not go to trial. I think it will end with plea agreements and sentencing of the defendants to significant prison time. I plan to report further developments.

Available Material
I am offering an 18-page complimentary PDF consisting of the U.S. Attorney's press release (2 pages) and the indictment (16 pages). Email jmbelth@gmail.com and ask for the August 2017 package about the U.S.A. v. Stevenson case.

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