Thursday, January 2, 2014

No. 17: Caramadre Sentenced to Six Years in Prison

Chief Judge William E. Smith of the U.S. District Court in Rhode Island recently sentenced Joseph A. Caramadre to six years in prison in a bizarre case about which I have written in The Insurance Forum. Judge Smith also sentenced Raymour Radhakrishnan, an employee of Caramadre's firm, to one year and a day in prison. Edward Maggiacomo and Edward Hanrahan were unindicted co-conspirators. They worked with Caramadre, cooperated with the government, and were not charged. Radhakrishnan placed his faith in Caramadre, did not cooperate with the government, and was charged. (U.S.A. v. Caramadre and Radhakrishnan, U.S. District Court, District of Rhode Island, Case No. 1:11-cr-186.)

In the June 2009 issue of The Insurance Forum, I wrote in general terms about stranger-originated annuities as a vehicle for money laundering. In the April 2010 issue, I discussed civil lawsuits filed by Transamerica and Western Reserve against Caramadre, Radhakrishnan, Maggiacomo, and Caramadre's firm. The complaints alleged that the defendants, using deceptive newspaper advertisements, located terminally ill persons, gave them small cash payments characterized as charitable donations, tricked them and their families into allowing investors to purchase large variable annuities on the lives of the ill persons, arranged for the annuities to provide guaranteed minimum death benefits and other features favorable to the investors, arranged for the investors to pay the premiums and be the beneficiaries, and allowed the investors to profit significantly from the deaths of the ill persons without risk of loss.

In November 2011, the U.S. Attorney in Rhode Island charged Caramadre and Radhakrishnan with 65 counts of wire fraud, mail fraud, conspiracy, identity fraud, aggravated identity theft, and money laundering. Caramadre was also charged with one count of witness tampering. The indictment described not only the variable annuity scheme but also a "death-put bond" scheme. In the latter scheme, a corporate bond was purchased jointly by an investor and a terminally ill person, with right of survivorship. The bond was purchased at a price well below face value. At the death of the ill person, the investor redeemed the bond at full face value.

In November 2012, the trial began. It was expected to last four months. On the first four days, the government presented 14 witnesses, whose testimony was devastating to the defendants.

At the beginning of the fifth day of the trial (a Monday), in a stunning development, the defendants pleaded guilty to one count of wire fraud and one count of conspiracy. Judge Smith closely questioned the defendants about the plea agreements that had been hammered out over the weekend, accepted the pleas, ruled the defendants guilty, set a sentencing date, and terminated the trial. The government agreed to recommend prison terms of not more than ten years and move for dismissal of the other charges at the time of sentencing. The defendants stipulated to a host of facts outlining the scope of their wrongdoing.

In January 2013, although Caramadre had sworn under oath at the plea hearing that he was satisfied with his legal representation, he fired his attorneys and retained new counsel. Then, in another stunning development, he filed a motion to stay all proceedings to permit the defendants to file a motion to withdraw the guilty pleas. Caramadre's public relations firm released this statement from him:
When I pled guilty in November, I did so relying on the advice of my lawyers, and because as a husband and a father I hoped the immediate end of the trial would alleviate the serious health issues that several members of my family were experiencing as a result of the trial.
However, to enter a guilty plea to something that I did not do, simply to relieve the pressure of a 3 1/2 year criminal process, was wrong. I am innocent of the allegations leveled by the federal government against me. In the coming days, I will be asking the Court to allow me to withdraw my plea, and for the opportunity to get my day in court, wherein I can actually defend the false and misguided accusations against me.
Judge Smith denied the motion to withdraw the guilty pleas. He called the effort "bizarre, without merit, and a cynical attempt to manipulate the judicial process." He ordered Caramadre jailed immediately because of flight risk, and delayed sentencing.

Caramadre filed a motion to reconsider the detention order; Judge Smith denied the motion. Caramadre appealed the denial; the U.S. Court of Appeals for the First Circuit affirmed the denial.

Sentencing Memoranda
In its sentencing memorandum, the government asked that Caramadre be imprisoned for ten years, the maximum under the plea agreement. Caramadre asked for two years in prison followed by two years of home confinement and 3,000 hours of community service during the home confinement.

The government asked that Radhakrishnan be imprisoned for eight years. Radhakrishnan asked for one day of prison, one year of home confinement, and 2,000 hours of community service.

Letters to Judge Smith
According to press reports at the time of sentencing, Judge Smith received 89 letters requesting leniency for Caramadre. The letters were not in the electronic court file, and could be viewed by the public only at the court clerk's office in Providence. Some of the letters reportedly were from prominent persons: Thomas J. Tobin, Catholic bishop of Providence; Raymond L. Flynn, former mayor of Boston; and Robert G. Flanders, former associate justice of the Rhode Island Supreme Court.

Caramadre's attorney filed a motion for sentence variation. Attached was a list of charities to which Caramadre contributed. The list did not show dates or amounts. Also attached to the motion was evidence of a contribution of at least $100,000 to United Way, a 1987 award from the Catholic Foundation of Rhode Island, an award from the Diocese of Providence, and an award from Big Brothers of Rhode Island.

On December 16, 2013, Judge Smith sentenced Caramadre to 72 months in prison on one of the counts in the plea agreement and 60 months on the other count, with the terms to run concurrently, three years of supervised release, a $200 special assessment, and no fine. Judge Smith granted the government's motion to dismiss the 64 other counts and the forfeiture allegation, and recommended to the Bureau of Prisons that Caramadre be placed in a facility "as close to Rhode Island as possible." Judge Smith denied Caramadre's motion to be released during the Christmas break, gave him credit for the time he served after being jailed as a flight risk, ordered him to participate in a program of mental health treatment, ordered him to perform 1,000 hours of community service per year for a total of 3,000 hours, and said the "service shall be devoted to the terminally ill elderly in hospice or palliative care or other service for the elderly like Meals on Wheels."

The judge sentenced Radhakrishnan to "12 months and 1 day" on each of the two counts in the plea agreement, with the terms to run concurrently, three years of supervised release, a $200 special assessment, and no fine. Judge Smith granted the government's motion to dismiss the 63 other counts and the forfeiture allegation, recommended to the Bureau of Prisons that Radhakrishnan be placed in the medium-security Federal Correctional Institution (Berlin, NH) "to maintain contact with his family," and ordered him to surrender on January 13, 2014. Judge Smith ordered Radhakrishnan to spend the first six months of supervised release on home detention, perform 1,000 hours of community service per year for a total of 3,000 hours, and said the "service shall be devoted to the terminally ill elderly in hospice or palliative care or other service for the elderly like Meals on Wheels."

U.S. Magistrate Judge Patricia A. Sullivan filed a report about restitution. She said total losses from the scheme were $46.3 million. Losses to insurance companies from 195 annuity transactions were $33.9 million. Insurance companies that suffered losses exceeding $1 million were Nationwide ($11.4), Genworth ($4.0), Security Benefit ($3.0), ING ($2.8), Jefferson National ($2.5), Midland ($1.9), MetLife ($1.7), Hartford Life ($1.5), Pacific Life ($1.3), and Western Reserve ($1.1). Losses to bond issuers from 54 brokerage accounts were $12.4 million. Bond issuers that suffered losses exceeding $1 million were General Motors Acceptance ($4.7), Countrywide Financial ($2.7), and CIT Group ($2.3). Judge Smith delayed ruling on restitution.

Scope of Wrongdoing
To my knowledge, the Caramadre case is the only criminal case thus far relating to stranger-originated annuities. Judge Sullivan, in her report on restitution, and relying on stipulations in Caramadre's plea agreement, described the scope of the wrongdoing as follows:
The Plea Agreement's Statement of Facts lays out the basics of the scheme: Caramadre concocted an insurance annuity investment scheme beginning in 1995 and a death-put bond scheme in 2006; he was joined by Radhakrishnan in July 2007 and they continued until August 2010. The purpose of the scheme was to defraud financial institutions by purchasing variable annuities and death-put bonds with a guaranteed profit by surreptitiously including terminally-ill individuals with no relationship to the real investor as a "measuring life" for the transaction. The object was to fraudulently obtain significant sums of money from insurance companies and bond issuers by making material misrepresentations and omissions. To execute the scheme, the Plea Agreement describes how they fraudulently obtained the identity information and procured signatures from terminally-ill individuals by misrepresenting the true purpose of investment documents and concealing from the terminally-ill individuals and their family members that their identities would be used on annuities and bonds to be purchased by Caramadre and his co-conspirators, clients, and their families, as well as by taking steps to prevent the terminally-ill individuals from understanding the documents they were signing....
Another essential indicia of the scheme, according to the Plea Agreement, was repeated deception of insurance companies, bond issuers, broker-dealers and brokerage houses to prevent them from uncovering the true nature of the transactions. Caramadre, sometimes assisted by or acting through Radhakrishnan or the unindicted co-conspirators, lied to and manipulated his victims: telling insurance companies, broker-dealers and representatives from brokerage houses that some of the annuity owners were friends, clients or acquaintances of the terminally-ill individuals; opening annuities with small deposits that would not attract scrutiny; delaying the filing of death claims to avoid attention; opening brokerage accounts in Radhakrishnan's name although the funds actually belonged to Caramadre; lying about Radhakrishnan's assets and income to qualify him as an account owner; misrepresenting the purpose of the co-owner bond accounts; and falsely stating that some of the funds for the accounts came from the terminally ill....
Notice of Appeal
On December 27, 2013, Caramadre's attorney filed a notice of appeal. It reads:
Now comes the Defendant, Joseph Caramadre, through counsel, and hereby gives notice of appeal to the United States Court of Appeals for the First Circuit of the conviction, sentence, and orders in the above-referenced matter.
The minute entry about the December 16 sentencing hearing states: "Court verifies that the deft [defendant] has waived his right to appeal, pursuant to the plea agreement." The November 19 plea agreement states:
Defendant hereby waives Defendant's right to appeal the convictions and sentences imposed by the Court, if the sentences imposed by the Court are at or below the government's maximum recommended sentence.
It remains to be seen whether Caramadre will actually file an appeal and, if so, what he appeals. No longer does anything about this bizarre case surprise me.

Articles about the Case
In addition to the previously mentioned June 2009 and April 2010 issues of The Insurance Forum, I wrote about the Caramadre case in the March 2012, February 2013, April 2013, and October 2013 issues. The Providence Journal and ProPublica reported often about the case. When the defendants were sentenced, The New York Times and the Associated Press reported on the case.