The president of a Costa Rican company that sold reinsurance bonds to life settlement companies was found guilty by a federal jury in Richmond, Va., for carrying out a half-billion-dollar fraud scheme that affected more than 2,000 victims throughout the United States and abroad.
Minor Vargas Calvo, 60, a citizen and resident of Costa Rica, owner of Provident Capital Indemnity (PCI) Ltd., an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica. He was convicted of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud, three counts of wire fraud and three counts of money laundering. He faces a maximum penalty of 20 years in prison on each fraud count and up to 10 years in prison on each money-laundering count when he is sentenced on Oct. 23, 2012.
According to court records and evidence at trial, PCI sold financial guarantee bonds to companies selling life settlements, or securities backed by life settlements, to investors. These bonds were marketed to PCI’s clients as a way to alleviate the risk of insured beneficiaries living beyond their life expectancy. The clients, in turn, typically explained to their investors that the financial guarantee bonds ensured that the investors would receive their expected return on investment irrespective of whether the insured on the underlying life settlement lived beyond his or her life expectancy.
Evidence at trial showed that Calvo and PCI’s purported independent auditor for PCI, Jorge Castillo, 56, of New Jersey, used lies and omissions to mislead PCI’s clients and investors regarding its ability to pay claims when due on the financial guarantee bonds that PCI issued. Calvo caused Castillo to prepare audited financial statements that falsely claimed that PCI had entered into reinsurance contracts with major reinsurance companies. The pair issued fraudulent financial statements PCI distributed showing significant assets and relatively small liabilities.
From 2004 through 2010, PCI sold at least $485 million of bonds to life settlement investment companies located in various countries, including the U.S.
Evidence at trial showed that Vargas sent more than $23 million of his ill-gotten gains to fund his professional soccer team in Costa Rica, to his unrelated companies, to his family and to himself.
Castillo, who was a PCI employee prior to becoming PCI’s “outside auditor,” pleaded guilty on Nov. 21, 2011, to conspiring to commit mail and wire fraud.