MANHATTAN (CN) - Federal prosecutors accused three insurance agents of running a "massive fraud" involving more than $100 million in stranger-owned life insurance policies issued through straw buyers.
The defendants are also charged with obstructing justice, the U.S. Attorney's Office said in announcing the men's arrests.
Charged are Michael Binday, 48, owner of a Scarsdale insurance agency; James Kevin Kergil, 57, an insurance agent based in Peekskill; and Mark Resnick, 56, an insurance agent based in Orlando, Fla.
Kergil and Resnick were arrested Thursday and Binday surrendered voluntarily, prosecutors said.
The U.S. Attorney's Office said that for 5 years the men defrauded life insurance companies into issuing stranger-owned life insurance (STOLI) policies.
Prosecutors said in a statement that the scheme worked this way: "They recruited elderly clients of modest means as 'straw buyers' to apply for life insurance policies, promising them payment if the policies were issued and then resold. The straw buyers' applications, which Binday submitted to the life insurance providers, typically contained material misrepresentations regarding the straw buyers' assets and net worths, their intent to resell their policies, and whether they had other life insurance policies or pending insurance applications. Binday, Kergil, and Resnick often used third-party financing to pay the policy premiums to the life insurance providers. They then concealed the roles of the third-party investors by arranging to have funds
transferred from the third parties to bank accounts controlled by, or in the names of, the straw buyers, so the life insurance providers would believe the straw buyers were personally paying their policy premiums. The defendants also arranged for the policies to be resold on the secondary market. Binday, Kergil, and Resnick earned millions of dollars in commissions from their scheme, and even arranged to purchase STOLI policies from straw buyers for themselves to gain the benefits when the buyers passed away. In total, the scheme orchestrated by Binday, Kergil, and Resnick defrauded or attempted to defraud the life insurance providers into issuing STOLI policies worth more than $100 million."
Prosecutors say the men obstructed justice during the grand jury investigation by conspiring to destroy documents and electronic files.
They are charged with conspiracy to commit mail and wire fraud, mail fraud, and wire fraud. Kergil and Resnick were also charged with conspiring to obstruct justice, and Binday was charged with obstructing justice.
If convicted of all charges, they each face up to 80 years in prison.