ALEXANDRIA, Va. (CN) – Criminal and civil charges accuse Provident Capital Indemnity, a Costa Rican company, and its president and “purported outside auditor” with a fraud involving hundreds of millions of dollars of bond offerings. The SEC sued Provident, its president Minor Vargas Calvo, and “purported outside auditor” Jorge L. Castillo, and said that federal prosecutors “announced simultaneously a parallel criminal action against the defendants and the arrests of Vargas and Castillo.”
Provident “provides financial guarantee bonds on life settlements and claims to protect investors’ interests in life insurance policies by promising to pay the death benefit if the insured lives beyond his or her estimated life expectancy,” the SEC said in announcing the prosecutions.
“From at least 2004 to March 2010, PCI issued approximately 197 bonds backstopping numerous bonded offerings of investments in life insurance policies with a face value of more than $670 million. The PCI bonds were a material component of numerous third-party life settlement offerings in the U.S. and abroad.”
The SEC claims that Provident, Vargas and Castillo “misrepresented PCI’s ability to satisfy its obligations under its bonds. They made material misrepresentations about the assets that backed PCI’s bonds, PCI’s credit rating, the availability of reinsurance to cover claims on PCI’s bonds, and whether PCI’s financial statements had been audited.”
It seeks disgorgement, appointment of a receiver, an injunction, freezing of assets, and wants Vargas and Castillo to surrender their passports.