Insurance Agents Accused of RICO Fraud

     LOS ANGELES (CN) – The Independent Order of Foresters claims a group of insurance agents conspired to take money for life insurance certificates they knew would lapse after they received payment. The Canadian company claims John Mungo ran the game through his company Beacon Crest Financial and Insurance Services.
     The Foresters, a fraternal benefit society, sued Mungo, Beacon Crest, and 14 Beacon agents, all of Los Angeles County. Mungo is president of Beacon Crest, according to the federal complaint.
     The Foresters claim the defendants were authorized to solicit applications for life insurance certificates on the Foresters’ behalf, and that their duties were “‘to service and use best efforts to keep the certificates in force that you sell for Foresters.'”
     Under a commission agreement, the defendants took an advance on first-year commissions up to “certain specified maximums per certificate,” according to the complaint.
     After a certificate is issued by Foresters and the first monthly premium is paid, the agent would receive the advance, but if the certificate became inactive during the first year, “the defendant would receive notice of a chargeback” and the agent would be responsible to repay Foresters, according to the complaint.
     Foresters claims the defendants devised a scheme to maximize first-year compensation by “submitting forged applications for certificates and applications for certificates on individuals who, among other things, were induced to cooperate with an application, were promised financial or other inducements to cooperate with the application, or who the defendants knew had no intention of keeping the certificate in force.”
     The defendants would “submit false or fabricated bank account information in requesting the pre-authorized check plan as part of the application for the certificate,” and after the certificate was issued, Foresters says, it “would attempt to electronically draft or debit the alleged bank account, which would result in notice from the bank of insufficient funds or that the account information was inaccurate.”
     Foresters claims the agents would advance the initial premium for the certificate, get money orders for the initial premiums, “or refund or rebate to the individual the initial premium from the commission advance.”
     Foresters says that since it was unaware of this scheme and had received the first monthly payment, it would advance the annualized first-year commissions to the defendants.
     But nearly all the certificates – about 97 percent of them – lapsed or became inactive after 4 months, resulting in chargebacks, but the agents have refused to repay more than $850,000, Foresters claims.
     Foresters says that for each certificate submitted by the defendants as part of their scheme, it “incurred an acquisition cost and conservation costs of about $570 per certificate” – a total of more than $325,000.
     It claims that more than 70 percent of the applications the agents submitted to Foresters “were for individuals for whom defendants had previously submitted applications on behalf of and obtained life insurance policies with the other life insurance company.”
     Named as defendants are: John Mungo, Beacon Crest Financial and Insurance Services, Steven Kwizera, Julius Katega, Solomon Kisekka, Cheche Momodu, Damiano Kigoye, Andrew Muhumuza, Sharon Komwaro, George Agaba, Rose Severino, Maria Malek, Marie Kalungi, Ronnie Kamara, Michael Lyadda, and Patricia Torres.
     Foresters seeks treble and punitive damages for racketeering, breach of contract and fraud. It is represented by Michael Bell with Burke, Williams & Sorensen.

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