Thursday, December 28, 2006
Viaticals -- something was rotten, indeed
Florida physician Clark Mitchell pleaded guilty to participating in a securities fraud scheme with Mutual Benefits Corp. that robbed investors of $965 million and conspiracy to commit healthcare fraud. According to the U.S. attorney's office for the Southern District of Florida, MBC principals induced investors to purchase interests in the life-insurance-policy death benefits of terminally ill or elderly people in return for a lump-sum cash payment. MBC dictated fraudulently low life-expectancy figures on thousands of the policies to doctors including Mitchell, who signed more than 5,000 letters and affidavits to investors falsely claiming that a physician completed a review of the insured's medical condition to determine life expectancy. Mitchell also pleaded guilty to inflating Medicare bills by more than $500,000 while he was director of an AIDS clinic. Mitchell will be responsible for $367 million in restitution payable to MBC investors and $500,000 in restitution for the healthcare fraud. He also faces up to 10 years in prison and a $5 million fine. His sentencing is scheduled for March 7, 2007.The Orlando Sentinel has a good story on this case.
For years, I had been skeptical of these contracts, but my concern had to do with the potential for coercive deals with dying patients who had run out of financial options and signed over life insurance contracts out of desperation and on terms that bordered on the unconscionable. Occasionally, the premiums for these policies had been paid by partners while they were still healthy enough to work and who could find themselves with nothing after the death of the insured person. I hadn't thought about the potential for ripping off investors, so a tip of the hat to Dr. Mitchell, whose breathtakingly massive fraud adds a chapter to my education on the subject of viaticals.