$100 Million Fraud Trial Gets Underway

A huge fraud scam involving a hundred million dollars, hundreds of people and a Texas businessman has been under review in a Virginia federal court in recent days.

According to Bloomberg Businessweek, a federal prosecutor noted on June 7th that Adley Abdulwahab, of Spring, Texas, told numerous lies in order to swindle investors. A defense attorney on the other side of the argument stated that some other people who have already been convicted are at fault. This trial is over what the government is describing as a $100 million fraud scheme that made victims out of hundreds of people in about three dozen states, plus Canada.

Abdulwahab is charged with wire fraud, security fraud and money laundering. He was one of three major players in a Houston-based company that would buy life insurance policies from insured people at less than face value and then collect the benefits when those people died. He promised to share the payout with other investors.

Justice Department attorney Albert Stieglitz said in his opening statement at the trial that company officials portrayed the investments as risk-free and the firm, A&O Resource Management Inc., as larger and more successful than it really was. Rather than putting investor funds into escrow accounts and using them to pay insurance premiums as promised, the prosecutor said, Abdulwahab and his partners funneled the millions directly into company coffers that they used “like their personal ATMs.”

“This is about a wall of lies built to get people’s money and hide what was really happening to it,” Stieglitz told the jury.

The prosecutor noted that Abdulwahab and the others told the duped investors and the agents who sold the so-called “life settlement” contracts across the country, that A&O operated internationally, had hundreds of employees in offices in several cities, had decades of experience in the insurance and investment businesses, and had successfully turned $579 million into $1.2 billion over five years. Stieglitz noted that none of this was true.

Stieglitz also stated “The lies infected just about everything Abdulwahab and his co-conspirators told investors.”

The only alleged lie that defense attorney Murray Janus mentioned in his opening statement was the defendant’s claim in A&O marketing materials that he had an economics degree from Louisiana State University. Janus dismissed the claim as “puffery” and added: “I don’t think there will be a single investor say they bought the investment because he said he went to LSU, and that was their school.”

Janus indicated that his client was merely a salesman who made a nice commission selling the product, and that it was the company’s founders, Christian Allmendinger and Brent Oncale, who made all the profits. He stated that it was Allemendinger who failed to keep insurance premiums in force, which caused the investors’ losses.

Allmendinger was convicted last month by a jury on seven counts of fraud and money laundering, while Oncale pled guilty to two conspiracy counts. Four others also pled guilty to their roles in the scam, one of whom was a sales agent in Richmond, which is one reason the case is being tried in Virginia. Several victims also were from the Richmond area.

Oncale, who acknowledged that he hopes for a lighter sentence for cooperating with the government, testified Tuesday that Abdulwahab was so successful selling A&O’s investment in the company’s early days that he and Allmendinger decided to make him a partner in 2006. He said Abdulwahab continued to earn sales commissions, and whenever Allmendinger determined the company had collected enough money for the partners to take a chunk, they would split it three ways.

Oncale also testified to the fact that Abdulwahab was involved in the production of some of their misleading marketing materials. This includes a “history sheet” which falsely claimed that the company had 350 agents worldwide and an “internal staff” of 27.

The history sheet did get one fact correct though; Oncale stated that A&O was led by a three-member management team. An earlier version of the sheet listed several fictitious executives, including a president and CEO, but they were removed once people started asking to speak with the nonexistent higher-ups.

The jury also heard from Wallace Bennett, who is a financial adviser from Mansfield, Texas. He stated that he learned about the life settlement product from Abdulwahab himself in 2005 and decided to invest $100,000 of his own money before offering the product to his clients. He later called that “a big mistake.” He also went on to help several family members invest their money. Bennett stated that they all lost their money, and that he’s now trying to reimburse those family members.

Bennett said he never would have invested or helped his relatives buy life settlement contracts had he known the company was not as big as it claimed and the money would not be set aside to pay premiums.

Well I would hope not.