A viatical settlement business, one of its vice presidents, and four viatical brokers have been indicted by a Florida grand jury for fraudulently buying and selling life insurance policies.

The charges stem from the purchase and resale of about $9 million worth of life insurance policies fraudulently obtained from 53 insurance companies. Authorities allege the policies were illegally obtained by "clean sheeting," a practice in which someone with poor health applies for life insurance, lies about their health on the appliation, and then immediately sells the policy to a viatical company. The schemes are initiated by companies looking to buy and re-sell policies to investors:

• Future First Financial Group of Ponte Vedra Beach, a viatical settlement provider, and William Sweeney, vice president of the company, were each charged with 81 counts of grand theft and one count of organized fraud. Sweeney is accused of marketing fraudulently obtained policies valued at $6.9 million. If the company is convicted, it could be subject to fines, restrictions, or have its charter revoked, according to Oscar Gelpi, a spokesperson for the Office of Statewide Prosecution.

• Three officers and a client representative from Life Benefit Services, a Winter Park-based viatical settlement broker, were charged. Wanda Tappan, president of the brokerage, Bruna Covelski, vice president, Stan Covelski, chief financial officer, and Joel Seidman, a client representative working from Fort Lauderdale, were each charged with one count of organized fraud, plus 72 counts among them for dealing in stolen property. The charges stem from the sale of about $2.5 million in life insurance policies that were illegally obtained.

In addition to the indictments on Feb. 4, the five viatical dealers were banned from brokering viatical settlements until the fraud and theft charges have been addressed in court.

The latest indictments are part of an ongoing investigation by the Florida Department of Insurance (DOI) into the viatical business. Vitatical settlements are agreements in which life insurance policies owned by terminally ill people are bought by viatical companies and re-sold to investors. The life insurance policies are sold for a percentage of the face value, and the investor collects the death benefit when the insured dies.

Aside from sellers called viators and investors, there are generally two parties who deal in viatical settlements: Providers, who buy the policies and sell them to investors, and brokers, who work with the viators and providers to hammer out the agreement. In a statement, the DOI describes the viatical brokerage business as "lucrative." The investigation revealed that, in one case, Future First received $48,510 in commissions for the sale of one policy worth $122,746.

These cases are the second and third indictments resulting from the state's ongoing investigation. In October 1999, several officers from Justus Viatical Group of Pompano Beach were indicted on charges of organized fraud, grand theft, and insurance fraud. "For more than a year now, we've been digging into the viatical industry," says Florida Insurance Commissioner Bill Nelson. "Our investigation so far suggests widespread fraud."

In a statement, Future First says it was "baffled" at the allegations, claiming that it "spearheaded a change" in Florida to protect investors from scams. It notes that Sweeney worked with state regulators to develop an internal policy for viatical companies to "screen out" policies that have been fraudulently purchased. "We find it incomprehensible that Future First or Bill Sweeney has been cast under this cloud of suspicion," the statement says.

Officers from Life Benefit Services did not return calls seeking comment.