An auditor for Provident Capital Indemnity Ltd. (PCI) pleaded guilty in federal court Nov. 21 for his role in a $670 million life insurance fraud scheme involving victims in the United States and abroad.
Jorge Luis Castillo, a 56-year-old New Jersey resident, entered the plea before U.S. District Judge John A. Gibney in the Eastern District of Virginia. He was charged with conspiring to commit mail and wire fraud, which carries a maximum penalty of 20 years in prison. Castillo is scheduled to be sentenced May 22.
"Mr. Castillo used his position as a CPA to give PCI an air of legitimacy that provided their clients the peace of mind to invest millions," U.S. Attorney Neil MacBride said in a press statement.
Assistant Attorney General Lanny Breuer of the U.S. Justice Department's Criminal Division said Castillo created false documents that concealed the true nature of the company's operations.
PCI was an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica, according to documents filed with the plea agreement. The outfit sold financial guarantee bonds to companies selling life insurance settlements, or securities backed by settlements, to investors.
Castillo admitted he conspired with PCI's president and majority owner, Minor Vargas Calvo, to prepare false financial statements indicating the company had entered into contracts with major reinsurance companies. But Castillo admitted he never performed an audit of PCI's financial statements as he claimed, and that he and others at PCI knew the company never actually entered into reinsurance contracts with any major companies.
PCI sold $670 million in bonds to life settlement contract companies in the United States, the Netherlands, Germany and Canada from 2004 to 2010, and the company's clients sold investment offerings backed by PCI's bonds to thousands of investors around the world, according to prosecutors. Purchasers allegedly were required to make upfront payments before the company would issue the bonds.
Vargas, a Costa Rica citizen, was indicted on mail and wire fraud charges as well as money laundering in October. He is in jail pending trail, scheduled for Feb. 13. The U.S. Postal Inspection Service, Internal Revenue Service and FBI are continuing an investigation, with assistance from the Virginia State Corporation Commission, the Texas State Securities Board and the New Jersey Bureau of Securities.