Sifting through the opposing rulings on the legality of the subsidies on the federal health insurance exchange.
AUSTIN, Texas, Feb. 20 -- The Texas State Securities Board issued the following news release:
Howard Glen Judah and Gregory F. Jablonski, the architects of a fraudulent life settlement corporation that attracted nearly $30 million from investors, today were each sentenced to serve 10 years in state prison for securities fraud and 10 years for sale of an unregistered security. The sentences will run concurrently.
Judah, who is 82 years old, was the CEO of National Life Settlements LLC (NLS), a Houston company that sold unregistered securities that were supposedly backed by the proceeds from the death benefits of life insurance policies. Jablonski, 62 years of age, was a principal in the company. Each man had pleaded guilty to securities fraud and the sale of an unregistered security.
The State Securities Board investigated the cases, which were prosecuted by the Harris County District Attorney's Office.
National Life Settlements falsely promised investors that its investments would pay a steady return of 8% to 10% a year through promissory notes backed by death benefits. The company solicited money from retired and active state employees and teachers; millions of dollars were rolled out of retirement plans and into NLS investments.
A State Securities Board undercover investigation led to a civil action that forced NLS into receivership in 2009. Investors received 69% of their money back as a result of the receivership proceedings. The investigation led to the indictments against Judah (http://www.ssb.state.tx.us/Enforcement/legalactions/Judah.pdf) and Jablonski (http://www.ssb.state.tx.us/Enforcement/legalactions/Jabonski.pdf).
Before forming NLS, Judah, of Houston, was a three-time federally convicted felon, including a 1998 conviction in U.S. District Court for the Southern District of New York. He was convicted of conspiracy to commit wire fraud, sentenced to two years, eight months in prison and ordered to pay $3.5 million in restitution. Judah and his co-conspirator promised investors high rates of returns from non-existent "prime bank guarantees."
Jablonski, of Castle Rock, Colo., was a principal of an Internet networking company that filed for bankruptcy protection in 2007.
National Life Settlements was able to ramp up operations quickly by using insurance agents to sell its products. Evidence in the civil case against NLS showed that the company paid more than $4 million in commissions to insurance agents, many of whom were not licensed as securities dealers. The court-appointed receiver overseeing NLS testified that the corporation operated as a Ponzi scheme, paying new investors with money from earlier ones.
Judah and Jablonski failed to acquire the life insurance policies needed to pay investors. The pair also falsely told investors that NLS was a large, national provider of life settlements and that NLS had received billions of dollars from the Federal Reserve.
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