2 Charged In $11.3 M California Ponzi Scheme

InsuranceNewsNet

WASHINGTON – Two southern California insurance agents have been have been charged with defrauding 27 people of $11.3 million through sale of unsecured investments. The victims include a retired major league baseball player, according to officials of the California Department of Insurance (CDI).

The CDI official said the scheme was financed through purchase of life insurance policies in the name of third parties that yielded commissions of up to 115 percent for the primary defendant, Joseph Francis Bartholomew, 75, of Lake Forest, Calif. The policies, however, would soon be allowed to lapse, officials alleged.

According to a CDI spokesman, the commissions were used to fund payments to original investors in the scheme. Losses ranged from $50,000 to $2.9 million.

Prosecutors are alleging a “Ponzi scheme” through which Bartholomew used investments by victims for his benefit or to repay earlier investors.

Bartholomew obtained new investors either by selling them legitimate insurance policies or by networking at various Orange County golf club where he played, a CDI spokesman said.

Bartholomew owned and operated MBP Insurance Services (MBP). He is alleged to have offered and sold securities based on fraudulent insurance policies. Bartholomew is accused of defrauding 28 investors between July 2005 and May 2014 by falsely promising them that he would be able to provide a return of 15 to 40 percent in interest from their investment, the CDI said. Bartholomew had one valid insurance license and one expired license, the spokesman said.

Bartholomew is charged with one felony count of the use of a device or scheme to defraud and 28 felony counts of using an untrue statement in the purchase or sale of a security with sentencing enhancements for aggravated white collar crime over $500,000 and loss greater than $3.2 million.

If convicted, Bartholomew faces a maximum sentence of 42 years in state prison. Bartholomew is being held on $11.3 million bail and must prove that the money comes from a legal and legitimate source before posting bond.

Co-defendant Wendy King-Jackson, 54, Laguna Niguel, Calif., is charged with one felony count of the use of a device or scheme to defraud and two felony counts of the use of an untrue statement or omission in connection with the purchase or sale of a security with sentencing enhancements for aggravated white collar crime over $500,000 and loss greater than $3.2 million.

“The largest message we seek to convey is that before making an investment, consumers should ask questions of outside, authoritative professionals about a potential investment to ensure they are not being defrauded,” the CDI spokesman said, citing a similar recent incident in Michigan. “If it is too good to be true, it usually is,” he said.

Arthur D. Postal has covered regulatory and legislative issues for more than 30 years in Washington, D.C. He can be reached at [email protected].