7 Charged In Life-Insurance Settlements Insurance-Fraud Case

Sept. 10--RICHMOND, Va. -- More than 800 investors in the U.S. and Canada -- including 26 from the Richmond area -- allegedly were swindled out of at least $100 million in a scheme involving life-insurance settlements.

"The alleged victims in this case are not banks or professional investors taking a calculated risk," U.S. Attorney Neil H. MacBride said at a news conference yesterday in Richmond.

"Instead, this case involved elderly retirees and others who gave most -- and in some cases, all -- of their life savings and have seen it all disappear."

Uncovering the fraud -- and the subsequent charges brought yesterday -- marks the first national financial fraud case coordinated by the Virginia Financial and Securities Fraud Task Force, a partnership formed in May between federal and state investigators and regulators.

It sends a strong message that the Justice Department places a high priority on prosecuting financial fraud, said Denis McInerney, chief of the fraud section of the Justice Department's criminal division.

The U.S. attorney's office in Richmond charged and arrested three executives of A&O Resource Management in Houston. It also charged four other people in connection with the fraud, including Tomme Bromseth, who solicited investors for the company in the Richmond area.

The executives routinely used tens of millions of dollars to fund a lavish lifestyle buying exotic cars, such as a Lamborghini, a Porsche and a Bentley, and a 5.6-carat diamond ring, a diamond Cartier watch and a Steinway grand piano, MacBride said.

They also formed shell companies in an attempt to throw off investigators and make the money trail more difficult to trace, the indictment says.

The indictment also seeks forfeiture of $103 million from three executives.

The goal in every case is to recover as much in restitution as possible to compensate victims, MacBride said.

Christian M. Allmendinger, 39; Adley H. Abdulwahab, 35; and David C. White, 40, all from the Houston area, each were charged in federal court in Richmond with one count of conspiracy to commit mail fraud, six counts of mail fraud, one count of conspiracy to commit money laundering, six counts of money laundering and four counts of securities fraud.

If convicted of all charges, they face up to 20 years in prison on each count except the securities fraud counts, on which they face up to five years in prison per count.

Bromseth, 68, the Richmond area sales agent formerly from Chester who lives in Blackstone, was charged with mail fraud and structuring financial transactions to evade reporting requirements. He sold more than $3 million of A&O products to 15 investors, MacBride said.

The three executives and their representatives allegedly misrepresented to investors the company's prior successes, its scope and size, the risk involved in its investment offerings and the use of investor funds.

They dealt in life insurance settlements. A life settlement is an investment in which a person, typically elderly or terminally ill, sells his or her life insurance policy for a cash payment, which is a percentage of death benefit -- the amount paid by an insurance company when the insured dies.

A&O, founded in November 2004, bought life settlements from a wholesaler and began selling whole or fractional interests in those settlements to investors, according to the indictment. In such sales, investors typically buy the right to receive a portion of the death benefit when the insured dies.

A&O claimed it had set aside money to pay premiums. If premiums are not paid, insurance companies have no obligations to pay death benefits.

The company had insufficient funds to pay the premiums and filed for bankruptcy protection in September 2009.

Contact Carol Hazard at (804) 775-8023 or [email protected].

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