Imperial Holdings Inc., whose Boca Raton, Fla., headquarters was raided by federal agents last September, said its president resigned as part of an agreement that resolves federal fraud allegations tied to its business that financed the purchase of life insurance.
Federal prosecutors maintain that certain Imperial employees held seminars to persuade elderly people to take out policies, among other means of attracting business, and some employees facilitated and/or made misrepresentations on applications to hide the company's role in financing the premiums those individuals would owe.
As part of the nonprosecution agreement with the U.S. attorney's office in New Hampshire, Imperial acknowledged the misrepresentations in certain instances and agreed to pay an $8 million penalty. Imperial also said that its president and chief operating officer, had stepped down from its board and is no longer an employee.
The Federal Bureau of Investigation's raid on the little-known Florida lender had put a spotlight on an obscure corner of the financial world, where life-insurance policies are held as collateral for high-cost loans that older people can use to buy life insurance.
Imperial called the pact a tremendous step forward but said it doesn't resolve a previously disclosed investigation by the enforcement division of the Securities and Exchange Commission.
A U.S. Attorney in New Hampshire, said Imperial has provided and will continue to provide substantial assistance in the investigation of those individuals whose fraudulent conduct was at the root of the illegal business practices.
In the mid 2000s, thousands of elderly people used loans to pay for policies that they quickly flipped to professional investors. But new state laws, revised actuarial tables, mounting legal battles and fading investor interest have all helped damp demand for the policies in recent years.
Federal prosecutors alleged that the Imperial employees misrepresented facts in instances when an insurance carrier was likely to deny an applicant's policy on the basis of the premium financing, the agreement states.
The company also failed to take precautions to prevent misrepresentations in insurance applications for policies submitted by external agents, brokers and applicants themselves, the agreement adds.
Some insurers disdain premium financing because it often is a central feature of stranger originated life insurance, or STOLI, which are policies taken out as bets on longevity, not to financially protect a family or an estate.
The September raid included inspectors from one of the federal government's financial-crisis bailout programs. Imperial has ties to at least two recipients of the Troubled Asset Relief Program: American International Group Inc. and Lincoln National Corp. AIG provided lender protection insurance to Imperial, while about 20% of the proceeds from Imperial's loans had been used in some years to pay for Lincoln policies, according to Imperial's regulatory filings.
People familiar with the matter said federal prosecutors in New Hampshire began their probe when an investigator heard from an insurer about alleged schemes to dupe insurers into issuing policies that involved hidden financing and found that some state residents had taken out such policies.
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