Globaleye.com

You may remember that we have been following this story with interest since we are aware of a number investors in the region who have fallen foul of this investment. We plucked this story from http://www.mbcfraud.com/ and it makes an interesting read. Written by Gwilym Rhys-Jones who represents an action group, he goes on to say “Mutual Benefits Corporation was mercilessly marketed on the Costa del Sol by unscrupulous commission driven financial advisers and the snake oil salesmen who dreamed up the scheme. The Securities & Exchange Commission's complaint alleges that since 1994 MBC raised over $1.67 billion from more than 29,000 investors through a fraudulent, unregistered offering of securities in the form of fractionalized interests in viatical and life settlements”. These were sold throughout the GCC too so for the full story,

“Judge Moreno in Florida has at last dealt with the Receiver’s motion of 22nd April 2005 which in essence pleaded for a sale of all policies and for the proceeds to be distributed to investors on a pro rata basis. That resolution would have been potentially disastrous for investors on a fire sale basis. The Judge had received all sorts of representations on behalf of investors and interested parties. Mr Brian Stack of Messrs. Stack, Fernandez, Anderson & Harris who are lawyers for Traded Life Policies Ltd. with whom I have established a constructive dialogue filed one motion.

The judge held that on the basis of the Court’s initial judgment that MBC was a fraudulent operation (NB to those who sold it) so therefore it was not possible to solicit new business. Most policies have already gone past their estimated life expectancy dates. He said, ‘No disposition plan will provide investors with their anticipated returns’.

It appears that most investors want a choice in the ultimate disposal of the policies. The judge considered it vital for the court to establish a plan to maximize returns to investors whilst giving heed to investors’ wishes. Common sense equity and justice have prevailed and Judge Moreno has ordered that all investors be given the opportunity to indicate their preference as to the disposition of their interests.

The available choices are:
1. To consent to the sale of their interest by the Receiver
2. To retain or take over their interest in the policy and assume responsibility for payment of their share of premiums, including those premiums paid past life expectancy
3. To allow their interest to lapse (not advised)

During the administration of the disposition premiums will continue to be paid for all policies from the premium escrow accounts. (In a separate judgment it was recently ordered that interest earned on the escrow account should go towards paying the Receiver’s costs). Policies that have not gone past life expectancy will continue to have their premiums paid to life expectancy. In simple terms premiums will be paid from escrow until the viator should be dead. Thereafter the investors in that policy will have to bear the burden of the premiums until the grim reaper strikes.

In respect of policies already past life expectancy at the time of disposition premiums will continue to be paid and recovered when the policies are sold (not advised) or, and this should be the consensus of opinion, premiums would be recovered by imposing a surcharge in addition to premium payments if the investors choose to retain or take over their interests in the policies. The administrator for the continuation of policies and all retained interests of investors will be Viatical Services Incorporated whose administration fees will be indicated in the notice to be sent out to investors.

In respect of policies owned by multiple investors, and that is primarily what we are dealing with; the majority vote will decide the destiny of the policy. If the majority of investors decide to take over the policy and all that entails (premium payments, administration charges etc) the dissenting investors will have to be addressed. The Judge has ordered that the dissenter’s interest be first auctioned to other investors. The proceeds of any such sale will go to the investor less expenses. If that does not work the Receiver will endeavour to negotiate a reduction in the face value of the policy to reduce premium payments. If that recourse fails the Receiver will notify the other investors that they will have to take over the dissenter’s premium obligations on a pro rata basis or the policy will be sold. The dissenter’s interest will then be distributed to the other investors on the same basis as they contributed.

Any proceeds of policies already matured will be distributed according to investors’ interests in them as will any interest earned on the monies. There is a tail end to the judgment requiring action by 30th September and I shall clarify what exactly has to be achieved by that date. This is a good judgment and certainly what we were seeking.”

Gwilym Rhys-Jones E-mail: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it (www.costa-action.co.uk) Tel: +(34) 951 31 82 77 Mobile: +(34) 699 840 606 Skype address: gwilymrj Huerta Nueva 11 17 1D Estepona 29680 Málaga Spain