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Florida Business, Whistleblower, & Securities Lawyers / Blog / Fraud / New Jersey Resident Sentenced for His Role in Half-Billion Dollar Fraud Scheme

New Jersey Resident Sentenced for His Role in Half-Billion Dollar Fraud Scheme

Fifty-seven year old Jorge Luis Castillo of New Jersey, was sentenced to more than four years in prison for his role in a scheme that allegedly defrauded thousands of U.S. and foreign investors out of nearly half-billion dollars. Castillo, a certified public accountant and outside auditor for Provident Capital Indemnity Ltd. (“PCI”), pleaded guilty to one count of conspiracy to commit mail and wire fraud.

Court records reflect that PCI was doing business in Costa Rica as an insurance and reinsurance company. PCI marketed and sold financial guarantee bonds to companies in the U.S. and abroad that sold life settlements to investors. Financial guarantee bonds are a way to ensure that investors receive the expected investment return regardless of whether the insured individual on the underlying life settlement contract exceeds his or her life expectancy.

According to the U.S. Department of Justice, Castillo and Minor Vargas Calvo, the president and majority owner of PCI, created false financial statements for PCI that reflected that PCI had entered into reinsurance contracts with major reinsurance companies, which Castillo and Calvo knew was false. In addition, the Justice Department claims Castillo provided the falsified financials and fraudulent independent auditors’ report (also created by Castillo) to Dun and Bradstreet, which Dun and Bradstreet then relied on in issuing a 5A rating of PCI’s financial strength.

According to the government, PCI sold $485 million of financial guarantee bonds between 2004 and 2010 to life settlement investment companies in the U.S., the Netherlands, Germany, Canada and elsewhere. Purchasers of the bonds were required to pay PCI upfront premiums of 6 to 11% of the underlying settlement.

On April 30, 2012, Vargas was convicted of mail and wire fraud and money laundering. He was sentenced to 60 years in prison. Castillo pleaded guilty to conspiracy to commit mail and wire fraud. He was sentenced to 54 months in prison, three years of supervised release and ordered to pay $43,582,699.

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