A former auditor for Provident Capital Indemnity Ltd. admitted to assisting a $670 million fraud conspiracy in the life settlement bonding market, federal prosecutors said.
Jorge Castillo, of Hackettstown, New Jersey, pleaded guilty today to one count of conspiracy to commit mail and wire fraud, U.S. Attorney Neil MacBride in Alexandria, Virginia, said in a call with reporters. The charge carries a maximum sentence of 20 years in prison and prosecutors are also seeking as much as $40 million in forfeiture, MacBride said.
The U.S. claims the Costa Rica-based company, also known as PCI, misrepresented its ability to satisfy obligations under its bonds, according to a related civil complaint the Securities and Exchange Commission filed against the company in Richmond, Virginia.
“This is a significant outcome today,” MacBride said. “PCI is alleged to have pulled off a global fraud scheme based on criminal representations made by its outside auditor.”
Castillo, 56, is scheduled to be sentenced on May 22 in federal court in Richmond.
The insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica sold financial guarantee bonds to companies selling life settlements or securities to investors, prosecutors said in an e-mailed statement.
From 2004 to 2010, PCI sold about $670 million of bonds to life settlement investment companies in several countries, including the U.S., Canada, Germany and the Netherlands, prosecutors said.
Castillo admitted to conspiring with PCI president Minor Vargas Calvo to prepare financial statements that falsely claimed PCI had contracts with other reinsurance companies. Castillo admitted he never audited PCI’s financial statements and that he knew the company never entered into any contracts with other reinsurance companies, prosecutors said.
Castillo was paid about $84,000 by PCI from 2004 through 2010, prosecutors said.
Vargas, a citizen of Costa Rica, and PCI have been criminally charged with conspiracy and mail and wire fraud charges. He and the company have pleaded not guilty.
Vargas, 60, also faces three counts of money laundering. He and the company are scheduled for trial in February.
The criminal case is U.S. v. Provident Capital Indemnity Ltd., 11-00014, U.S. District Court, Eastern District of Virginia (Richmond).
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