Owner of Costa Rican Firm Convicted of $485 Million Fraud

The president and majority owner of Provident Capital Indemnity Ltd. was convicted by a federal jury in Virginia of a $485 million fraud conspiracy in the life settlement bonding market, U.S. prosecutors said.

Minor Vargas Calvo, a citizen and resident of Costa Rica, was found guilty today in U.S. District Court in Richmond of conspiracy, mail fraud, wire fraud and money laundering. Vargas, 60, faces as long as 20 years in prison on each fraud count when he is sentenced on Oct. 23.

From 2004 to 2010, the Costa Rica-based company known as PCI sold at least $485 million of bonds to life settlement investment companies in several countries, including the U.S., Canada, Germany and the Netherlands, prosecutors said. Vargas misrepresented PCI’s ability to satisfy obligations under its bonds, they said.

“Mr. Vargas lied to investors across the globe to sell almost half a billion dollars worth of ‘guaranteed’ bonds, which turned out to be worthless,” U.S. Attorney Neil MacBride said in a statement. “His fraud affected thousands of victims around the world, many of whom invested their life savings with life settlement companies because of the worthless guarantees PCI made.”

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.

Mail Fraud

Jorge Castillo, of Hackettstown, New Jersey, pleaded guilty in November to one count of conspiracy to commit mail and wire fraud related to the scheme, which prosecutors initially said involved $670 million.

Castillo admitted to conspiring with Vargas 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.

The case is U.S. v. Provident Capital Indemnity Ltd., 11-00014, U.S. District Court, Eastern District of Virginia (Richmond).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE