UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND UNITED STATES OF AMERICA ) } Criminal No. v. JOSEPH CARAMADRE and RAYMOUR RADHAKRISHNAN Defendants. } } In violation of: } } Counts 1 to 26: 18 U.S.C. } (Wire Fraud) } } ? 1343 } } ) } Counts 27-32: 18 U.S.C. ? 1341 (Mail Fraud) Count 33: 18 U.S.C. ? 371 (Conspiracy) ? 1028 (a) (7) ) ) Counts 34-59: 18 U.S.C. } (Identi ty Fraud) } } } Counts 60-64: 18 U.S.C. ?1028A(a} (1) (Aggravated Identity Theft) ) } } ) ) ) Count 65: 18 U.S.C. ?? 1957 (a) and (b) (1) and (2) ) (Money Laundering) Count 66: 18 U.S.C. ? 1512 (b) (3) (Witness Tampering) INDICTMENT The Grand Jury charges that: At uLl. ti.me8l~levant to this TnJi~tment, unless stated hereiD: eli:: JIl ackli i. i nil / from at least in or about 1995"through at least in or about August 2003, CARAMADRE was licensed to market insurance products and securities. 2. CARAMADRE did business through an entity called Estate Planning Resources. On or about January 18, 2006, in the state of Rhode Island, CARAMADRE caused Estate Planning Resources, Inc. incorporated. ("Estate Planning Resources") to be CARAMADRE was the President, CEO and majority owner of Estate Planning Resources. 3. From at least 1995 through 1997, the offices of Estate Planning Resources were located at 51 Jefferson Boulevard, Warwi~k, Rhode Island. From 1997 until November 2007, the offices of Estate Planning Resources were located at 400 Reservoir Avenue, Providence, Rhode Island. In or about November 2007, the offices of Estate Planning Resources moved to 1000 Chapel View Boulevard, Suite 270, Cranston, Rhode Island, where they remained through at least December 2010. 4. From in or abo,ut July 2007 through at least December 2010, defendant RAYMOUR RADHAKRISHNAN ("RADHAKRISHNAN") was an employee of Estate Planning Resources. 5. JOHN DOE #1, an unindicted co-conspirator whose true LoLLy .i.r:l knowl) to the CTclJl<] ,JUf'Y I Wa.f) <:i. lic~en8 .i.rlSllraOCE::~ ,'3ecu:ci tiel3 I Corp. (\\Lifc:)ll\i:;l:c),I/) I in Eoche,'3t r I New York. Although JOHN DOE #1 never had an ownership interest in Estate Planning Resources, he maintained an office within the office space of Estate Planning Resources. 6. JOHN DOE #2, an unindicted co-conspirator whose true identity is known to the Grand Jury, was a licensed insurance broker. From in or about November 2000 through in or about' From October 2006, JOHN DOE #2 was registered .with Lifemp.rk. in or about October ,2006 though 2009, JOHN DOE #2 was registered with broker-dealer The Leaders Group, Inc., .( "Leaders Group"), headquartered in Littleton, Colorado. 7. In or about 2006,JOHN DOE #2 became the owner 6f twenty percent of Estate Planning Resources. 8. JOHN DOE #3, an unindicted co-conspirator whose true identity is known to the Grand Jury, was a licensed insurance broker who was registered with broker-dealer Fortune Financial Services, Inc. ("Fortune Financial"), headquartered in New Brighton, Pennsylvania. 9. Numerous persons and corporate entities, both known and .unknown to the Grand Jury, made investments through CARAMADRE and Estate Planning Resources and are collectively referred to herein as "investors" or "CARAMADRE's clients." 10. 'rIle I:ollovli.nq to antitiAs t:e (collectively, "Broker n0 ieG between customers Insurancc:: CompcmJc,'::l: J,ifefvidt'k; Lead.el:u Gruup; Fortune Financiali and Sammons Securities Corp. 11. ("Sammons"). The following corporate entities (collectively, the "Insurance Companies") offered for sale investment products known as variable annuities (hereinafter "annuities"): Metropolitan Life Insurance Company ("MetLife " ), Genworth Life Insurance Company ("Genworth"), Midland National Life Insurance Company ("Midland National"), Hartford Life Insurance Company ("Hartford Life"), ING Life Insurance & Annuity Company ("ING"), Western Reserve Life Insurance Company ("Western Reserve fl ) , Transamerica Life Insurance Company ("Transamerica fl ) ,. Jefferson National Life Insurance Company ("Jefferson National"), Minnesota Life Insurance Company ("Minnesota Life"), Nationwide Life Insurance Company ("Nationwide"), Pacific Life Insurance Company ("Pacific Life fl ) , Golden American Life Insurance Company ("Golden. American"), Allmerica Financial Life Insurance and Annuity Company ("Allmerica"), AXA Equitable Life Insurance Company ("~A Equitable"), American Skandia Life Assurance Company ("American Skandia"), Lincoln Benefit Life Company ("Lincoln Benefit"), Security Benefit Life Insurance Company ("Security Benefit") The {c I Travelers Life and Annuity Company ("Traveler,gll) of Virginic'-l ("Life of Vir<::Jinia ll ) ("P,mecicdJl I Tlu:;ura.oce Company I ClU.r:l i\lIIcricarlN;)i:.ional Tn,c.Jur;:Jn<.:(:; CutnpcU1Y l\)atiork'.L II) 12. The followi~g corpotate entities (collectively the "Bond Issuers") offered for sale to the public corporate bond$ that contained survivorship options: American General Financial, Inc., Bank of America, Bank Hapoalim BM, Bear Stearns Co., Carolina First Bank, Caterpillar Financial Services, Corp., CIT Group, Inc., Compass Bank, Countrywide Financial, Corp., Countrywide Home Loan, Inc., Fannie Mae, Federal Home Loan Mortgage Corp., Federal National Mortgage Association, Federated Capital, Corp., First Bank Pr., Ford Motor Credit Corp., Freddie Mac, General Electric Corp., General Motors, Corp., Genworth, GMAC, John Hancock Life Insurance Co., Hartford Life, Hartford Life Global, HSBC Financial, International Lease Finance, Corp.! Lassalle Bk Na Chicago Ill., Lassalle Fndg LLC, Lehman Bros Holdings, Inc., Marshall & Isley Corp, MBIA Inc., Mercantile Bk Orlando Fl, Merrill Lynch Co., Protective Life, Provideht Bank of Cincinnati, OH, Providian Natl Bank, Prudential Financial, SLM Corp., Standard FedBank Troy Mich., Tennessee Valley Authority, and Western Bank Pro 13. The following corporate entities (collectively "the Brokerage Houses") were entities through which individuals coulc1. lx:: ,(~ecUI:'ities f rJ.CC!OUJJt::-; ill wb.ich death--pI)I: bonds could LJ,C (I\r~':"rr()_de::;lf) I Lif(::;!l1dJ.k. Sc~curities Corp. (\\Lifemark"), Pershing LLC . ('\\Pershing"), Scot trade '. Inc. (\\Scottrade"), Fidelity Investments ("Fidelity"), Kane Reid Securities Group, Inc., d/b/a TradeKing ("TradeKing") and Charles Schwab &. Co, Inc. (\\Charles Schwab") . OVERVIEW OF VARIABLE ANNUITIES 14. Under the terms of certain variable annuities offered by the Insurance Companies, individuals or ,corporations could deposit funds with the Insurance Companies and select a. specific fund or sub-account in which their monies would be deposited. On an application to open an annuity, the applicant could identify who the annuitant would be and ch60se the \\annuitization date" - the date on which the annuity payments would commence. 15. In addition to providing the owner of an annuity with the opportunity to invest his/her money in a variety of ,funds, the Insurance Companies also offered certain death benefits to be payable upon the death of the annuitant. death benefits varied by company, but always included a guarantee that all premiums previously paid by the annuity owner would be returned, regardless of the cash value in the annuj,ty at the time of dea.th. that I The This death benefit guaranteed I UpOH Lhe c1eat:h ot (,he d ClImLti CaJil', thE" arlfluL t:y owner c;,mOlllll: VVOl.llrl, rli, I\lildrm1Ti1, ?cec; ivc tlJC full of mUr)('Y 1.k1 i(1 in L() the afLllu:L any i?U::: t i) c,ll losses incurred in the investment. 16. In addition to guaranteeing a return of premiums paid, many of the Insurance Companies offered other benefits that were triggered by the death of the annuitant. These benefits included a guaranteed rate of return, often in the amount of 5-7 percent per year. Under the terms of this death benefit, the annuity owner would be guaranteed a specified rate of? return upon the death of the annuitant, irrespective of any actual losses that had occurred in the annuity investment. 1.7 ' Moreover, many of the Insurance Companies offered additional benefits to the annuity owner, including paying bonus payments of up to five percent of all amounts deposited into the annuity. Some Insurance Companies also offered ~earning "death benefit riders" and enhancement riders," under which the Ihsurance Companies would pay additionai sums upon the death of the annuitant. 18. Under federal regulations, insurance brokers such as CARAMADRE, JOHN DOE #1, JOHN DOE #2 and JOHN DOE #3 were not permitted to submit applications for annuities directly to the Insurance Companies. Rather, Broker-Dealers (such as LifeMark and Leaders Group) were required to act as _L-lcc:rlll(;didTies h:~t,\!leeJl_ the cu::,tom2:r and the In::::rura..nce i::a.ble fl fo:c [:1](-" particular customer. The Broker-Dealers examined a number of factors when making this suitability determination, including the time horizon for the investment, the investment experience of the in,Vestor, the source of funds, and the annual income and net worth of the investor. OVERVIEW OF DEATH-PUT BONDS 19. Under the terms of the prospectuses issued with certain corporate bonds, the Bond Issuers allowed for bonds to be owned jointly by two individuals with rights of survivorship. These corporate bonds typically had a maturity date - a date at which the bonds could be redeemed at full face value that was years or decades away. fo~purchase These bonds were available on the secondary market for a price below the However, under the terms of the full face value. survivorship provisions in the prospectuses authorizing the issuance of the bonds, the bonds could be redeemed at full face value by a bond owner immediately upon the death of the bond's co-owner. 20. These corporate bonds with survivorship clauses, known in the industry and referred to herein as "death-put bonds," allowed for full, immediate redemption of the full face value of Ult? bond as LC i.:lllC; matu:ci 21. Individuals wishing to j.ointly own death-put bonds could do so through a brokerage account with rights of survivorship in the names of the two. individuals who are to own the bonds jointly. The brokerage accounts relevant to this Indictment were all opened through the Brokerage Houses identified in Paragraph 13 above. COUNTS 1 through 26 (Wire Fraud) 18 U.S.C. ? 1343 22. The allegations contained in paragraph one (1) through twenty one (21) of the General Allegations of this Indictment are realleged and are incorporated by reference as if fully set forth herein. THE FRAUD SCHEME 23. From an unknown date, but at least as early as in or about January 1995, and continuing through in or about August 2010, in the District of Rhode Island and elsewhere, the defendants JOSEPH CARAMADRE and RAYMOUR RADHAKRISHNAN knowingly devised and intended to devise a scheme and artifice to de:fraud, and for obtaining. money and property by means of :l:ci .18e a:r1d fraudulent p:r.?ei::eoHes, 8cmtatiorLg and OBJECTS OF THE SCHEME TO DEFRAUD 24. It was the object of the scheme to defraud for CARAMADRE and RADHAKRISHNANto unlawfully enrich themselves, JOHN DOE #1, JOHN DOE #2,. JOHN DOE #3, and CARAMADRE's friends, family members and clients by fraudulently obtaining millions of dollars from the'Insurance Companies and Bond Issuers. 25. It was further an object of the scheme to defraud for CARAMADRE and RADHAKRISHNAN to obtain the identity information and signatures of terminally-ill and elde~ly individuals for use in furtherance of their ,scheme to obtain money from the Insurance Companies and Bond Issuers. 26. It was further an object of the scheme to defraud for CARAMADRE and RADHAKRISHNAN to profit from the deaths of terminally-ill and elderly individuals. Using the identity information of terminally-ill and elderly people, CARAMADRE, RADHAKRISHNAN and others known and unknown to the Grand Jury caused to be purchased over 200 annuities, deposited at least $125,000,000 into these annuities and fraudulently obtained more than $15,000,000 from the Insurance Companies. Moreover, CARAMADRE and RADHAKRISHNAN used the identity information of termj,nally-i,ll and elderly people to open approximately 77 bxoko I)U.TCll(;l i::H~d accounL~S in vJbich Ulou,san,d,Cj oE death'-put bonds were ,rIpon i-,be c10Dtlw of U18 terminaJJ.y??:i lJ CAWWJAD lU'; clod rV\DI?IAKEI SI-iJ\Jl\J\f { incH vid.UiJ.L [7, l:.oge tllc~:c wi 1:11 ?,10- others known and unknown to the Grand Jury, exercised the survivorship options in these death-put bonds and fraudulently obtained mOre than Issuers. THE MANNER AND MEANS OF THE SCHEME TO DEFRAUD ~10,OOO,ooo from the Bond The manner and means by which defendants CARAMADRE and RADHAKRISHNAN accomplished the objects of the scheme to defraud included, among others, the following: 27. It was part of the scheme to defraud that CARAMADRE and RADHAKRISHNAN fraudulently obtained millions. of dollars by making material misrepresentations and omissions to (1) terminally-ill and elderly people, their family members and care-givers, in order to obtain identity information and signatures for use in furtherance of the scheme; Insurance Companies; (3) (2) Bond Issuers; and (4) intermediaries, including Brokerage Houses and BrokerDealers. Genesis of the scheme 28. It, was part of the scheme to defraud that CARAMADRE devised a strategy in which annuities and death-put bonds would be purchased using the names of terminally-i.ll and eJderly iueJlviduaJ:::l with short life the re turl) of prin.c (and other death benefits) on dll -I I" annuities purchased and allowed for the redemption of deathput bonds at full face value upon the deaths of the terminally-ill and elderly individuals. CARAMADRE. employed this strategy with respect to annuities from at least 1995 through 2010 and with respect to death-put bonds from 2006 through 2010. RADHAKRISHNANjoined the scheme when he was hired by CARAMADRE in 2007. The success of this strategy depended on using the names, social security numbers, dates of birth and other identifying information (hereinafter "identity information") of large numbers of terminally-ill and elderly individuals. Obtaining the identity information of terminally-ill people 29. It was further part of the scheme to defraud that, beginning as early as 1995 and continuing throughout the scheme, CARAMADRE obtained and caused? to be obtained the identity information bf terminally-ill and elderly individuals by means of false and materially misleading representations and omissions. CARAMADRE then used the identity information of the terminally-ill and elderly individuals to enrich himself, RADHAKRISHNAN, JOHN DOE #1, JOHN DOE #2, JOHN DOE #3, his family, ..~ 0 . friends and clients . expectancy of six months or less to serve ??1 ClS ;:;1111.1\1 i l-