![USATODAY.com - Viatical life insurance deal concerns elderly couple
http://www.usatoday.com/money/consumer/2001-02-28-viatical.htm[11/5/2010 10:22:22 AM]
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02/28/2001 - Updated 09:20 AM ET
Viatical life insurance deal concerns
elderly couple
By Greg Farrell, USA TODAY
Like most seniors, Thomas and Jessie Johns of Cincinnati were worried about
how to provide for their future.
They owned a home, lived on a modest retirement income and had some cash
investments.
But given the vagaries of the health care system, they thought they needed
more.
Read more
Stories Some seniors lose on risky deals from insurance agents
Retirees trust insurance agents, lose big
Viatical life insurance deal raises concerns
Couple's phone investment pays off at first, then stalls
Sweep of phone cons nears end
Red flags can tip you off to scams
One day, Jessie was discussing her concerns with a neighbor whose son,
Chuck Eberle, was an independent insurance agent.
"(Chuck) was a family friend," recalls Nina Johns Castro, the couple's daughter.
"We've known him since he was a child."
After hearing about the Johnses' desire, Eberle gave them promotional
literature on viatical investments from Alpha Capital.
The Johnses had never invested in viaticals, so Eberle explained the process.
Some terminally ill people need cash immediately. One option is for them to sell
their life insurance policy for a fraction of its value and name the buyer as the
beneficiary.
Because these people — known as viators — are terminally ill, investors who
buy policies for 50 cents on the dollar can double their money in a short period
of time. That's what Alpha's promotional material promised: a 100% return,
risk-free.
The Johnses liked the product, and trusted their neighbor's son, so they
invested one-quarter of their net worth, a sum that Castro did not wish to
disclose.
"About 6 months later, my mother said there might be some problem," says
Castro, whose parents asked her to speak for them. The Johnses saw stories
in Ohio newspapers about Alpha Capital and its escrow agent, Viatical Escrow
Services. Alpha had sued the escrow agent and its founder, James Capwill,](https://image.slidesharecdn.com/lmlinterview-2001-151119181008-lva1-app6892/85/Laurence-Landsman-interview-2001-02-28-usa-today-viaticals-1-320.jpg)
![USATODAY.com - Viatical life insurance deal concerns elderly couple
http://www.usatoday.com/money/consumer/2001-02-28-viatical.htm[11/5/2010 10:22:22 AM]
accusing him of misappropriating millions of dollars entrusted to it.
This was worrisome news for the Johnses, who had written the check for their
investment not to Alpha, but to Capwill's company, VES.
Castro, a former credit manager, investigated further. "I was alarmed to find
that the contracts didn't contain a lot of hard facts," she says. Besides, her
parents didn't even have the actual policies they thought they were buying. "All
they received were medical assessments, with policy numbers," Castro says.
"My parents became concerned because of the lawsuit and countercharges,
and I started to push for more information," Castro says. "It seemed like there
might be collusion between all the companies. If nothing else, there was a real
lack of fiduciary responsibility."
Despite written assurances from Alpha's founder, Ann DiLeo, that Alpha was
doing everything possible to redeem the money that Capwill's company is
accused of misusing, Castro was disturbed by what she'd learned.
In November, DiLeo pleaded guilty in Chattanooga, Tenn., to two counts of
fraud involving the sale of viatical policies. Her sentencing is scheduled for
June.
Attorney Laurence Landsman of Block & Landsman in Chicago has filed a
lawsuit against Alpha and is seeking class-action status. In it he alleges Alpha
and DiLeo exercised bad judgment in turning millions of investors' dollars over
to Capwill. In the complaint, Landsman notes that Capwill had been suspended
as a certified public accountant, had virtually no experience in the viatical
business and had been sued for non-payment of taxes.
DiLeo's attorney, Bill Wuliger, concedes that his client could have done a better
job checking Capwill's background. But he says DiLeo is making progress in
returning funds to Alpha investors. Wuliger also says that Landsman's lawsuit
will cause Alpha investors more harm than good.
As to allegations of financial mismanagement, Capwill says, "Wait until the
accounting comes out," but would not comment further.
Leo Ward, a Cleveland attorney who has worked with Capwill in the past, says
the legal action against Capwill doesn't represent the full story: "If somebody
had not brought a frivolous lawsuit against him, nobody would have lost
anything."
Castro is concerned because, right now, she can't account for at least half her
parents' investment.
Eberle, the family friend who sold them the policies, says he feels awful about
the Johnses' investment.
"These are people who are near and dear to me," Eberle says. "They helped
raise me. Here I was trying to help." He says he has lost more than $100,000
of his own money by investing through Alpha Capital.
William Kelley, executive director of the Viatical & Life Settlement Association of
America, says that the failure of a handful of viatical firms has hurt his industry,
but that viaticals remain a worthwhile investment option.
"People could check with this association before they invest," Kelley says.
USATODAY.com partners: USA WEEKEND Sports Weekly Education Space.com
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- 1. USATODAY.com - Viatical life insurance deal concerns elderly couple http://www.usatoday.com/money/consumer/2001-02-28-viatical.htm[11/5/2010 10:22:22 AM] Home News Money Money briefs Markets Markets Report Most active stocks World stocks Commodities Currencies Key interest rates Investor Research Stock Screener Mutual funds screener Get a Quote Managing Money Columns and tips Financial calculators CD and loan rates Calendars Economic Company Special Sections Autos Small Business Careers Network USA TODAY Travel Interactive Money eXchange Talk Today Sports Life Tech Weather Click here to get the Daily Briefing in your inbox 02/28/2001 - Updated 09:20 AM ET Viatical life insurance deal concerns elderly couple By Greg Farrell, USA TODAY Like most seniors, Thomas and Jessie Johns of Cincinnati were worried about how to provide for their future. They owned a home, lived on a modest retirement income and had some cash investments. But given the vagaries of the health care system, they thought they needed more. Read more Stories Some seniors lose on risky deals from insurance agents Retirees trust insurance agents, lose big Viatical life insurance deal raises concerns Couple's phone investment pays off at first, then stalls Sweep of phone cons nears end Red flags can tip you off to scams One day, Jessie was discussing her concerns with a neighbor whose son, Chuck Eberle, was an independent insurance agent. "(Chuck) was a family friend," recalls Nina Johns Castro, the couple's daughter. "We've known him since he was a child." After hearing about the Johnses' desire, Eberle gave them promotional literature on viatical investments from Alpha Capital. The Johnses had never invested in viaticals, so Eberle explained the process. Some terminally ill people need cash immediately. One option is for them to sell their life insurance policy for a fraction of its value and name the buyer as the beneficiary. Because these people — known as viators — are terminally ill, investors who buy policies for 50 cents on the dollar can double their money in a short period of time. That's what Alpha's promotional material promised: a 100% return, risk-free. The Johnses liked the product, and trusted their neighbor's son, so they invested one-quarter of their net worth, a sum that Castro did not wish to disclose. "About 6 months later, my mother said there might be some problem," says Castro, whose parents asked her to speak for them. The Johnses saw stories in Ohio newspapers about Alpha Capital and its escrow agent, Viatical Escrow Services. Alpha had sued the escrow agent and its founder, James Capwill,
- 2. USATODAY.com - Viatical life insurance deal concerns elderly couple http://www.usatoday.com/money/consumer/2001-02-28-viatical.htm[11/5/2010 10:22:22 AM] accusing him of misappropriating millions of dollars entrusted to it. This was worrisome news for the Johnses, who had written the check for their investment not to Alpha, but to Capwill's company, VES. Castro, a former credit manager, investigated further. "I was alarmed to find that the contracts didn't contain a lot of hard facts," she says. Besides, her parents didn't even have the actual policies they thought they were buying. "All they received were medical assessments, with policy numbers," Castro says. "My parents became concerned because of the lawsuit and countercharges, and I started to push for more information," Castro says. "It seemed like there might be collusion between all the companies. If nothing else, there was a real lack of fiduciary responsibility." Despite written assurances from Alpha's founder, Ann DiLeo, that Alpha was doing everything possible to redeem the money that Capwill's company is accused of misusing, Castro was disturbed by what she'd learned. In November, DiLeo pleaded guilty in Chattanooga, Tenn., to two counts of fraud involving the sale of viatical policies. Her sentencing is scheduled for June. Attorney Laurence Landsman of Block & Landsman in Chicago has filed a lawsuit against Alpha and is seeking class-action status. In it he alleges Alpha and DiLeo exercised bad judgment in turning millions of investors' dollars over to Capwill. In the complaint, Landsman notes that Capwill had been suspended as a certified public accountant, had virtually no experience in the viatical business and had been sued for non-payment of taxes. DiLeo's attorney, Bill Wuliger, concedes that his client could have done a better job checking Capwill's background. But he says DiLeo is making progress in returning funds to Alpha investors. Wuliger also says that Landsman's lawsuit will cause Alpha investors more harm than good. As to allegations of financial mismanagement, Capwill says, "Wait until the accounting comes out," but would not comment further. Leo Ward, a Cleveland attorney who has worked with Capwill in the past, says the legal action against Capwill doesn't represent the full story: "If somebody had not brought a frivolous lawsuit against him, nobody would have lost anything." Castro is concerned because, right now, she can't account for at least half her parents' investment. Eberle, the family friend who sold them the policies, says he feels awful about the Johnses' investment. "These are people who are near and dear to me," Eberle says. "They helped raise me. Here I was trying to help." He says he has lost more than $100,000 of his own money by investing through Alpha Capital. William Kelley, executive director of the Viatical & Life Settlement Association of America, says that the failure of a handful of viatical firms has hurt his industry, but that viaticals remain a worthwhile investment option. "People could check with this association before they invest," Kelley says. USATODAY.com partners: USA WEEKEND Sports Weekly Education Space.com Home Travel News Money Sports Life Tech Weather
- 3. USATODAY.com - Viatical life insurance deal concerns elderly couple http://www.usatoday.com/money/consumer/2001-02-28-viatical.htm[11/5/2010 10:22:22 AM] Resources: Mobile news Site map FAQ Contact us E-mail news Jobs with us Internships Terms of service Privacy policy/Your California Privacy Right Advertise Press Room Media Lounge Electronic print edition Reprints and Permissions Add USATODAY.com RSS feeds The Nation's Homepage Copyright 2008 USA TODAY, a division of Gannett Co. Inc.