Two executives of a life settlement firm in Houston have been indicted by a grand jury in Harris County, Texas.
Howard Judah Jr., chief executive of National Life Settlements L.L.C., and Gregory Jablonski, a principal of that company, were each being held on $1 million bail in connection with charges of securities fraud and the sale of unregistered securities to retired state employees, teachers and other Texas investors.
John LaGrappe, a Houston attorney who is representing Judah and Jablonski, says both men are innocent.
Judah, 81 years old, has terminal cancer, LaGrappe says.
"I don't think these guys did any thing wrong," he says.
THE ALLEGATIONS
In February 2009, a state-appointed receiver seized the accounts of National Life Settlements after the Texas State Securities Board alleged that the company sold fraudulent life insurance settlement contracts.
A state district court judge appointed the receiver at the request of Texas Securities Commissioner Denise Voigt Crawford and Texas Attorney General Greg Abbott.
The indictment states that around 270 investors deposited about $20 million with National Life Settlements from 2006 through 2008 for the purchase of life settlements. About $2.7 million of the total came from the retirement accounts of former teachers and state employees, according to court papers.
National Life Settlements sold the investments in Houston, central Texas and other areas, promising proceeds of 8% to 10% each year for 5 years along with return of principal, according to the indictment.
The state receiver in 2009 seized about $19 million in bank accounts under the control of National Life Settlements and company officials, according to the Securities Board.
National Life Settlements returned only $3 million to investors over 2 years and paid about $3 million in commissions to unregistered securities salespeople, the indictment charges. National Life Settlements also paid about $900,000 to Howard Judah, including $230,000 in salary, while paying Jablonski and his company, JCJ and Associates, Castle Rock, Colo., about $650,000, officials allege.
The Securities Board alleges the company told investors it would buy life policies and use the profits from selling the policies to finance an investment trust that would pay guaranteed returns.
