orlandosentinel.com
Asset firm cleared in insurance scheme
The Associated Press
December 25, 2002
ATLANTA -- An asset management firm did nothing illegal in its dealings with Orlando-based National Heritage Life Insurance Co., which became the largest failure by criminal activity in the insurance industry's history, an appellate court has ruled.
The federal district court in Orlando was correct to dismiss a civil lawsuit brought by Delaware's insurance commissioner that accused New York-based Global Equities & Realty Inc. of participating in a scheme to loot National Heritage of tens of millions of dollars, a three-judge panel for the 11th U.S. Circuit Court of Appeals in Atlanta ruled Friday.
At the time the lawsuit was filed in 1997, Delaware's insurance commissioner was the receiver for National Heritage, which was being liquidated.
The commissioner's office accused Global of working with Sholam Weiss to purchase mortgages in default with money from National Heritage. The plan was for Global to help convert the mortgages into profitable investments, and Weiss would sell the mortgages to National Heritage at a profit.
But because Global failed to turn the mortgages around, National Heritage would have suffered a substantial loss had the deal gone through. So Weiss sold the mortgages to a shell corporation he controlled, pooled the mortgages into bonds and tried to sell the bonds back to National Heritage, according to the insurance commissioner's office.
National Heritage purchased the bonds for $118 million, a move that eventually led to the company becoming insolvent.
Earlier this year, Weiss was extradited from Austria to Florida to face an 845-year prison sentence for his role in National Heritage's downfall after having eluded international authorities for a year.
Six others were convicted or pleaded guilty for the complicated plot to skim $450 million from National Heritage. The scheme caused the Orlando company to collapse in 1994, and many of its 25,000 investment customers lost their life savings.
The appellate court agreed with the lower court ruling that Global didn't conspire to defraud or know that others were defrauding National Heritage.
The appellate panel also dismissed the insurance commissioner's allegations that Global was willfully blind to what was going on. The panel ruled that Weiss kept Global officials in the dark.
Copyright 2002 Associated Press
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