Former Founding Partner of Ft. Lauderdale Law Firm Sentenced in MBC Investment Fraud Scheme

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, announce that defendant Michael J. McNerney, a founding partner of the Ft. Lauderdale law firm formerly known as Brinkley, McNerney, Morgan, Solomon & Tatum, LLP, was sentenced earlier today by U.S. District Judge Adalberto Jordan to 60 months in prison, to be followed by three years of supervised release, for his role in a scheme to defraud investors in the Mutual Benefits Corporation (“MBC”). McNerney also was ordered to pay restitution of $826 million jointly and severally with other defendants who have been convicted in relation to the MBC fraud.

For almost ten years, from about October 1994 through May 2004, McNerney was the lead outside lawyer for MBC, and participated in a scheme through which MBC sold investment interests in viatical and life settlement insurance policies to the general public, raising more than $1.25 billion from approximately 30,000 investors worldwide. A viatical settlement is a transaction in which a terminally ill person sells the death benefit of his or her life insurance policy to a third party in return for a lump-sum cash payment, which is a discounted percentage of the policy’s face value. A life settlement is similar to a viatical settlement, except the seller is not terminally ill, but is a senior citizen. In the sale of viatical or life settlements, an investor would realize a profit if, when the insured dies and the policy matures, the policy benefit is more than the price paid for policy. Any profit realized would be decreased by additional out-of-pocket costs, such as premium payments.

McNerney, as outside counsel for MBC, made and caused others to make, knowingly misleading representations concerning such matters as the management of MBC and its related entities and the sufficiency of the funds set aside to make premium payments on the investors’ policies. For example, among the misrepresentations made to investors, MBC’s sales agents falsely promised a “fixed return” on investments and falsely represented that MBC had a strong track record of accurately predicting life expectancies. In addition, McNerney and his conspirators concealed from investors and regulators the fact that Joel Steinger, a convicted felon, was the key decision maker at MBC. Through these and other misrepresentations, MBC engaged in an unsustainable scheme, that eventually collapsed.

Mr. Ferrer commended the investigative efforts of the FBI and the Southeast Regional Office of the Securities and Exchange Commission, which previously brought a civil action against MBC and its principals. The matter is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.