Three Insurance Agents Sentenced in Manhattan Federal Court for Elaborate Multi-Million-Dollar Life Insurance Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL BINDAY, the president and owner of a Scarsdale-based insurance agency, JAMES KEVIN KERGIL, an insurance agent based in Peekskill, New York, and MARK RESNICK, an insurance agent based in Orlando, Florida, were sentenced today to prison terms of 12 years, nine years, and six years, respectively, for their involvement in a massive scheme to defraud life insurance companies in connection with the issuance of stranger-originated life insurance (“STOLI”) policies. BINDAY, KERGIL, and RESNICK were found guilty of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in October 2013, following a 12-day jury trial before U.S. District Judge Colleen McMahon, who also imposed today’s sentences. KERGIL and RESNICK were also found guilty of conspiring to obstruct justice.
Manhattan U.S. Attorney Preet Bharara said: “For several years, the defendants carried out an elaborate scheme to deceive life insurance providers and trick them into issuing policies for unintended beneficiaries. Based on the defendants’ web of lies, the insurance companies were misled to believe they were issuing policies for wealthy senior citizens when in reality, those seniors were straw applicants who had no ability to pay the premiums and had been recruited by the defendants who were seeking big commissions for themselves. The defendants now will have to forfeit the proceeds of their scheme and, more importantly, their liberty.”
According to the evidence at trial, documents filed in Manhattan federal court, and statements made at today’s sentencing and other court proceedings:
BINDAY ran a business in Scarsdale, New York called R. Binday Plans and Concepts, Ltd. (“R. Binday”). R. Binday purported to be a general agency that secured high face-value life insurance policies for wealthy “clients.” In truth, from 2006 through early 2009, BINDAY and his company were engaged almost exclusively in procuring STOLI policies—policies on the lives of seniors for the benefit of investors who were strangers to them—by means of false and fraudulent applications.
The various life insurance companies on whose behalf R. Binday claimed to act as agent (the “Insurers”) expressly prohibited their agents from soliciting and submitting STOLI business. In pricing and underwriting universal life insurance, the Insurers relied on the basic premise that the people applying for the policies—rather than professional investors—were the ones seeking and planning to pay for these high-face-value policies. These assumptions permitted the Insurers to offer lower prices than they could have without the assumptions. Accordingly, the Insurers asked questions on their universal life applications specifically designed to identify STOLI policies and to prevent such policies from being issued. The Insurers also required their agents to certify that all information in the life insurance applications—including the answers to these questions and the applicants’ financial information—was accurate.
BINDAY, with the help of R. Binday office workers and independent insurance agents, including KERGIL and RESNICK, prepared and submitted applications for life insurance that were riddled with lies to conceal from the Insurers that the applications were for STOLI policies and to trick the Insurers into issuing those policies. The insurance applications were designed to falsely make it appear to the Insurers that the senior citizens purportedly applying for life insurance were wealthy individuals who wanted insurance for their “estate planning” needs. In fact, unbeknownst to the Insurers, most of the seniors could not possibly afford these policies, and the financial information included in the applications was completely fabricated. In reality, the seniors were people of modest means who had been recruited by the defendants to serve as straw insureds so that investors could insure the seniors’ lives, pay the premiums until death, and then reap what BINDAY and his associates had projected would be massive profits—at the expense of the Insurers. Yet BINDAY, KERGIL, RESNICK, and others certified to the Insurers, over and over, that these were not applications for STOLI policies, and that the information on the applications was accurate to the best of their knowledge.
In addition to preparing and submitting blatantly false insurance applications, BINDAY, KERGIL, and RESNICK supported their fraud with bogus back-up documentation and supposedly “independent” verification papers, all predicated on false financial figures and other lies. And once a policy had been issued based on these falsehoods, the defendants arranged elaborate bank transactions to create the false impression that the seniors—rather than investors—were the ones paying the premiums on the policies. The defendants also instructed insureds to refuse to speak to Insurer representatives and, if conversation could not be avoided, to lie.
For every stealth STOLI policy issued, the Insurers paid out a substantial commission, usually in the six figures. The defendants split these commissions with the investors on whose behalf they were secretly operating, generally pocketing about half for themselves. Collectively, the defendants made millions in commissions over just a few years from their fraudulent STOLI applications.
To cover up and perpetuate their fraud, the defendants lied to governmental authorities and conspired to destroy evidence. First, in 2009, during sworn testimony before the New York State Insurance Department, BINDAY falsely claimed he was not involved in procuring STOLI policies and that he would never submit a life insurance application knowing it to be for a STOLI policy. Later, in 2010, after FBI agents approached RESNICK with questions about stealth STOLI policies he had submitted, all three defendants and another insurance agent conspired to destroy documents and electronic records related to their fraud.
In addition to their prison sentences, BINDAY, 50, of New York, New York, KERGIL, 59, of Peekskill, New York, and RESNICK, 58, of Orlando, Florida, were ordered to pay $39,308,305.63 in restitution, an amount for which they are jointly and severally liable. Additionally, BINDAY was ordered to forfeit $13,522,424.64; KERGIL was ordered to forfeit $15,623,737.64; and RESNICK was ordered to forfeit $14,315.868. Portions of the forfeiture judgments carry joint and several liability.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. McCallum and Eun Young Choi are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is handling the forfeiture aspects of the prosecution.