Published: November 07, 2013 11:30 PM
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By Katie Mulvaney
Katie Mulvaney Providence Journal
Published: November 07 2013 11:30
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Joseph A. Caramadre
PROVIDENCE — A federal magistrate judge is recommending that Cranston estate planner Joseph A. Caramadre be on the hook for $46 million in losses associated with an investment scheme targeting terminally ill people.
A total of $33 million of those losses occurred after his former employee Raymour Radhakrishnan joined Caramadre’s Estate Planning Resources firm in 2007, according to findings by U.S. Magistrate Judge Patricia A. Sullivan. That means Radhakrishnan could be responsible for that sum.
Sullivan’s recommendations will now go to U.S. District Judge William E. Smith for consideration before Caramadre’s and Radhakrishnan’s sentencing on Dec. 16. Both men could be held liable for the full amount, or Smith could apportion losses based on culpability, the findings state.
Once philanthropist and political donor Caramadre and Radhakrishnan pleaded guilty to fraud and conspiracy in November 2012 days into what was expected to be a four-month trial.
Federal prosecutors cast Caramadre as the mastermind of an investment strategy in which he and Radhakrishnan stole identities by misleading terminally ill people, their families and their caregivers. They purchased variable annuities and death-put bonds by surreptitiously including dying people with no relation to the actual investor as the “measuring life” in the investment. Caramadre’s clients then profited when the people died.
Witnesses testified that they received $2,000 or more from Caramadre and Radhakrishnan that they thought to be a philanthropic donation or gift.
Sullivan’s recommendations followed a three-day evidentiary hearing to determine what losses insurance companies and bond insurers incurred as a result of the scheme. As part of the proceedings, prosecutors submitted a list of investors to the court that included Terry McAuliffe, now governor of Virginia, and former state Supreme Court Justice Robert G. Flanders’ previous law firm.
McAuliffe described himself as a “passive investor” who did not know the specifics. Flanders asserted there was nothing inappropriate about the investments, that he was fully aware of the investment vehicle he was using toward the firm’s retirement fund. The insurance companies marketed those investments for elderly people without asking participants’ medical history, allowing investors to take advantage of the money-back guarantee, he said. The terminally-ill participants also knew, he said.
According to Sullivan’s findings, the men deceived the companies by indicating the account owners were friends or relatives of the terminally ill, by opening accounts with small deposits to avoid scrutiny, by delaying death claims, and by purchasing investments in Radhakrishnan’s name using Caramadre’s money.
Sullivan lamented that the terminally-ill victims and their families would not be compensated.
“In what may seem like a cruel irony, the government is unable to seek restitution on their behalf because restitution awards are limited to ‘direct’ losses and cannot include ‘consequential’ damages,” Sullivan wrote. The court, she said, cannot order restitution for compensatory damages such as mental or emotional distress.
Caramadre and Radhakrishnan had argued that restitution should be limited to losses associated with the 23 investments that were subject to their guilty pleas. Those losses — about $5 million — were far short of federal prosecutors’ claims.
Sullivan concluded that the plea agreement “crisply states that it names only ‘some of the terminally-ill people whose identity information was used by the defendants’ and that the terminally-ill people whose identities were used without their knowledge ‘include, but are not limited to’ the people named in the plea agreement.” Thus, the plea deal does not limit the losses to only accounts associated with people named in the agreement.
Sullivan rejected Caramadre’s and Radhakrishnan’s arguments that the insurance companies would have suffered losses regardless due to the stock market collapse.
“This argument ignores the evidence that an essential element of Caramadre’s scheme was to choose risky investments,” Sullivan wrote. “It also ignores pervasive evidence that, but for the scheme, these annuity investments would not have been made, including evidence of the cover-up so that insurance companies would not discover the real nature of the annuity investments as well as the evidence that insurance companies that became suspicious tried to block the conspirators from making new investments
A total of $33 million of those losses occurred after his former employee Raymour Radhakrishnan joined Caramadre’s Estate Planning Resources firm in 2007, according to findings by U.S. Magistrate Judge Patricia A. Sullivan. That means Radhakrishnan could be responsible for that sum.
Sullivan’s recommendations will now go to U.S. District Judge William E. Smith for consideration before Caramadre’s and Radhakrishnan’s sentencing on Dec. 16. Both men could be held liable for the full amount, or Smith could apportion losses based on culpability, the findings state.
Once philanthropist and political donor Caramadre and Radhakrishnan pleaded guilty to fraud and conspiracy in November 2012 days into what was expected to be a four-month trial.
Federal prosecutors cast Caramadre as the mastermind of an investment strategy in which he and Radhakrishnan stole identities by misleading terminally ill people, their families and their caregivers. They purchased variable annuities and death-put bonds by surreptitiously including dying people with no relation to the actual investor as the “measuring life” in the investment. Caramadre’s clients then profited when the people died.
Witnesses testified that they received $2,000 or more from Caramadre and Radhakrishnan that they thought to be a philanthropic donation or gift.
Sullivan’s recommendations followed a three-day evidentiary hearing to determine what losses insurance companies and bond insurers incurred as a result of the scheme. As part of the proceedings, prosecutors submitted a list of investors to the court that included Terry McAuliffe, now governor of Virginia, and former state Supreme Court Justice Robert G. Flanders’ previous law firm.
McAuliffe described himself as a “passive investor” who did not know the specifics. Flanders asserted there was nothing inappropriate about the investments, that he was fully aware of the investment vehicle he was using toward the firm’s retirement fund. The insurance companies marketed those investments for elderly people without asking participants’ medical history, allowing investors to take advantage of the money-back guarantee, he said. The terminally-ill participants also knew, he said.
According to Sullivan’s findings, the men deceived the companies by indicating the account owners were friends or relatives of the terminally ill, by opening accounts with small deposits to avoid scrutiny, by delaying death claims, and by purchasing investments in Radhakrishnan’s name using Caramadre’s money.
Sullivan lamented that the terminally-ill victims and their families would not be compensated.
“In what may seem like a cruel irony, the government is unable to seek restitution on their behalf because restitution awards are limited to ‘direct’ losses and cannot include ‘consequential’ damages,” Sullivan wrote. The court, she said, cannot order restitution for compensatory damages such as mental or emotional distress.
Caramadre and Radhakrishnan had argued that restitution should be limited to losses associated with the 23 investments that were subject to their guilty pleas. Those losses — about $5 million — were far short of federal prosecutors’ claims.
Sullivan concluded that the plea agreement “crisply states that it names only ‘some of the terminally-ill people whose identity information was used by the defendants’ and that the terminally-ill people whose identities were used without their knowledge ‘include, but are not limited to’ the people named in the plea agreement.” Thus, the plea deal does not limit the losses to only accounts associated with people named in the agreement.
Sullivan rejected Caramadre’s and Radhakrishnan’s arguments that the insurance companies would have suffered losses regardless due to the stock market collapse.
“This argument ignores the evidence that an essential element of Caramadre’s scheme was to choose risky investments,” Sullivan wrote. “It also ignores pervasive evidence that, but for the scheme, these annuity investments would not have been made, including evidence of the cover-up so that insurance companies would not discover the real nature of the annuity investments as well as the evidence that insurance companies that became suspicious tried to block the conspirators from making new investments
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