Life insurance in reverse

Prison time for San Diegan who bilked $5.2 million from investors

Last Friday (June 5) in Santa Ana federal court, San Diegan Daniel Christian Stanley Powell was sentenced to more than ten years (121 months) in prison for running what he called a "reverse life insurance" scam.

He told victims that he would use their money to purchase life-insurance policies from insured people. The company would pay the monthly premiums and be the ultimate beneficiaries of the policies, he claimed. Powell trademarked the name "reverse life insurance" and claimed he would take the company public.

Powell told investors he had $1.9 billion in reverse life-insurance policies. But he did not own any, said the U.S. Attorney's office in Santa Ana. Powell also said the money he received would be invested in gold mines. Again, he had no money invested in gold mines.

He stung 60 investors for $5.2 million, and has been ordered by the judge to pay most of it back.

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Scammers like this one seldom have any of the stolen funds left, and hence cannot pay much or any of it back. How would he arrange to make restitution from a prison cell, anyway? I think his victims will wait a very long time to be paid back. Just how old is he?

Visduh: Usually I don't even reference a judge's order to repay scam victims. The money is seldom paid back, partly because the take may be in offshore banks, but largely because it has been spent. I thought I would throw it in this time for no particular reason. Best, Don Bauder

Where do these cons find these "victims?" And with vast amounts of money.

Don, I have been following your stories before the J. David scam. Then there was the recent Bernie Madoff implosion. There are scams going on everywhere and there seem to be plenty of people falling for them and losing their money.

Take this story. Don't people ask to see books, contact references, search the internet, or any other due diligence? With numbers like $1 billion in policies, he should have had some pretty impressive offices and staff. "Going public?" Where are the seed investors, venture funds, bankers and lawyers to put the deal together. "Gold mines" Good grief, most investors know gold mines don't make much money, and like oil and gas exploration, many mines are very risky and fail.

If I had someone tell me a story like that I would ask him if he was off his meds and then contact the local authorities.

Ponzi: Yours are wise words. I have followed scamsters like this for more than 50 years, and have some observations.

  1. Many con artists con themselves. On one level, they may actually believe that their scam will pay off. That's why they are so convincing to those that get skinned. 2. Some con artists are simply sociopaths -- devoid of a conscience and scruples. They know their game is a complete scam so they have usually set up escape routes, often through offshore banks.

Both these kinds of con artists prey on the naive. The cons can sense that the mark is too naive to do any homework, such as you suggest.

You ask where the cons find the marks. One place is church. A person who accepts all the tenets of a religion -- whatever religion -- can accept the promises of a con man without checking. They take the con on faith, just as they take the religion on faith.

Some people can be hypnotized easily and others cannot. Some can never be hypnotized. The con artist will sense that a potential mark is the kind that can be hypnotized.

Also, many of the victims are incredibly greedy themselves. The con promises 50% a month return, and the mark gets stars in his/her eyes. W.C. Fields used to say, "You can't cheat an honest man."

Back in the late 1980s, I pondered doing a book on con artists and their victims. I found there was very little literature on the topic. At that time, few psychologists and psychiatrists had devoted their studies to con artists or the suckers who fall for them. I don't know if there is still a paucity of academic studies. Best, Don Bauder

NOTE; THIS SCAM HAS BEEN AROUND A LONG TIME. I should mention that this scam of buying life insurance policies and attempting to cash in on them -- and telling investors it is a sure thing -- has been around for many years. I remember doing columns on this for the U-T in the 1990s. Best, Don Bauder

"You ask where the cons find the marks. One place is church. A person who accepts all the tenets of a religion -- whatever religion -- can accept the promises of a con man without checking. They take the con on faith, just as they take the religion on faith."

Local politicians are very well acquainted with this fact, and count on some of them to provide dedicated voters who ask no questions.

Wabbitsd: Amen. As I recall, Abraham Lincoln did not belong to a church. Can you imagine such a politician getting elected in these days? Best, Don Bauder

The elderly are also frequently victims of these kinds of scams. My great uncle, in his 90s, fell victim to a very similar scam. Lost pretty much all his life savings. The con artist was caught and jailed, but all the money was gone.

In his prime, my great uncle would never have fallen for a scam like that. But as we age, the ability to assess trustworthiness is sadly one of the things that goes. The people that take advantage of the elderly are the scum of the earth.

AlexB: Yes, feeble-minded elderly are particularly vulnerable. That's why laws are supposed to stop elder abuse. Telemarketing cons sell sucker lists made up of demented elderly, along with younger people who have no sales resistance. Such lists are the most expensive for the crooks to purchase. Best, Don Bauder

I've long wondered just how so many people with so much money could be conned out of it. The Dominelli saga was a real case-in-point, when some of the "smartest" money and "smartest" people in La Jolla fell for that guy, and believed everything he was telling them. I still don't understand how folks who were so smart and amassed such wealth could be so fooled. In the J David case, all the signs of fraud were there. He was sponsoring all sorts of charitable and other worthy organizations in town, and his GF, Nancy Hoover, was doing more. Was his operation that profitable? Obviously not; the money was the investors money and was going through his operation "like shit through a goose." But there have been, in the past three decades, hundreds more like him, many of which made him look like a piker. Madoff was the champion scamster.

Visduh: Good point. The con artist very often gains respectability in the community by giving to local nonprofit organizations, with maximum visibility. Nancy Hoover (who no longer has that name) served that purpose for Dominelli, along with George Mitrovich.

This lavish giving of money (which actually did not belong to Dominelli, but belonged to his investors)) should have been a tipoff. In fact, it was. Fred Muir of the San Diego Union staff went there two years before the story broke, smelling a rat, but couldn't crack the story. Best, Don Bauder

It always amazes me too, how naïve and gullible humans can be. As a general contractor you can't even imagine how many crazy stories I've heard about people who've handed over many thousands of dollars to a "handyman" they met one time in a Home Depot parking lot, never to be seen again.

bkkbob: That seems to be a variation on the pigeon drop. Yes, the combination of the con's greed and the victim's gullibility is deadly. Best, Don Bauder

You know, my grandaddy had a simple saying. If something sounds too good to be true, turn around and walk the other way. If the idea was that good, someone else would have already done it.

danfogel: Maybe your grandfather was first to come up with the classic warning: "If it sounds too good to be true, it probably is." Best, Don Bauder

Actually, I don't think he ever said that.

danfogel: Then whoever said it first was very wise. Best, Don Bauder

don bauder Perhaps. But personally, I think it's more likely a comment that was made in hindsight by someone who had been taken to the cleaners with nary a clue that it was happening.

danfogel: Unfortunately, it is the kind of statement that many people may claim that they made it first. Best, Don Bauder

RESEARCH: It's not easy, even in the internet age, to do this kind of research. I've been looking at non-profits lately, to which I might contribute money or time. I'm amazed at some major organizations that do not offer a financial statement to their donors. Some have pretty 'statements' that are a sales pitch with little financial information. All non-profits have to report to the feds with a form 990, but for some reason the feds have chosen to keep that information from the public. You can buy that information from private companies.

Of course financial info of private companies can also be difficult to find. Even public companies can fool you: An hour ago I was reading that Hewlett-Packard is involved in lawsuits because it invested billions in a company that 'cooked the books' and was not worth what it seemed.

So true. And with the internet a savvy con artist can actually create a lot of false information by setting up multiple bogus websites and online reviews. The internet has enabled obscuring the facts too.

Ponzi: Good point. I see scams all the time on the internet. I also receive them by email. Best, Don Bauder

swell: You should be able to get 990s of an organization. But 990s don't contain all the information needed. Scams by so-called charities are some of the most cruel around. Best, Don Bauder

I have a long been fascinated by stories of scams. You’re spot-on that the victims are sucked into these schemes because of their own unbridled greed. If anyone has any experience with saving and investing money, they should be suspicious of any claims of uncharacteristically high returns. “Risk & Return” If someone says they can (and are doing for multiple other clients) a ROI of more than 15% a year, watch out. If they have a solid business plan that is actually has that kind of “margin” to share with investors, then why don’t they go to a lender and get the money instead? Greedy people want to believe.

When I was a teenager, I worked for a con. I didn’t know it until the FBI raided the offices. But I recall the story he told the investors and it was believable. It was Karl Brownstein of Electronics Emporium in Kearny Mesa. He even had the cops coming around giving them free food and CB radios. So with so many law enforcement types hanging around, it just seemed legit. But later it was found to be a Ponzi scheme. He used the affinity connections, swindling dozens of people who were deaf and members of a support group. I could write a book about that, because it was crazy with Mafia characters, trips with briefcases of cash to Las Vegas … and more. In Brownstein’s case, I think he started off with good intentions, but got drunk on the investor money that was coming in. Like you said, he believed his own story and thought he could dig his way out of it. BTW, he was offering a 45% annual return and a 10% finders fee to bring in new, ahem, investors.

It’s so true that people still go into these deals on a hunch, or faith. I would wager the same people who believe in conspiracy theories, the supernatural, and the paranormal would be perfect candidates to con. The cons also rely on birddogs, paying them a “finder fee” to bring them more investors. That is how Madoff collected so many victims over the years.

I (still) have your book, Captain Money and the Golden Girl. As far as writing another, I wonder if it might be misused as a “guide” for the next generation of scammers. But it would be interesting to know the back story on how the various scams defy scrutiny.

Ponzi: Scams may differ in the details, but they have similar structures. Yes, those who believe in the supernatural, paranormal, etc. are really vulnerable to scams.

If anybody promises you a 45% annual return, run away. But too many drool and jump aboard. Best, Don Bauder

how long before reverse mortgages are in the news under similar conditions?

can't be too far off for people to realize its a prime way to rip off people

Murphyjunk: Reverse mortgages are said to have been cleaned up. I wrote about them many years ago, but haven't recently. I question that they have been cleaned up, but I may be wrong. Best, Don Bauder

seems to me too many questionable companies offering them lately.

Murphyjunk: True. Too many are playing this game now. Best, Don Bauder

"Reverse Life Insurance" sounds like a gimmick name for Life Settlements.

Don, you make an interesting point about finding scam victims in the church. I would think that the appeal of an "investment" of this nature within religious settings would even be more sensational . . . and less susceptible to legit skepticism.

The preoccupation with death is a part of the framework of just about every religion. The ways to ostensibly overcome death often become the galvanizing principles/beliefs that differentiate one religion from another.

Thus, I would think that many (but not all) people in religious circles would be pretty susceptible to a pitch that centered on a way to turn death into a source of profit.

As a 15 year veteran of life insurance sales, I am convinced that people are ripe for exploitation when it comes to any product dealing with death, especially their own. People want to "check the box" of their anxiety . . . . and move on. It's not a pleasant subject. People would rather get screwed than continue the dialogue.

By the way, if you want to read up on one of Wall Street's much more polished version of this "Reverse Life Insurance" scam, google Life Partners Holding Company.

Bad shiz, man. Bad shiz.

KingDavid: As I said, this scam has been around at least for a couple of decades. I remember writing about it in the 1990s in my U-T column.

Church-goers who will take anything on faith are vulnerable to this scam, and to all others. When making decision on an investment, forget about "faith," or blind belief in the probity of the individual selling the scam.

Investments should be bought and sold with cold, hard analysis. Best, Don Bauder

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