Executives in 'Death-Benefits' Company Indicted for Securities Fraud

Jan 11

Howard Glenn Judah Jr. and Gregory F. Jablonski, executives for a Houston-based company that was shut down in 2009 based upon an investigation by the Texas State Securities Board, have been indicted by a Harris County grand jury.

Judah, the CEO of National Life Settlements LLC of Houston, and Jablonski, a principal in the company, were indicted Jan. 6 on charges of securities fraud and the sale of unregistered securities, Texas Securities Commissioner Denise Voigt Crawford announced today. Both men face up to 99 years in state prison. Bail is set at $1 million for each.

The pair sold $30 million in unregistered investments that were purportedly tied to payouts from life insurance policies. Judah, of Houston, is a three-time convicted felon with a long history of investment fraud. Jablonski, of Castle Rock, Colo., was a principal of an Internet networking company that filed for bankruptcy protection in 2007. The indictments stem from an undercover investigation by the State Securities Board into NLS' claims, advertised on websites, that it was selling a safe, secure investment that would pay investors a steady return of 10% a year.

The company purported to sell promissory notes backed by the death benefits from interests in life insurance policies it acquired. A so-called life-settlement contract is the sale of an insurance policy to a third party in exchange for a one-time cash payment. The purchaser then continues to pay the premiums and becomes the beneficiary of the policy. The company solicited money from retired state employees and retired public educators; millions of dollars were rolled out of retirement plans and into NLS investments, according to court documents in the State Securities Board's civil lawsuit against NLS. NLS sold unregistered investments through insurance agents.

In December 2009, investors received $19.8 million, or 69%, of their money back as a result of the State Securities Board lawsuit and the work of a court-appointed receiver, Houston lawyer Janet Mortenson. Evidence in the civil case showed that NLS paid more than $4 million to insurance agents, many of whom were not licensed as securities dealers.

The receiver testified that NLS operated as a Ponzi scheme, paying new investors with money from earlier ones. In the criminal case, the indictments allege that Judah failed to tell investors of his criminal convictions and lied extensively in marketing NLS investments. According to the indictment, Judah and Jablonski failed to acquire the life insurance policies needed to pay investors. The pair allegedly also falsely told investors that NLS was "one of the largest providers of life settlements in the nation;"that NLS "had received billions of dollars from the Federal Reserve;"and that investors' money was spent on personal expenses, including the purchase of houses and automobiles.