RICHMOND, Va. (AP) -- A federal jury began deliberations in a former Costa Rican insurance executive's $670 million insurance fraud case Monday after hearing contrasting opinions about the strength of the government's evidence.
U.S. Justice Department lawyer Albert Stieglitz Jr. said witness testimony and a mountain of emails and other documents proved that Minor Vargas Calvo deliberately and repeatedly lied to clients and investors about his company's financial stability and credit rating.
Defense attorney Jeffrey Everhart acknowledged that Vargas made mistakes but argued that prosecutors failed to prove their case beyond a reasonable doubt.
Vargas, who has a doctorate in economics and owned a professional soccer team in Costa Rica, is charged with one count of conspiracy and three counts each of mail fraud, wire fraud and money laundering. His company, Provident Capital Indemnity Ltd., sold bonds guaranteeing funding for life settlement companies, which buy life insurance policies from insured people at less than face value and collect the benefits when those people die.
The government claims Provident sold $670 million in bonds based on fraudulent financial statements. According to prosecutors, Vargas not only misrepresented the company's assets but also lied when he told clients, investors and regulators that Provident was protected by reinsurance agreements with major companies.
"The bottom line is you can't lie to get people's money," Stieglitz said. "That's what Dr. Vargas did over and over and over again."
Everhart said an accountant first falsified the financial statements before Vargas took over the company.
"Mr. Vargas inherited a mess and did the best he could to try to make it right," Everhart said.
The accountant, Jorge Luis Castillo of Hackettstown, N.J., testified last week against Vargas. Castillo, who testified that the Provident financial statements were fabricated, pleaded guilty last year to conspiring to commit mail and wire fraud and faces up to 20 years in prison at his sentencing, set for Sept. 5.
The government's evidence against Vargas includes several email exchanges between Castillo and Vargas. In one such exchange, Castillo asks whether Provident has any real numbers he can use in the financial statements and Vargas replies, "We do not have any accounting."
Everhart conceded that some of the emails make Vargas look bad, but he added: "I suggest there are times Mr. Castillo is being a little more incriminating than the responses from Mr. Vargas would indicate."
Vargas testified last week that he did not deal with the financial statements in detail and only used them as "a marketing tool."
Stieglitz said it defies logic that a highly educated company president would simply be in the dark about his firm's finances.
"This is not a man trying to run a legitimate business," he said. "This is a man running a scam."
The government also filed charges against Provident, which has agreed to plead guilty to a single count of mail and wire fraud conspiracy. The company faces a fine of $500,000 or double the amount it collected from any victim of the offense, plus full restitution. Sentencing is set for Sept. 5.
The Securities and Exchange Commission also filed a civil complaint against Provident last year, and a judge froze the company's assets and enjoined it from doing business.
One of Provident's major customers was Houston-based life settlement company A&O. Seven people affiliated with A&O, including its three principals, have been convicted in jury trials or pleaded guilty to a $100 million fraud that claimed 800 victims in three dozen states and Canada.
The charges were filed in Virginia because that's where some of the victims and transactions were located.
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