U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23399 / November 3, 2015
Securities and Exchange Commission v. Provident Capital Indemnity, et al., Civil Action No. Civil Action No. 3:11-cv-0045 (E.D. Va.)
Provident Capital Indemnity Receiver Finalizes Distribution to Investors
On September 30, 2015, the Court approved final distributions concluding the receivership in the Commission's litigation against the purported international insurance company, Provident Capital Indemnity, Ltd. (PCI). The Court's Order effectively ends the SEC's litigation, which was settled with the last remaining defendant, PCI's former president, Minor Vargas Calvo (Vargas), following his conviction in a parallel criminal case filed by the United States Attorney for the Eastern District of Virginia. To date, the Court-appointed Receiver has distributed approximately $2.3 million to approximately 2,000 victims of life settlement offerings purportedly bonded by PCI. After payment of fees and expenses, any remainder will be paid over to the United States Marshall for payment towards PCI's asset forfeiture obligation in the parallel criminal case.
The SEC's case was initiated on January 19, 2011, when the SEC charged PCI, Vargas, and PCI's purported outside auditor Jorge L. Castillo (Castillo) with conducting a massive life settlement bonding fraud. According to the complaint, PCI provided financial guarantee bonds on life insurance policies, which intermediaries then packaged and sold as bonded life settlement investments across the U.S. and abroad. From at least 2004 through March 2010, PCI issued approximately 197 bonds with a face value of more than $670 million. The SEC alleged that PCI, Vargas, and Castillo misrepresented PCI's ability to satisfy its obligations under its bonds. They made material misrepresentations about the assets that backed PCI's bonds, PCI's credit rating, the availability of reinsurance to cover claims on PCI's bonds, and whether PCI's financial statements had been audited. The SEC's civil injunctive action coincided with Vargas's and Castillo's arrests in the parallel criminal case. The SEC also named Desarrollos Comerciales Ronim, S.A. ("Desarrollos"), PCI's managing agent, as a relief defendant. For more information about the SEC's action, please see Litigation Release No. 21818 (Jan. 19, 2011).
On January 21, 2011, the SEC obtained a temporary restraining order and the Court appointed Richard B. Roper, of the law firm Thompson & Knight, Receiver for PCI. On February 11, 2011, the Court entered a Preliminary Injunction. For more information, please see the claim: Provident Capital Indemnity, Ltd., Minor Vargas Calvo, Jorge L. Castillo and Desarrollos Comerciales Ronim, S.A.
The SEC's case was resolved by a series of consent judgments entered by the Court on the following dates: Castillo (April 6, 2012); PCI (July 10, 2012); and Vargas (September 27, 2012). Each of the defendants was permanently enjoined from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. PCI, Vargas and Relief Defendant Desarrollos (July 10, 2012) were ordered to pay disgorgement of $43,582,699 jointly and severally, with the disgorgement amount subject to reductions based on amounts paid in the parallel criminal case. PCI was also ordered to pay prejudgment interest, and a civil penalty of $13,780,000. The PCI and Vargas settlements were among the earliest settlements obtained by the SEC with admissions. For the terms of Castillo's Final Judgment, please see Litigation Release No. 22332 (Apr. 26, 2012).
The SEC's investigation was conducted by Michael S. Fuchs and Mika M. Donlon, together with accountants Regina Barrett and Deborah Russell, under the supervision of C. Joshua Felker. The SEC's litigation was led by Suzanne J. Romajas.
For further information about the parallel criminal case, please see: President of Costa Rican Company Sentenced to 60 Years in Prison for Half-Billion-Dollar Fraud Scheme with Thousands of Victims Worldwide.