U.S. Securities and Exchange Commission
Litigation Release No. 18346 / September 11, 2003
Securities and Exchange Commission v. Viatical Capital, Inc., d/b/a Life Settlement Network, Life Investment Funding Enterprises, Inc., Charles Douglas York, and Robert Kingston Coyne, Case No. 8:03-CV-1895-T-23TGW (M.D. Fla., filed September 8, 2003)
The Securities and Exchange Commission Obtains Emergency Orders Against Viatical Capital, Inc., Charles Douglas York, Robert Kingston Coyne and, Life Investment Funding Enterprises, Inc. In Connection With $61 Million Securities Scam That Targeted At Least 1,900 Elderly And Unsophisticated Investors Nationwide
The Securities and Exchange Commission (SEC) announced that on September 8, 2003, a federal judge in the Middle District of Florida entered a temporary restraining order, asset freeze and other relief against a Florida corporation Viatical Capital Inc. (VCI), a Nevada corporation Life Investment Funding Enterprises, Inc. (Life Investment), Charles Douglas York, and Robert Kingston Coyne, enjoining them from violating the antifraud provisions and (as against VCI, York and Coyne) the securities registration provisions of the federal securities laws. The SEC's complaint against VCI, Life Investment, York and Coyne, alleges that they have engaged in a systematic fraud in connection with a scheme to solicit investment in various limited liability companies (LLCs) that invested in viatical settlements (i.e., a life insurance policy of a terminally ill person that is sold at a price less than the face value of the policy).
According to the SEC's complaint, VCI prepared and disseminated quarterly statements to investors representing that certain LLCs owned viaticated insurance policies even though those policies had been rescinded, terminated or cancelled. The complaint also alleges that many of the viatical settlements in VCI's portfolio were fraudulently obtained, making the policies subject to cancellation, and that they were acquired from an unlicensed viatical settlement provider. In addition, the Complaint alleges that VCI, York and Coyne misrepresented and omitted to disclose material facts concerning the investment, including risk factors, rates of return, planned public offerings, and the checkered disciplinary histories of VCI, its related entities, and York and Coyne. The Complaint also alleges that VCI, York and Coyne misused investor proceeds by, among other things, using a quarter million dollars of investor funds to fund York and Coyne's own boat-leasing venture. Finally, the Complaint alleges that Life Investment recently filed with the SEC materially false and misleading registration statements in its attempt to become a public company (According to offering materials provided to investors, Life Investment would acquire the assets of each LLC, and conduct an initial public offering).
As a result, the SEC alleges that VCI, York and Coyne violated Sections 5(a) and 5(c), and of the Securities Act of 1933 ("Securities Act"); and that all defendants violated Sections 17(a)(1), (2) and (3) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, thereunder. In addition, the Complaint alleges that York and Coyne acted as "control persons" for VCI under section 20(a) of the Exchange Act for its violations of Section 10(b) of the Exchange Act and Rule 10b-5, thereunder. The SEC is also seeking in its lawsuit, among other things, preliminary and permanent injunctions, disgorgement and civil penalties.
The SEC would like to extend its thanks to the Florida Department of Financial Services, the Tampa office of the Florida Office of Financial Regulation, and the Enforcement Division of the Texas State Securities Board for their assistance in this matter.