(Orange, Texas)

December 7, 2012

Court in Va. hears Texas man's fraud appeal

Associated Press

RICHMOND, Va. — A lawyer for a former Texas businessman convicted in a $100 million life insurance fraud scheme urged a federal appeals court to reverse the conviction, or at least toss out a 45-year prison sentence that he contends is excessive.

Attorney Barry J. Pollack told a three-judge panel of the 4th U.S. Circuit Court of Appeals on Friday that a judge improperly allowed the government to substantially alter the indictment against Christian Allmendinger without re-presenting it to a grand jury. He also argued that $67 million of the loss that was used to calculate Allmendinger's sentence should be attributed solely to a company that was charged in a related case.

Assistant U.S. Attorney Michael Dry disputed both claims. He said changing a few details in the indictment, including the number of victims directly linked to Allmendinger, did not affect the charges. Dry also said the trial judge properly concluded that Allmendinger's lies to investors at the outset of the scheme led to the later losses.

"He didn't care one iota about the investors," Dry said.

Allmendinger was one of the principals of a group of Houston-based companies known as A&O, which used investors' money to buy life insurance policies at less than face value and then collected benefits when the insured people died. Prosecutors said Allmendinger and co-conspirators lied about the company's size, its track record and the safety of its "life settlement" contracts to lure investors and then failed to safeguard their money.

"They used the investor money as their personal piggybank," Dry told the appeals court.

A&O purchased bonds purportedly backing the investments from Costa Rica-based Provident Capital Indemnity Ltd., the second company implicated in the scheme, but many of those bonds proved to be worthless after the firm's president spent the money on personal expenses. Minor Vargas Calvo also was convicted and was sentenced to 60 years in prison.

The related scams claimed hundreds of victims, including many who said in letters or court testimony that they lost their life savings.

Pollack argued that Allmendinger, who sold his stake in A&O before the charges were filed, had no way of knowing that PCI would fail to meet its obligations.

"So there is no honor among thieves or between thieves," Judge Andre Davis said. "Didn't he lie to PCI to get the bonds? The whole thing was a lie."

Pollack said the jury clearly found that Allmendinger lied to obtain investors, but he said his client was not responsible for the losses caused by PCI.

Dry argued that Allmendinger "tried to wash his hands and run away so he would not be on the hook for the inevitable investor losses." He said it was "reasonably foreseeable" to Allmendinger that the scheme would continue.

Pollack also claimed that Allmendinger's sentence is disproportionately harsh because Brent Oncale, the other A&O founder, only got 10 years. Dry countered that while Allmendinger went to trial and accepted no responsibility for his actions, Oncale pleaded guilty and cooperated in the prosecution of his co-conspirators.

Allmendinger was convicted of mail fraud, money laundering and securities fraud. In all, nine people associated with the two companies were convicted. Three went to trial, and the others pleaded guilty.

A decision on Allmendinger's appeal is expected in a few weeks.