Insurance Agent Is Accused of Running Complex Life Insurance Sales Scheme
A Sacramento insurance agent has been charged with orchestrating an elaborate insurance scam by selling about $11 million in life insurance policies to clients whom he instructed to hide the fact that they had serious illnesses, federal authorities announced Thursday.
Insurance agent Lonnie L. Harwell, 59, was charged with mail fraud and aiding and abetting. His wife and seven clients were charged as accomplices, according to a statement released by U.S. Atty. Paul L. Seave.
The charges are the first filed in connection with an ongoing investigation by the U.S. attorney’s office, FBI, California Department of Insurance and the Sacramento County district attorney’s office.
The purpose of the joint investigation is to crack down on a type of insurance fraud known as “clean sheeting,” a scam in which seriously ill people obtain life insurance policies by hiding their life-threatening illnesses. The fraud most often involves insurance policies worth less than $150,000, because those policies do not usually require medical examinations or blood tests.
According to state and federal authorities, Harwell and his associates recruited patients with life-threatening illnesses and had them purchase multiple life insurance policies from several insurance firms--and told them to withhold their serious medical conditions from the applications. Those who agreed to take part were offered $1,000.
Harwell then sold the insurance policies to investors, who thought they were helping terminally ill individuals collect much-needed funds while they were still alive, according to the statement from the U.S. attorney’s office. In return, the investors would collect the face values of the insurance policies when the original purchasers died.
Harwell’s wife, Penni Alexander, 56, was charged with helping conceal the illegal scheme. The two had been doing business as Penni Alexander & Associates and Omega Capital Group Inc.
Charges also were filed against seven of Harwell’s clients: James Edward Rust, 37, of Laguna Niguel; Clifford Dean Robinson, 44, of Laguna Beach; Michael Richard Mullins, 47, of San Diego; Thomas Robert Linder, 50, of San Diego; Thomas Willard Quinn, 48, of San Diego; Timothy Marshall Rhodes, 38, of Dumfries, Va.; and Shari Ann Schreiber, 42, of Taunton, Mass.
The investigation is continuing, authorities said.
