(Updates with prosecutor’s comment in fourth paragraph.)
Sept. 28 (Bloomberg) -- Two executives of hedge fund A&O Resource Management Ltd. were sentenced to decades in prison for their roles in a $100 million life-settlement fraud scheme, federal prosecutors said.
Adley H. Abdulwahab, a part-owner of A&O, was sentenced today in federal court in Richmond, Virginia to 60 years in prison, while the firm’s co-founder Christian Allmendinger got a 45-year term yesterday, according to a statement from the U.S. Justice Department.
The men sold “bonded life settlements” guaranteeing returns of 10 percent to 20 percent, according to the indictment. They misrepresented their qualifications and past successes while spending investor money on personal expenses including multimillion-dollar homes, luxury cars and a 15-carat diamond ring, prosecutors said.
“The victims of A&O’s scam were looking for a conservative investment, and they were manipulated into believing A&O was a safe, secure, no-risk investment,” U.S. Attorney Neil MacBride in Alexandria, Virginia, said in the statement. “It was all a big, fat lie; A&O was a sham, a financial house of cards waiting to collapse.”
The two Houston men were charged last year in an 18-count indictment alleging conspiracy, mail fraud, securities fraud and money laundering in a scheme that victimized more than 800 investors in the U.S. and Canada.
Allmendinger, 40, was found guilty on seven counts in March. Abdulwahab, 36, was convicted of all 18 counts after a trial in June.
A&O used money from investors in 37 states to invest in life insurance policies, prosecutors said. The insured person gets cash, while the investor pays the premiums to maintain the policy and collects the death benefit when the insured dies.
A&O bought bonds that failed to deliver the promised returns, according to investigators. There weren’t enough bonds or underlying life insurance policies to pay off investors, investigators said.
The case is U.S. v. Allmendinger, 3:10-cr-00248, U.S. District Court, Eastern District of Virginia (Richmond).
--With assistance from Joel Rosenblatt in San Jose, California. Editors: Andrew Dunn, Mary Romano
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