Nine suspects were arrested on May 18 following a 15-month joint investigation code-named “Operation Cleansheet,” conducted by the CDI Bureau of Investigations and Fraud Division, the FBI, the U.S. Attorney’s Office and the Sacramento District Attorney’s Office.
The CDI received information alleging a nationwide scheme attempting to defraud investors and the insurance industry. Viatical settlement fraud, known as “cleansheeting” in the industry, occurs when material misrepresentations are made on an individual’s insurance application hiding the fact that the applicant was previously diagnosed with a terminal condition. The insured individuals then sell their policies to viatical companies. Viatical companies buy and sell life insurance policies, the policies are sold to investors who believe they are helping terminally ill individuals with financial backing while they are still alive. When the insured dies, the investor receives the benefits of the insurance policy.
The joint investigation successfully exposed a large-scale viatical settlement scam operating throughout California. Lonnie Lee Hardwell, 59, and Penni Alexander-Harwell, 56, of Sacramento were charged on felony charges that identify them as the ringleaders of the “cleansheeting” scam. According to CDI investigators, the Harwells, who were licensed insurance agents in California, assisted terminally ill individuals in acquiring multiple fraudulent life insurance policies through misrepresentation.
The indictments charge seven Harwell clients with fraudulently obtaining multiple life insurance policies with total values in excess of $4.6 million. The seven individuals who were arrested for conspiring with the Harwells include: James Edward Rust, 37, of Laguna Nigel; Michael Richard Mullins, 47, of San Diego; Thomas Robert Lindner, 50, of San Diego; Thomas Willard Quinn, 48, of San Diego; Clifford Dean Robinson, 44, of Laguna Beach; Timothy Marshall Rhodes, 38, of Dumfries, Va.; and Shari Ann Schreiber, 42, of Taunton, Mass.
Topics Fraud
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