Mass. Man Pleads Guilty to Viatical Fraud Scheme

March 1, 2001

A Gardner, Mass. man pled guilty yesterday in federal court to insurance fraud charges. United States Attorney Donald K. Stern said that Darrin J. Stafford pled guilty before U.S. District Court Judge Nathaniel M. Gorton to multiple counts of mail fraud and money laundering in connection with a scheme to defraud life insurance companies, which resulted in Stafford’s receipt of at least $550,000 in illegally obtained funds.

The U.S. Attorney alleges that Stafford, who was diagnosed with AIDS in 1995, applied for life insurance policies after his AIDS diagnosis and falsely answered questions on the policy applications relating to his medical history. Stafford obtained life insurance in a total amount of approximately $950,000 that would otherwise have been denied as a result of his pre-existing health condition. Stafford then presented the fraudulently obtained policies together with his correct medical records to brokers for the purpose of selling the policies and obtaining an immediate payment of a percentage of the death benefit, also known as “viatical settlements.”

In other cases, the U.S. Attorney alleges, Stafford applied for life insurance in the name of one or more other individuals, not infected with AIDS. Upon receipt of the policies, totaling more than $7 million, Stafford substituted his own medical records and presented false identification to viatical brokers for the purpose of fraudulently selling the life insurance policies of one or more healthy individuals through a viatical settlement process, thereby obtaining an immediate payment of a percentage of a death benefit that would not otherwise have been available.

Stafford faces a maximum sentence of five years’ imprisonment and a $250,000 fine on each of the six mail fraud counts, ten years’ imprisonment and a $250,000 fine on each of the five money laundering counts, and criminal forfeiture.

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