Illinois Insurance Agent Sentenced to 5 Years for Fraud Scheme

July 26, 2017

A Decatur, Ill., independent insurance agent has been sentenced to 63 months in federal prison for defrauding his clients, the U.S. Attorney’s Office for the Central District of Illinois reported.

Chief U.S. District Judge James E. Shadid sentenced James P. Smith for fraudulent activity conducted from February 2011 to July 2016. Smith was also ordered to pay $349,777 in restitution to victims of his crime.

The court ordered Smith to supervised release for three years after he is released from prison. A condition of release is that Smith cannot work in insurance or other financial-related business.

The U.S. Attorney’s Office said Smith pleaded guilty on March 23, 2017, to wire fraud (one count); mail fraud (two counts); and money laundering (one count.).

Smith worked as an independent agent at the Prairie State Insurance Agency in Decatur. According to court documents and statements made in court, from at least February 2011 through July 2016, Smith solicited clients to purchase insurance, including whole life insurance, and financial products, including annuities.

Smith admitted that he falsely represented the minimum rate of return the annuities could obtain for his clients. Instead of investing clients’ money in insurance, annuities, or other financial products, he used the money for his own benefit.

Smith requested that clients make payment to “MSM Inc.,” which he represented was the insurance company or the investment company for the annuity the clients were purchasing.

MSM was actually Main Street Marathon, a gas station in Mt. Zion, Ill., that Smith owned. Smith used the money to finance the gas station and to make mortgage payments on his personal residence.

Smith also admitted he cancelled or cashed out clients’ insurance policies or annuities without their knowledge or permission, and then used the cash value and/or future premiums or payments for personal expenses. He admitted he used the money to pay his attorney’s fees, personal bankruptcy fees, and to make purported annuity payments to other clients to prevent them from discovering that he had not purchased their annuities as promised.

The Federal Bureau of Investigation and the Macon County Sheriff’s Office conducted the investigation. Supervisory Assistant U.S. Attorney Eugene L. Miller is prosecuting the case with the cooperation of the Macon County State’s Attorney’s Office.

Source: U.S. Attorney’s Office for the Central District of Illinois

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