A Smithville, Tenn., insurance broker was arrested Dec. 27 on 15 federal counts of wire fraud, according to officials.
According to the federal grand jury indictment, B. Don James defrauded investors of more than $1.8 million by telling them he would use their money to buy financed insurance premium contracts – but never used the money for those purposes.
Instead, the indictment said, James made what he called interest payments to older investors with money obtained from newer investors.
Insurers offer consumers financed premiums to make payments more affordable than a single lump sum. Companies can then sell those policies to investors to cover their costs. The investors make money by collecting the installments and other fees associated with the contracts.
The indictment alleges that James told clients they would receive fixed and guaranteed rates of return from their investment, and “the only way that the investors could lose money would be if James himself stole it.”
It was not immediately clear whether James had hired a lawyer. A telephone listing for his business in Smithville was connected to a fax machine.
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