| WASHINGTON, March 13
WASHINGTON, March 13 U.S. securities regulators
filed civil charges against two brokers and seven others, saying
they were involved in a scheme to profit from the death of
terminally ill patients through variable annuity sales.
The Securities and Exchange Commission's complaint, filed on
Thursday as an administrative action, says Los Angeles-based
broker Michael Horowitz, 39, was the mastermind behind the
scheme to exploit people nearing their death.
Variable annuities are investment vehicles designed to help
retirees maintain a source of income.
Typically, insurance companies who sell the annuities will
agree to make periodic payments to people who purchase the
But another common feature offered is a death benefit, in
which the insurer pays the policyholder's beneficiary under
According to the SEC, Horowitz recruited people to help him
steal personal health information from hospice and nursing home
patients so he could designate them as annuitants and sell the
products to wealthy investors.
The SEC said that at least 16 terminally ill hospice
patients who were designated as annuitants had no family or
business relationships with the investors who ultimately bought
Among the people he recruited was another broker, Moshe Marc
Cohen, 38, of Brooklyn, New York, the SEC said.
Together, they falsified a variety of documents, including
forms designed to help determine if certain investments are
suitable for customers, the SEC said.
As a result, the SEC said, insurance companies "unwittingly
issued variable annuities that they would not otherwise have
Later, the SEC said, Horowitz moved on from just selling to
individual investors and pitched the products to large
institutional investors as well in the hopes of boosting
All told, the SEC said, the scheme led to the purchase and
sale of $80 million in deferred variable annuities between 2007
and 2008, with Horowitz reaping $300,000 in commissions and
Cohen getting $700,000.
The SEC did not disclose the names of the two men's
However, the brokerage database run by the Financial
Industry Regulatory Authority identified Horowitz's firm as
Kovack Securities Inc, and listed him as still employed there.
Kovack officials were not immediately available for comment.
Cohen's firm was listed in the FINRA database as Woodbury
According to a report filed with FINRA, Woodbury terminated
his employment in 2008 over a failure to cooperate with an
internal review of his sale of annuity contracts.
Lawyers for Horowitz and Cohen could not be immediately
reached for comment. The SEC said the two were fighting the
The remaining defendants, including one investment advisory
firm, all settled without admitting or denying the allegations,
and will collectively pay $4.5 million.
(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)