From: Morin, Diana

Sent: Thursday, October 24, 2002 11:40 AM

To: DOICLO; DOILA; DOISAC; DOISD; DOISF

Subject: Press Release #149

SAN DIEGO MAN ARRESTED ON 116 FELONY COUNTS

ALLEGED TO HAVE DEFRAUDED 120 SENIOR CITIZENS OF OVER $10 MILLION
$5 MILLION BAIL SET

SAN DIEGO - Investigators with the California Department of Insurance (CDI) Criminal Investigations Branch’s Investigation Bureau and the San Diego County District Attorney’s Office announced the arrest this morning of Carmen John Palmieri, 51, on 116 felony counts of grand theft and the fraudulent sale of securities. Palmieri’s bail has been set at $5 million.

Investigators allege through an elaborate and sophisticated scheme of fraud, Palmieri defrauded approximately 120 senior citizen investors of over $10 million. Palmieri allegedly sold more than 280 fraudulent viatical settlement contracts to unsuspecting seniors.

Viatical settlement contracts allow terminally ill patients to sell the future proceeds of their life insurance policies to investors for a portion of the face value. Terminally ill patients are then able to use the proceeds to improve the quality of their care. Investigators say that Palmieri’s viatical investors were told they were the irrevocable beneficiaries of life insurance policies of terminally ill people and that their investments were safe and fully guaranteed. The life insurance policies referenced on the investment contracts were never Palmieri’s to sell; the insureds on the policies never received any monies.

In March 2002, CDI investigators, with the assistance of the San Diego County District Attorney’s Office, served search warrants at the corporate offices of C. Palmieri Enterprises, Inc. (DBA: National Medical Funding), Palmieri’s residence, and several other locations in San Diego County. Financial and viatical documents were seized during the execution of the search warrants that identified banks and unsuspecting insureds used by Palmieri in the fraudulent sale of viatical contracts.

In July 2002, six additional search warrants were issued and served on six financial institutions. Records received from the banks indicate that Palmieri received funds from investors and diverted the funds to his personal use, largely for the purchase of real property. Investigators believe that a substantial portion of the investors’ funds was diverted to an offshore bank.

The California Department of Insurance urges all viatical investors who have a viatical purchase agreement with National Medical Funding and who have not previously been contacted by CDI, to contact CDI at (619) 525-4092.

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