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September 23, 2013 at 05:29 AM
The Securities and Exchange Commission on Friday charged a father and son in Lexington, S.C., with operating a fraudulent investment program designed to illegally profit from the deaths of terminally ill individuals.
The SEC alleges that Benjamin S. Staples and his son Benjamin O. Staples deceived brokerage firms and bond issuers and made at least $6.5 million in profits by lying about the ownership interest in bonds they purchased in joint brokerage accounts opened with people facing imminent death who were concerned about affording the high costs of a funeral.
The Stapleses recruited the terminally ill individuals by offering to pay their funeral expenses if they agreed to open the joint accounts and sign documents that relinquished their ownership rights to the accounts or any assets in them, the SEC says.
“The Stapleses exploited the tragic circumstances surrounding a terminally ill diagnosis and turned the misfortune of others into a profit-making enterprise for themselves,” said Kenneth Israel, director of the SEC’s Salt Lake Regional Office that investigated the case, in a statement. “The Stapleses deceived brokerage firms and bond issuers by casting themselves as survivors of a joint ownership situation when the deceased had no legal ties to the bonds at all.”
According to the SEC’s complaint filed in federal court in Columbia, S.C., once a joint account was opened and they had sole control, the Stapleses purchased discounted corporate bonds containing a “survivor’s option” that allowed them to redeem the bonds for the full principal amount prior to maturity if a joint owner of the bond dies.
“Following the death of one of their terminally ill participants, the Stapleses redeemed the bonds early by citing the survivor’s option to the brokerage firm and misrepresenting that the deceased individual had ownership rights to the bond,” the SEC says. “Their illicit profit was the difference between the discounted price of the bonds they purchased and the full principal amount they obtained when redeeming the bonds early.”
