Miami-Dade County

South Florida mastermind of $1 billion-plus swindle sentenced to 20 years in prison

Joel Steinger, a wheelchair-bound swindler, rambled on and on about running a $1 billion-plus life insurance investment scam before he finally got around to expressing some remorse for his victims in Miami federal court.

“It eats my guts out that this thing turned into a criminal enterprise — that people were hurt,” said Steinger, who fumbled repeatedly as he tried to persuade a judge on Friday not to give him a 50-year prison sentence.

“I’m sorry. I repeat it every night,” he told U.S. District Judge Robert Scola. “I’ll take the blame for everybody. My life is over.”

Steinger, the former head of Fort Lauderdale-based Mutual Benefits Corp., who pleaded guilty to a pair of fraud conspiracies in March, caught a break — of sorts. The judge sentenced the 64-year-old Steinger to 20 years in prison.

Despite his misgivings, Scola showed some leniency after taking into consideration Steinger’s declining health, his assistance in an unrelated corruption probe and his punishment relative to other defendants in the long-running case.

“I could easily sentence you to 50 years and never lose a moment of sleep,” Scola told Steinger. “It’s clear you were the mastermind of this criminal enterprise.”

The judge imposed no fines on Steinger, because the former multi-millioniare is now penniless. A restitution hearing is set for Nov. 24, but it’s unclear whether Steinger has any assets: his highly mortgaged Fort Lauderdale waterfront mansion is in such disrepair that it’s worth almost nothing — though the land would still be valuable.

Steinger, the last defendant to be convicted and sentenced in a 2008 indictment, has been suffering from a degenerative spinal condition and partial paralysis, resulting in pre-trial detention for more than two years at Larkin Community Hospital. His defense attorney, Steven Haguel, made the most of his client’s poor health to gain the judge’s sympathy — as did Steinger.

“I got a heart problem, I got a spinal problem. My days are numbered anyway,” Steinger told the judge, as he weighed the prosecution’s recommendation of a 50-year maximum prison term. “If I had the money, I’d give it all back.”

Steinger, once a major donor to the Republican Party in Florida, also sought credit for helping the FBI and Justice Department investigate and convict a major GOP fundraiser, Dr. Alan Mendelsohn of Hollywood, who lobbied on behalf of the executive’s company in Tallahassee.

Mendelsohn, convicted of tax offenses and released from prison this summer, had asked Steinger for a $400,000 campaign donation back in 2007. As Steinger wore a wire, the physician falsely boasted that he could give some of that money to Gov. Charlie Crist to get him to shut down the federal fraud investigation into Mutual Benefits.

Prosecutors, however, did not want to give Steinger any credit for assisting in the Mendelsohn case or for anything else, largely because they viewed him as a deceptive defendant who manipulated the justice system.

Prosecutor Karen Rochlin compared Steinger to Wall Street Ponzi schemer Bernard Madoff, who was sentenced to 150 years, and Fort Lauderdale lawyer-turned-swindler Scott Rothstein, who received a 50-year prison term.

“He has caused untold harm to so many people,” Rochlin told the judge, arguing Steinger’s sentence should send a loud message of deterrence. “There should be no others like it again.”

Unlike the other 11 convicted defendants in the Mutual Benefits case, Steinger dodged prosecution for years — partly because of delay tactics and partly because of his deteriorating health. Despite the passage of time, his leading role in the life insurance investment scheme was not lost on the judge.

Steinger formerly ran Fort Lauderdale-based Mutual Benefits, a brokerage business that sold $1.25 billion worth of life insurance policies held by people dying of AIDS, cancer and other terminal illnesses to some 30,000 investors.

The investors bought the policies at a discount, with the promise of receiving full value upon the death of the beneficiaries. But Steinger and other company employees lied about their life expectancy as investors paid the premiums of the former policyholders without ever receiving their benefits, according to court records.

Ultimately, the investors lost $835 million before the so-called viatical life insurance business was shut down amid allegations of fraud in 2004 by the U.S. Securities and Exchange Commission. The state Attorney General’s Office and Office of Insurance Regulation had also conducted investigations of Steinger’s company.

Steinger is among a dozen company executives and associates, including Steinger's brother, who have pleaded guilty and been sentenced from one to 20 years. The Mutual Benefits investigation, which started with state regulators who handed it off to federal prosecutors, is one of the largest investment scams in Florida history.

The only defendant in the long-running Mutual Benefits case to go to trial was Fort Lauderdale attorney Anthony M. Livoti Jr. Convicted in December, Livoti was sentenced to 10 years for disbursing trust account funds to pay off insurance premiums to keep Mutual Benefits’ investment racket going for a decade.

Livoti, as trustee, controlled Mutual Benefits’ investment accounts. Livoti was convicted of using newer investors’ money to pay the premiums on older life-insurance policies. Prosecutors called it a classic Ponzi scheme. His lawyers argued that he was manipulated by Steinger and other executives, who lied about the life expectancy of policyholders dying of AIDS and other illnesses.

In March, Steinger admitted as much in his plea agreement.

“In fact, it was the defendant, who had no medical training or expertise, who determined life expectancy projections for thousands of policies marketed to investors,” according to a statement filed with Steinger’s plea deal.

“On many occasions, the defendant or others acting at his direction altered life expectancy projections with white-out or by cutting and pasting portions of letters,” Steinger’s statement said. “These altered letters were Xeroxed to hide evidence of the alternations and then mailed to unsuspecting investors.”