A certified public accountant (CPA) and purported outside auditor for Provident Capital Indemnity Ltd. (PCI) was sentenced today in Richmond, Va., to 54 months in prison for his role in an approximately half-billion-dollar fraud scheme that affected more than 3,500 victims throughout the United States and abroad, announced U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Justice Departments Criminal Division.
Jorge Luis Castillo, 57, a resident of New Jersey, was sentenced today by U.S. District Judge John A. Gibney in the Eastern District of Virginia.
In addition to his prison term, Castillo was sentenced to three years of supervised release and ordered to pay $43,582,699 in forfeiture.
Castillo pleaded guilty on Nov. 21, 2011, to one count of conspiring to commit mail and wire fraud. Castillo was a PCI employee prior to becoming PCIs outside auditor.
As a licensed accountant, Mr. Castillo used his expertise to create fraudulent financial statements out of whole cloth, said U.S. Attorney MacBride. Many elderly investors relied on Mr. Castillos credibility as an outside auditor before entrusting their life savings in this fraud scheme. Accountants and auditors are the gatekeepers of our financial system and are entrusted with the critical role of protecting the public from fraud. Todays sentence will hopefully send a strong message to those in the accounting profession that they will be held responsible when they break that trust by facilitating or participating in fraud.
Jorge Luis Castillo will spend 54 months in prison for trading on his qualifications as a CPA to facilitate a massive fraud scheme that harmed investors throughout the United States and abroad, said Assistant Attorney General Breuer.
Mr. Castillos prison sentence demonstrates the Justice Departments commitment to holding accountable any fraudster who preys on innocent, unsuspecting investors.
According to court records, PCI was an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica.
PCI sold financial guarantee bonds to companies selling life settlements, or securities backed by life settlements, to investors. PCI marketed these bonds to its clients as a way to alleviate the risk of insured beneficiaries living beyond their life expectancy.
PCIs clients, in turn, typically explained to their investors that the financial guarantee bonds ensured that the investors would receive their expected return on investment irrespective of whether the insured on the underlying life settlement lived beyond his or her life expectancy.
Castillo admitted that he conspired with Minor Vargas Calvo, 61, the president and majority owner of PCI, to prepare audited financial statements that falsely claimed that PCI had entered into reinsurance contracts with major reinsurance companies.
These claims, which were supported by a letter from Castillo stating that he conducted an audit of PCIs financial records, were used to assure PCIs clients that the reinsurance companies were backstopping the majority of the risk that PCI had insured through its financial guarantee bonds.
Castillo further admitted that he never performed an audit of PCIs financial statements and that, in fact, he personally created the statements he claimed to be independently auditing. He also admitted that he and others at PCI knew that the company never actually entered into reinsurance contracts with any major companies.
Castillo also admitted that he and other conspirators provided the false financial statements and fraudulent independent auditors report to Dun < Bradstreet (D