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Death Takes a Policy: How a Lawyer Exploited the Fine Print and Found Himself Facing Federal Charges

The life insurance industry tried to make variable annuities irresistible to investors and was enraged when a Rhode Island lawyer exploited the fine print for his own profit.

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Phoebe Smith

Aug. 28, 2012, 12:26 p.m.

Had he split the “profit” with the families, there’d be no case…he was greedy too. He may have been honest about his dealings, but when you’re witness is dead…

As far as the insurance companies, no pity.

Steven

Aug. 28, 2012, 1:39 p.m.

So I guess its okay to lie to dying people as long as you leave them with a few sheckels and screw a big corporation on the way.

El

Aug. 28, 2012, 2:20 p.m.

I heard about this on “This American Life” and am somewhat surprised by the comments here. Most people commenting do not see anything wrong with what the lawyer did, and many seem to enjoy how he tricked the insurance companies.

So the insurance companies made a legal mistake. If somebody makes a mistake and leaves their wallet in a public place, taking it is ok?And if there is an dying person sitting close to the wallet, why not trick them to take the wallet, take out a hundred bucks and pass the rest to me? Seriously…Ok, it was the insurance company, not a person, “leaving the wallet”. But the company is made of people.

Caramadre and his clients stole from insurance companies, and, because of this, insurance agents got paid less or lost jobs, and insurance fees went up. Money does not come from nowhere.

The U.S. economy functions relatively well, because people produce and sell useful products and services and earn profits. People like Caramadre, just like some workers in Hedge Funds and banks before the financial crisis, exploit the loopholes, steal money, and are in effect destroying the economic system and the trust among people in our society.

JAC

Aug. 28, 2012, 3:04 p.m.

A close look at the facts depict the following: (1) the terminally ill we’re given $2,000 whether they participated in Mr. Caramadre’s program or not.  (2) those that elected to participate rec’d considerably more, in the range of $3,000 to $10,000.  (3) mr. Caramadre a well known philanthropist gave away millions of dollars to charity.  I would like to know how everyone critizing Mr. Caramadre would feel if 100% of the profits he made went to charitable organizations.

Phoebe Smith

Aug. 28, 2012, 4:12 p.m.

If Mr. Caramadre gave everything to charity…he’d still reap benefits of being Robin Hood. And feed some narcissistic need; I also have to wonder how little guys paying premiums aren’t being screwed b/c now they have to pay for insurance losses. Answer: we, little guys, are paying and will pay.

I liked this story at first- I respect using ones wits to make the system work for the little guy. As long as he wasn’t lying and/or coercing the dying- but here’s the thing, MOST folks would not agree to what he wanted if they knew someone else was making so much more off of their death- I know I’d want my family to get at least half.

This guy reminds me of shelf clearing couponers who claim to give all to the food pantries- they annoy the heck out of me…I mean what about me? I just want to get a box of cereal ON SALE, I don’t want to pay full price b/c you feel better about yourself giving to the food pantry.

That said- I think a conviction is wrong legally and it is sickening I am again ( me and all the other tax payers) paying for the insurance industry foibles. They screwed up, isn’t enough my premiums go up?

Ellen

Aug. 28, 2012, 4:59 p.m.

The article neglects to examine how it is that the FBI got involved in this.  This administration has been many things. It has protected the banking criminals who caused the 2008 crisis from prosecution. Wherever possible it has shielded them from investigation.

Please don’t suggest to me that you believe that these big insurance companies got FBI action just by sending someone over to lodge a complaint.  They got the FBI on their side because those insurance companies gave big political donations.

I suggest someone dig into exactly what donations and strings were pulled on behalf of Transamerica et al to bring the FBI in.

Katherine

Aug. 28, 2012, 5:34 p.m.

The insurance companies should have just changed their policies if they didn’t like Caramadre’s scheme. Simple as that. As for the morality of benefiting from another’s death, this is a non-issue. Caramadre did pay the annuitants for their signatures, and most of them appreciated the money. I believe he exploited weaknesses in the insurance companies’ legal counsels and I believe it was up to them to protect themselves. He seems to have done it purely as a money-making venture and in this society the opportunist is richly rewarded, so there you go.

As a person who has watched a loved one die slowly from a terminal illness, I can say that morality is usually scarce on the scene in such situations. It’s not fair that the loved one caught the illness, not fair that health insurance will only pay so much to keep him or her alive for so long, not fair that it’s happening to a good person and not to so many others who deserve it more, and not fair that the death topic is largely ignored among Americans. For someone to come along with a money making scheme that involves nothing but a signature on my part would be the least of my worries.

Deleteman

Aug. 28, 2012, 7:30 p.m.

Sounds to me like a contract of adhesion
And ambiguities in a contract of adhesion
Always go against the party that wrote the contract.

Some actuaries and insurance lawyers
Are at fault.

Katherine

Aug. 28, 2012, 8:02 p.m.

After reading El’s comment about the morality of taking money from a lost wallet, I am rethinking my position. Caramadre knew what he was doing was wrong. He was taking advantage of others. The fact these others were insurance companies is beside the point. If we expect others to play by the rules, we must lead by example. We can’t stop insurance companies’ sliminess by out-sliming them. That is just anarchy. I don’t believe he should be thrown in jail or forced to give reparations to the insurance co’s, but something ought to be done to stop this deliberate loophole exploitation. It’s unethical and everyone should be able to sense that.

On the other hand I think the fact that so many people’s exuberance at the insurance companies’ misfortune is a valid feeling. It cannot be overstated that insurance in general is a corrupt business badly in need of regulation. If Caramadre’s highjinks were only to point the finger at that widespread disgust, he shouldn’t have recruited investors and sought profit. He could’ve made a real statement had he left his greed out of the equation.

John

Aug. 29, 2012, 12:12 a.m.

If part of your business plan involves going to your parish priest to ask if what your doing is O.K., you probably shouldn’t do it.

max

Aug. 29, 2012, 8:43 a.m.

Something I felt was oddly missing in the discussion of the ethics surrounding this case is the fact that Insurance Companies do not mint money (i.e. it is not like the money Caramadre is making comes from thin air).  If an insurance company starts losing money it is not exactly like the CEOs take pay cuts, thus the expenses are distributed across all share holders. So while a few people benefit from this scheme, a lot of people suffer a small penalty.  This (and all Caramadre’s schemes) for me, is really an issue of the Tragedy of the Commons, where one man is aggregating wealth at the expense of everybody else.  I don’t think he should go to jail for this, I just think he is a parasite.

Al

Aug. 29, 2012, 10:21 a.m.

The insurance industry for years has been using loopholes, technicalities, and fine print clauses to get out of paying legitimate claims.  All of a sudden, when a little guy figures out a way to use the industry’s own contracts against them, the mega-billion dollar industry cries foul. 

What I find interesting is the criminal angle.  If there were forgeries, that is obviously a problem.  But fraud?  If there was any fraud, it should be against the insurance companies for issuing the policies and then in bad faith refusing to pay, just as Judge Smith seems to be saying.  And why do they continue to try to re-file dismissed cases other than to waste time and continue to refuse to pay out on otherwise rightful (as determined by the Judge) claims.  I also find it interesting that they are re-filing, rather than appealing, the Judge’s decision.  Perhaps they don’t want a published appellate decision against them, which could be used as precedent against them in future claims.   

Other than the forgeries, why are the feds involved?  They say that some of Caramadre’s associates ‘lied’ to the insureds.  If that’s the standard for a federal case, every salesperson in every industry in this country ought to lawyer up.  No salesperson that I know of ever has told the entire truth, either by design or default.  If this was the Bush DOJ, I could understand since the Republicans have sold themselves out to corporations, but this DOJ’s involvement I find to be curious.

The insurance industry has changed their model since Caramadre’s scheme, either tightening their policy language or dropping these types of policies all together.  They should pay the claims, lick their wounds and move on, and DOJ should stop wasting time and move on to more appropriate cases in their jurisdiction than a pissing contest between a lawyer who caught an industry with their pants down and a group of insurance companies who have buyers regret over their own policies.

Erik

Aug. 29, 2012, 1:57 p.m.

This is VERY similar to counting cards at blackjack.  It may be frowned upon by the house, but it’s not illegal, and it’s an obvious risk that the house either knows about or should know about if they’re the least bit competent.

KarenX

Aug. 29, 2012, 3:35 p.m.

I figured out what part of this story was bothering me so much, and why it’s so clear to me that Caramadre is a scumbag, regardless of the legality of the thing.

It’s not squeamishness about death; I think dying people ought to be able to profit from their own demise if they want to here, and should be able accept something they want (in this case money) for something another person wants (in this case a signature).

What I think is so disgusting is that the dying person’s compensation was so paltry as to be almost nonexistent compared to the investor. It’s absolutely taking advantage of a desperate situation and treating the dying person as a commodity and not a partner—even though without this dying person no one would be able to profit at all.

What would have seemed like a fair, ethical agreement would be to pay the dying person some kind of good faith amount (like the $2000) for the signature, and then equally split the profits above the original investment with the dying-now-dead person’s estate. Because the investor is still getting more than he or she would have, right? And I’m sure the lawyer arranging everything is taking a cut, too, as a process-enabler, which is why I think the payment for the signature while the dying person is still alive is reasonable, too.

PK

Aug. 29, 2012, 7:13 p.m.

Funeral homes, hospitals and cemeteries don’t make money from the dead. The dead own nothing. Because they’re dead.

JAC

Aug. 29, 2012, 7:47 p.m.

To KAREN X
You don’t know what you are talking about.  You so easily come to the conclusion that Mr. Caramadre is a scumbag, yet you are ignorant of the facts.  What you don’t want to understand is that every terminally ill person was given $2,000 whether the participated in the program or not.  Thereafter, if and only if, the terminally ill person decided to participate to be used as a policy annuitant, they rec’d add’l monies.  Would you retract your rude use of the word scumbag if every measuring life had the opportunity to receive a substantial percentage of the profits, but most declined for the following reasons: (1) they wanted the extra cash while they were alive, rather than a share of profits after they died, and (2) there was no guarantee that their would be a profit from the investment, as the court records indicate many of these annuities merely return the invested principal.

When was the last time you helped hundreds of people and gave millions to charity like Mr. Caramadre did?

Tutt

Aug. 29, 2012, 8:08 p.m.

I’m “ignorante” - maybe - but If hindsight is “20/20” perhaps there’s a reason that saying is so popular and valid. If the dying weren’t required to die rather quickly and first - before the “investors” cashed in on an investment that could not be had but for the participation of those dying (the most important factor) - exactly how many signing would think it a fair exchange to collect $2000 when others collect millions? Unless one really is “ignorante” I’m guessing very few would put ink to such a one-sided “deal”. But that’s just me - if something stinks the stench is not by degrees - it just stinks. After all - God himself said he would “spew from his mouth” the lukewarm who are neither hot nor cold.

Again - If Mr. Caramadre is such a genius “Robin Hood” - why didn’t he divvy up the profits fairly among the most important element in his scheme - the dying or their estates (i.e. family members)? You can probably bet the only people who happen to be dying and signing are in need of the money at whatever cost - which would make them poor and/or unsophisticated. It would say alot if this “scheme” were peddled to those of the Upper East Side ilk - rather than hospices or nursing homes. The wealthy don’t need $2000 and wouldn’t dignify a piece of paper with a signature so profound unless there’s something substantial in it for them - dying or not. Caramadre’s scheme has the same element as other scum who arrogantly justify greed at all costs - the defenseless. I actually feel good about disagreeing with the majority of posters because exploitation is exploitation regardless - and it’s not hard to pinpoint who is being exploited and who is profitting because the presence or absence of gain is irrelevant to right and wrong.

p.s. Exactly which charities did Caramadre donate to - none are identified and many are just scams hiding behind charities - so he could actually be “donating”” the money back to himself. I wouldn’t put it past him.

Alex

Aug. 29, 2012, 8:52 p.m.

While it is always good fun to beat up on big corporations and insurance companies, I’m not sure I’m completely on board with this guy.  It seems that all his “creations” techically follow the letter of the law but run counter to the intent.

The irony is that he claims to be taking on the world of high-priced lawyers and fine print.  But it is people like Caramadre that require corporations to hire high-priced lawyers and include those pages of fine print tht we all dislike.  It seems to me he is part of the problem, and we all pay the price.

Many thanks to Pro Publica and This American Life/ Planet Money for their reporting and story telling.  Keep up the great work.

Will Crain

Aug. 30, 2012, 1:01 a.m.

Very interesting to say the least And farily easy to comprehend the applications involved.
    As long as we are stuck with Capitalism this type of crap will continue. And of course it will continue until we have Regulations and Taxes in place to prevent these enormous Bonuses etc no matter who or what system comes next.
   
    Inaugerating National Health Insurance would have been a big help in crushing the Insurance Cartel ~ We had the chance but as you recall the Insurance Cartel would not allow Single Payer/ improved Medicare for All ON THE TABLE ~ thank you insurance cartel and Senator Max AIG GE Baucus.
    The Insurance Cartel is Big and they ALL Sleep together.  It makes me feel good all over to see them take a hit of any size… i wish for their bankruptcy ASAP

DAS

Aug. 30, 2012, 9:52 a.m.

This is the typical heads I win, tails you loose attitude of big business and hedge funds these days.  The insurance companies were fools and that is the end. 

Perhaps the better way to address the insurable intererest issue is to tell the financial services indusrty as a whole to develop a single standard.  Traders hate insurable interest now apparently Insurers love it.

Charles

Aug. 30, 2012, 5:17 p.m.

Who made the original complaint that precipitated the FBI investigation?

Or is the Bureau empowered to launch detailed investigations into anyone whom FBI officers decide is behaving in a morally reprehensible manner?

Or is it remotely possible that the insurance companies have influenced the Bureau’s decision to investigate Caramadre?

Kressel

Aug. 31, 2012, 7 a.m.

@ DAS - Excuse me, but are you THE Das, author of Extreme Money? If so, I think your book should become the next This American Life movie. Everything you said about “How Money Got Weird” and how it transformed the nerdy accountants into the coolest guys in the office is a story people can relate to. And I think Omi Vayda should play you (Chartur from 3 Idiots) and the music should include Peter Gabriel’s “Big Time” in the middle and the Beatles’ “Dear Prudence” at the end. Of course, the Beatles meant that Prudence should come out and play like the reckless guys. In your context, Prudence is the one who should be making the rules.

Kressel

Aug. 31, 2012, 7:01 a.m.

To DAS - Excuse me, but are you THE Das, author of Extreme Money? If so, I think your book should become the next This American Life movie. Everything you said about “How Money Got Weird” and how it transformed the nerdy accountants into the coolest guys in the office is a story people can relate to. And I think Omi Vayda should play you (Chartur from 3 Idiots) and the music should include Peter Gabriel’s “Big Time” in the middle and the Beatles’ “Dear Prudence” at the end. Of course, the Beatles meant that Prudence should come out and play like the reckless guys. In your context, Prudence is the one who should be making the rules.

Minni

Aug. 31, 2012, 2:15 p.m.

Obviously people have an issue with insurance companies here but I am saddened to see that no one here has a problem that this man took advantage of the terminally ill, only giving him them two thousand dollars and taking millions for himself at a time when they needed the money most.  But he’s a great guy according to you folks.

mike

Aug. 31, 2012, 3:11 p.m.

What is the issue?  the insurance company is betting on them dying just as much as he is… they just bet it is going to take longer.

Lars Mage

Sep. 1, 2012, 8:28 a.m.

Morality, Ethics, and Squeemishness aside, what Joseph Caramadre did to make money used the same financial technique that Goldman Sachs and others used in purchasing Credit Default Swaps that ended up being payed out by US taxpayers. It was not his fault that the insurance companies did not gauge what they were selling with their liability. They were perfectly happy to be making short term profits from annuity sales.
Why aren’t the fat cats on Wall St. being charged after all they profited a million times more than Joseph Caramadre ever did using the same method.

Maybe the US financial system needs more clever people like Joseph Caramadre in regulatory positions. We would be better off.

Al

Sep. 1, 2012, 6:44 p.m.

The idea that this government would be morally outraged about anything is laughable; insurance makes money on people dying all the time. Caramadre’s only crime is that he gamed the system; the government, and the insurance lobby it works for, is outraged that he did so legally.

Elaine Renoire

Sep. 1, 2012, 6:56 p.m.

There’s a larger picture here than besides what we feel about big insurance companies.  Caramadre didn’t just exploit them; he also exploited vulnerable people. 

Whether what Camaradie did was “legal” or not, doesn’t justify it.  The ways to abuse and exploit vulnerable people are both sickening and endless.

How would we feel if nursing homes took out life insurance on their residents? 

What about guardians taking out life insurance on their elderly or disabled wards?  Think they’re not doing it now? 

Join the national movement for reform of unlawful and abusive guardianships and conservatorships.

JOIN NASGA:  http://www.StopGuardianAbuse.org

JAC

Sep. 1, 2012, 7:19 p.m.

To Elaine R
How were the terminally ill exploited?  They had a choice, no duress or pressure.  They already were given $2,000 without any obligation.  According to court papers, at least 112 people rec’d $2,000 and did not participate.  Were these 112 people exploited for merely receiving $2,000?  How about the add’l 50 or so people who decided to accept a deal to participate and receive add’l cash in exchange for their signatures; how were these 50 people exploited if they had a choice?  Who else was offering money to the terminally ill?

When Mr. Caramadre is found innocent of all charges I hope the congressional oversight committee will review the outrageous conduct of the prosecutors and the FBI and hold them accountable for their obvious abuse of power and malicious actions.

Charles

Sep. 1, 2012, 7:26 p.m.

JAC puts his/her finger on a very real moral issue here.

Can someone explain the criteria the FBI use to decide who and when to investigate?

Dan

Sep. 1, 2012, 10:38 p.m.

Joseph Caramadre did no wrong, the only thing he did was to provide an education to some very bright individuals, now these bright individuals are upset that Mr. Caramadre knew more about their product than the hawkers.

ibsteve2u

Sep. 1, 2012, 11:25 p.m.

@Elaine Renoire:  Seems like you should include a list of all of the founding principle of NASGA - to include all of their funding sources - if you want to solicit members.

It wouldn’t be the first time that a corporate shill obscured the issue it hand with a seemingly honest issue to conceal other-that-honest motives.

ibsteve2u

Sep. 1, 2012, 11:34 p.m.

Errps…a couple of glaring typos, there…my typing fares rather poorly in a relationship to how hard I’m laughing, I’m afraid.

ibsteve2u

Sep. 2, 2012, Midnight

Although I did find out that NASGA is a 501(c)3 (EIN 26-2271628) headquartered in that hotbed of political, medical, legal, and social expertise and connections known as Loogootee, IN 47553 which has 2,751 citizens as of the 2010 census.

It can even be found on a map: 

http://www.mapquest.com/?q=38.676392,-86.914728&zoom=6

Barely.

Elaine Renoire

Sep. 2, 2012, 9:29 a.m.

JAC:  You’re assuming the terminally ill were all competent and able to make an informed decision. Did they? Do we know how much pain medication they were on at the time?  It makes a difference. 

ibsteve2you:  Guardianship/conservatorship abuse of the elderly and adult disabled is a national issue and if you don’t believe it, you might google and read the 2010 GAO report:  “Guardianships:  Cases of Financial Exploitation, Neglect and Abuse of Seniors.”  Also, I would ask you to take 4 minutes of your time to view the CBS News report on one of our members in AZ:  http://www.cbsnews.com/2100-18563_162-7179542.html

Robert

Sep. 2, 2012, 10:57 a.m.

I see no problem with this scheme at all.  He took advantage of a loophole and sick people were paid $ they never would have seen. Beat is missed by many reading this article is that the terminally ill we’re paid $2000 even of they chose to no participate.

All of the money was put up by outside investors.  Those investors should reap the larger portion.  If a sick person truly feels taken advantage of they could not participate.

Mike

Sep. 4, 2012, 9:15 p.m.

They should leave him alone—-let him pay a fine or civil restitution to families who felt gypped.—-But don’t ruin his life or the life of his family.  He never ruined anyone’s life.

parker

Sep. 6, 2012, 8:35 p.m.

I think what he did was fine.  Of course it would have been nice if he had paid the people more, but they were basically getting money for nothing, I’m sure a lot of people would have been happy to sign for just a few hundred bucks.  If there is any truth to the allegations of forgery that is another matter, but I doubt the forgery allegations are true, because why would he bother forging?  There were plenty of people happy to sign and get a few grand, so he didn’t need to forge. 
The insurance companies were blinded by their own greed.  They set the rules of the game, and they really didn’t think they would ever have to pay.  They just wanted to keep getting fees for nothing. 
Also he didn’t profit when people died, he only profited when the investments made money.  It was only when the investments lost money that the death of the terminally ill person would negate the loss.  So they weren’t really “profiting” on other people’s deaths.

Bella

Sep. 7, 2012, 2:36 p.m.

I listened to this story on This American Life and found it fascinating. As a therapist who treated many AIDS patients in the early nineties who sold their life insurance policies, the practice may have been perceived as ghoulish, but was a boon to the patients who needed the money to meet expenses.
What I find compelling about this story is not the legal aspect, but how it is opens a window into perception and priming - how what people are told about an experience or they way they are treated, (ie, research has shown, even the temperature of a cup of coffee held before the interaction in an experiment) is that they hold) before an experience influences their perception and behavior (see many good pieces in the New York Times about the research, and some recent books as well).
How each person feels about the ethics or morality of what Mr. Caramadre did depends so much on the context: what they were told and when, how it was told to them, how things were explained, what those around them thought, etc. How many of the people who either loved or reviled this business venture would change their opinion if it was reframed for them?

Michael Kaiser

Sep. 8, 2012, 9:23 p.m.

It’s simple. The insurance companies law firm/law department screw up.

Martine P

Sep. 11, 2012, 10:19 a.m.

People make money from death all the time, true. But they offer a service (usually).  Here the service offered is money, call it a “fungible” service.  The money the dying people were paid enabled them to spend the rest of their life more comfortably, they would not have been given this chance without the investors.  What would make such a deal “acceptable’ to my judgment is the percentage of the profits the investors make that is given to the “annuitant”.  Also for the deal to be acceptable IMO it would need to be transparent : the annuitant needs to know how much money is in play.

What percentage is fair?  Both the investor and the annuitant need each other: should it be 50-50? To say that would not mean that money equals life, or that your life is worth whatever the deal is, more that both parties need each other: how hard is it for a potential annuitant to find an investor, versus how hard is it for an investor to find a dying patent?  The other point of course is the risk for the investor. None on paper, but as we can see there is a potential risk down the road (which was foreseeable and should have been considered in the deal). 

So I am not sure what the percentage should be, but why not adopt hedge fund policies? 2% at signing of the deal, and 20% of eventual profits of the fund to annuitant ‘s beneficiaries.

The deal needs to show respect, not just a crumb off an opportunity.

So depending on what “deals” each annuitant got in the end, I would consider fair that Caramadre and investors (equally responsible) may have to pay so “adjustment fees” to these people.
Else than that, I always appreciate creativity… so may be Caramadre deserves a discount vs the investors

martine P

Sep. 11, 2012, 11:10 a.m.

Tutt,  Aug. 29, 10:08 p.m said:
“the presence or absence of gain is irrelevant to right and wrong.”

is what we should all keep in mind.  Thank you for saying that.

But here I am thinking of the dying people, not the insurance companies.
Personally, I consider Camaradre using the loopholes fair game.  The companies set up their rules, in their contracts, not exactly determined by fairness but by the profits the market will allow.  And they just screwed up. When considering individuals vs insurance companies (or Wall Street) any morality argument is simply a non starter.  The best individuals can do is “adapt” to their rules and always read and make sure they understand the fine prints.  Individuals cannot consider morality in a contract when the other side only considers profits and will use the law and beyond (thinking of home owners hesitating in “returning their keys” here, if you think you will have morality issues returning your keys in extreme circumstances, do not get into the deal in the first place).  In a business deal both sides have to play by the same rules.  In the case of Camaradre the “business deal” needed to be specified, or else it is indeed just exploitation.

Martine P

Sep. 11, 2012, 11:40 a.m.

Jonpaul Barrabee, Aug. 26, 4:38 p.m. said:
“The big question I was left with is: Why did the insurance companies write in this loophole in the first place?  It seems to me it would not be an accident but something intentionally added because it makes sense that the annuitant would be the investor.  This loophole must have served them in some fashion or it would not have been created”

Of course it had to be intentional, the loophole enabled more potential profits for them, thanks to people like Camaradre’s investors expanding the annuitants pool.  Of course risk moves against them if the funds loose value suddenly at the same time as annuitants are dying, which is what happened as they increased the risk in investment choices at the same time as the markets were ready to tank.  IMO it is clear to me that the insurance companies are the main guilty party here: they left the loophole open and they could not even figure out the market was moving against them.

MH

Sep. 14, 2012, 7:09 a.m.

(responding after listening to the This American Life story)

Caramadre’s dismissal of the accusations of ‘profiting from death’ by comparing himself to undertakers, florists, &c., strikes me as terribly disingenuous – after all, all of those people provide an actual service; they’re not merely speculating on human life.

That said, he’s right in noting that people in those industries do, in a very real sense, profit from death, and that fact is inevitably uncomfortable to anyone with a human heart beating in their breast. Just as inevitably, doctors profit from illness and suffering, therapists profit from mental anguish, and so on. It’s a necessary consequence of having a money economy in the first place, and it seems to me like a very good reason (if just one of many) to do away with it altogether.

amdm

Sep. 14, 2012, 11:07 a.m.

Assuming he followed the rules set forth by the insurance companies to the letter, there is no crime, strictly speaking.  Whether it’s tasteful or ethical is a different matter.  To my mind, if he paid cash up front and disclosed to the dying what they were signing and what the outcome would be, and they took the cash to enjoy during the remainder of their lives with no qualms about the aftermath, then it’s not unethical either.  He’s following the letter of the law and using full disclosure, then no harm, no foul.  It’s almost the flipside of a pre-nup, if you think about it.  People sign pe-nups all the time, in effect saying “if this marriage dies”, this is your pay-out.  People do this with real estate in France all the time: where the elderly person “sells” their home while reserving their right to live in it until their death, and they also receive a monthly stipend from the buyer to help them enjoy their final days.  Upon their death, the buyer gets the apartment.  It’s perfectly legit, and both parties know what they’re getting into.

Renee

Sep. 16, 2012, 12:24 p.m.

I see no trickery here. 
The woman that shared her hurt over the loss of her mother pulled at my heart. I have recently lost my mother-in-law. We were very close and I understand this woman’s sorrow. Putting that into perspective, I have helped my father-in-law navigate through the overwhelming crowd of people that are benefiting from the death of his wife - from the staff at the hospice facility to the company that helped with the funeral arrangements. None of these people were rooting for death, they are only stepping in to provide services for those who have lost loved ones. I can also attest that absolutely none of them offered to pay anything back to the family for participating in their services. Mr. Caramadre was working within the boundaries of the law, providing a service that did nothing but benefit the people signing and I cannot find any moral basis to disagree with him. I believe it is a delicate business dealing with death, but I am certain that it can be done well and with compassion.

Travis

Sep. 20, 2012, 12:47 p.m.

Most important points have been made already, but here’s my summary of the ethical implications.
Caramadre in general treated the annuitants ethically but, as others pointed out, he did treat the insurance companies unethically. The annuitants either did not have the money or the desire to invest in the scheme, so all they had was their life (and signature) to contribute. Let’s say the policy was for a $1 million, Caramadre got only a 5% commission, and the annuitant was paid $10,000 for the signature. Well, since the annuitants were dealing only with Caramadre, they got 20% of his take, which seems fair. Even if they were told how much was being invested and who would profit, it’s unlikely most of them would demand more money. As the interviews demonstrate, the families were by and large grateful for what they did get.
The investors put up the $1 million (risk-free, of course) and got whatever interest and investment gains occurred within the months to a year or so the annuitant lived. That might seem unsavory, but it’s not unfair vis-a-vis the annuitants. I disagree with Caramadre that our distaste is because we don’t like the idea of profiting from death. The funeral parlor, florist, and nursing home make a profit providing products and services for the dying person and his family. The investors are using the annuitant to profit from the insurance company’s oversight. It’s apples and oranges. Again, it’s not unfair to the annuitant-they make money, after all-but it’s unethical vis-a-vis the insurance company.
Many commenters pointed out that this oversight is the insurance company’s own fault: chalk it up to greed, disregard for possible loopholes, and/or their own unethical scheming. That, however, does not absolve Mr. Caramadre (or the investors) of their ethical duties.
I’m with everyone else who points out the hypocrisy of a criminal investigation of Caramadre, given the unbelievable scheming and frankly immoral investment shenanigans of the FIRE industry after the repeal of the Glass-Steagall Act. But that’s the difference between legal and ethical (or moral) behavior. My prediction is that ultimately the case will come down to minor issues of a technical nature rather than whether Mr. Caramadre’s scheme itself was illegal.

Jacob Amezcua

Sep. 21, 2012, 7:14 p.m.

Wow; this needs to be made into a movie. What an incredible story! And to voice my opinion on whether or not Caramadre’s decision was ethical, I give a resounding yes! As for legalities, there is no case against him.

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