Provident Capital Bond Fraud Case Intensifies

The bond fraud case against Provident Capital Indemnity Ltd. intensified with the addition of new money laundering charges.  Provident---together with its President (Minor Vargas Calvo) and outside auditor (Jorge Castillo)---were indicted in Virginia Federal Court earlier this year.  The defendants were charged with issuing fraudulent bonds that were designed to protect investors in life insurance policies.  In the event an insured lived past his or her estimated life expectancy, PCI was to pay the investors the face value of the underlying policy.  The bond purchasers were required to pay premiums between 6% and 11% of the underlying life insurance policies.  The indictment charged that the defendants lied to investors about PCI’s re-insurers, its financial statements, and its bond rating status.  Bonds in the approximate amount of $670 million were issued.

In addition to the fraud charges, federal prosecutors issued a superseding indictment on October 3, 2011 as reported in Law 360.  The new indictment charged Calvo with making three wire transfers totaling $735,000.  Each of the new counts would carry a maximum penalty of ten years in prison.  The charges are in addition to the original charges of conspiracy, mail fraud, and wire fraud.  The jury trial is scheduled for February 13, 2012, in Richmond, Virginia.