Auditor of Dominica-registered company pleads guilty to $670 million fraud

Richmond, Virginia (TDN) —- Dominica’s offshore sector is once again under the glare of world scrutiny following a guilty plea in a federal court in Richmond by Luis Costillo in a $670 million scam involving life insurance settlement investments.

Minor Vargas Calvo, head of PCI, the Dominica-registered company.

Jorge Luis Castillo, 56, was the "outside auditor" of Provident Capital Indemnity LTD (PCI), an insurance company registered in Dominica with business operations in Costa Rica. He pleaded guilty to conspiracy to commit mail and wire fraud in a global scam to defraud clients of millions of dollars.

Castillo and Minor Vargas Calvo, the president and majority owner of PCI, were named in a 10-count indictment last month alleging wire and mail fraud, wire and mail fraud conspiracy and money laundering.

According to the indictment, PCI provided financial guarantee bonds on life settlements and claims to protect investors’ interests in life insurance policies by promising to pay the death benefit if the insured lives beyond his or her estimated life expectancy.

After registering its offices in Dominica , PCI began selling what it called "life expectancy guarantee bonds" to life settlement investment companies that sold them to investors. From at least 2004 to March 2010, PCI issued approximately 197 bonds backstopping numerous bonded offerings of investments in life insurance policies with a face value of more than $670 million.

The indictment also alleged that Castillo told the public that he had audited PCI’s financial statements in accordance with generally accepted accounting standards. The complaint alleges that Castillo never conducted an audit of PCI and instead issued clean audit reports at the bidding of Vargas Calvo, who has also been arrested and is awaiting trial.

On January 17, 2008, Denise Crawford the Securities Commissioner for the state of Texas issued a cease and desist order to PCI forbidding them to conduct any business in the state. At the time of issuing the order, the Commissioner listed PCI’s address as c/o Michael Bruney, 12 Virgin Lane, Roseau Dominica and another address in Costa Rica.