Mastermind Of Scheme To Profit From Strangers’ Deaths Gets 6-Year Prison Sentence

Should it be morally wrong to profit from the death of a stranger? What about criminally wrong? What if they’re terminally ill? What if you give them money in order to use their death to reap a profit? These were the core questions in the trial of Joseph Caramadre, who has been sentenced to six years in federal prison more than a year after pleading guilty in the scheme. 

Yes, he and his associate pleaded guilty more than a year ago, and were supposed to be sentenced in the spring. It’s because of Caramadre’s attempts to get a new trial after pleading guilty four days into his first one.

A basic summary is that he took an investment product that life insurance companies offered in the ’90s and ’00s, the variable annuity, and exploited a loophole. Variable annuities have what’s called a guaranteed death benefit. No matter how risky the investment, the listed beneficiary would always receive at least the original principal they put in back after the person listed as the “annuitant” died.

Caramadre did something that none of the life insurance companies offering variable annuities had anticipated: he paid dying people a few thousand dollars to sign up as annuitants for wealthy strangers. They had the wacky idea that customers would use the product to protect large nest eggs for their heirs, not to profiteer from others’ deaths. Wacky.

Caramadre Gets Six Years for Investment Scheme Involving Terminally Ill [ProPublica]

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  1. mongo says:

    He didn’t do anything illegal. He just read and understood the fine print.

    What is amusing is the “victims” claiming that he took advantage of the dying because he didn’t share enough of the profits with them. Until he shows up there is nothing to share.

    • PhillyDom says:

      In all 50 states, the insurance laws require that the owner of a life insurance policy must have what’s called an “insurable interest” in the life of the person covered by the policy. (It’s what prevents people from taking out insurance on total strangers.) Neither Caramadre nor his “investors” had such an interest. Ergo, he broke the law.

      • furiousd says:

        It seems like that should be something the insurance companies should bear the burden of verifying when the policy is taken out. If they did so and he was fraudulent or deceptive in appearing to meet this requirement, then yes he broke the law and is subject to full penalties. If it’s not something that ever came up (whether verbally or in the print of the policy he signed) then it’s strange/creepy/whatever but not illegal

      • schwartzster says:

        Viatication is a recognized exception; the insured received cash up front in exchange for Caramadre getting the death benefit, so I’d say it was legit.

        You can learn the details of this case in a variety of places and it is clear that the insurance companies became well aware of what was happening and made no attempts to stop it, he never lied to the insurance companies or the insured. This was a win-win for the investors and the insured that the insurance companies didn’t seem to mind. Of course, I wasn’t present at the trial, but if the facts as I understand them are correct, I am very disappointed in this verdict.