Contact the Webmaster if you have questions or comments concerning this site. The Department of Corporations has joined securities regulators in over 35 states in a crackdown against firms marketing investments in illegal or fraudulent promissory notes that promise high interest rates but are in fact extremely risky. The department is warning investors to always be suspicious if the notes have an above-market rate with a maturity of less than a year. In addition, the department issued two subpoenas for the production of records to California companies allegedly selling similar investments. Viatical companies allow people to invest in life insurance policies of terminally ill patients, primarily AIDS patients, who then receive a discounted percentage of the death benefit in cash.
Investors then get a share of the death benefit when the insured dies.
Because of the uncertainty of predicting when a person is going to die, these investments are considered especially risky and speculative. In late 1998, the Riverside District Attorney filed indictments on 197 counts against 13 defendants for securities law and grand theft violations for offering and selling promissory notes to elderly investors and misrepresenting the use of funds and the security for the investment. The medical equipment turned out to be non-existent. In some of these cases, the assets or property that was supposed to be securing the investments didn t exist, was overvalued, or wasn t owned by the promoters. In other cases, aspects of the transaction were misrepresented.