By: Mike Stetzer
April 11, 2011
Struggling with government fines and lawsuit judgments, Florida financial planner Herman "Skip" Jaehne has filed for bankruptcy.
According to the Herald-Tribune, Jaehne's financial problems started with what has now been described by authorities as a fraudulent investment scheme that he started running in 1995. Under this scheme, he would sell viatical settlements to investors. According to Investopedia, a viatical investment involves "speculating on death" - a person with a terminal disease sells all or part of his or her life insurance value at a discount in return for cash. The buyer of the policy then gets to cash in the policy when the original holder dies.
According to the Securities and Exchange Commission, viaticals are highly risky investments because it is often impossible for the investor to predict when the original holder of the policy will pass away. The more quickly the death occurs, the higher his return, whereas if the original holder lives longer, the return diminishes.
At the time of his viatical scheme, Jaehne assured his investors that they'd be able to collect a 12 percent return within 12 to 18 months, the news source reports. This profit was never realized by his clients, and they began to sue him in 2004, the news source reports. His investors reportedly uncovered that Jaehne's employer, Mutual Benefits Corp., had hired a doctor to falsify medical reports to make it appear as though the life insurance holders that sold the viaticals were close to death, even though they were not.
Now, Jaehne says he has $580,215 in assets and $7.3 million in liabilities on his Chapter 7 bankruptcy filing. A large part of his liabilities are made up of the $3 million in civil judgments that 27 investors won against him when suing over the viatical investment scheme. Another $3.6 million is a fine imposed on him by the Florida Office of Financial Regulation for defrauding investors in that same scheme and for selling unregistered securities.
Jaehne also specifies his monthly income and expenses in his Chapter 7 bankruptcy filing - he says he earns $5,170 and spends $5,816, according to the news provider.