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Michael McNerney gets prison for Mutual Benefits scam

By Palm Beach Business.com

FORT LAUDERDALE — The founding partner of a now-defunct Fort Lauderdale law firm will be spending the next five years in federal prison for his role in one of the largest scams in Florida history.

U.S. Judge Adalberto Jordan sentenced Michael J. McNerney, one of the founders of the Brinkley, NcNerney, Morgan, Solomon & Tatum law firm, to 60 months in prison, plus three years of supervised release and payment of $826 million in restitution. McNerney was lead outside counsel to Mutual Benefits Corp., a viaticals firm that swindled $1.25 billion from as many as 30,000 victims worldwide.

A viaticals firm buys the life insurance policies of terminally ill patients and sells shares to investors. When the patient dies, the firm receives the proceeds from the insurance policy and distributes the profit to the investor. Mutual Benefit also was involved in the life insurance settlement business, which is similar to viaticals but involves elderly policyholders rather than terminally ill patients. 

Viaticals are legitimate investments, but it’s critical for the viaticals firm  to be able to predict the life spans of the terminally ill patients from which they buy the life insurance policies. If the patients live longer than expected, the viaticals firm and its investors will lose their proverbial shirts. Mutual Benefit, founded by convicted felon Joel Steinger, didn’t even bother to try. The firm simply made up life expectancy reports.

According to court records, McNerney, who represented Mutual Benefit for about 10 years through May 2004, helped conceal all this from both regulators and the investing public. McNerney helped hide Steinger’s involvement in the firm and lied about Mutual Benefits’ financial strength and its ability to accurately predict to predict life expectancies.