Insurance Agent Charged with Defrauding Clients, Money Laundering

Topics:  Marathon

U.S. Attorney’s Office
Central District of Illinois
8 September 2016

FOR IMMEDIATE RELEASE

Springfield, Ill. – A federal grand jury has indicted a Decatur, Ill., man who worked as an independent insurance agent. The indictment, returned Sept. 7, charges James P. Smith, 60, of the 5400 block of Traughber Road, with a fraud scheme that allegedly exposed clients to a potential loss of more than $250,000 from February 2011 to July 2016.

Smith is currently in custody on charges filed by the Macon County State’s Attorney’s Office. The U.S. Clerk of the Court will schedule a date for Smith to appear for arraignment in federal court in Urbana.

The Federal Bureau of Investigation and the Macon County Sheriff’s Office are conducting the investigation. Assistant U.S. Attorney Eugene L. Miller is prosecuting the case with the cooperation of the Macon County State’s Attorney’s Office.

According to the indictment, from at least February 2011 through July 2016, Smith represented that he was employed by or owned the Prairie State Insurance Agency in Decatur, Ill., and he acted as an independent agent. Smith solicited clients to purchase insurance, including whole life insurance, and financial products, including annuities. As part of the alleged scheme, Smith falsely represented the minimum rate of return the annuities could obtain for his clients. Instead of investing clients’ money in insurance, annuities, or other financial products, Smith allegedly used the money for his own benefit.

As alleged in the indictment, Smith requested payments be made payable to “MSM, Inc.,” which he represented was the insurance company or the investment company for the annuity the clients were purchasing. In fact, as Smith knew, MSM, Inc., was actually “Main Street Marathon,” a gas station in Mt. Zion, Ill., owned by Smith. Rather than use the clients’ funds as represented, Smith used the money to finance the gas station without his clients’ knowledge. Smith also used his clients’ money to make mortgage payments on his personal residence.

Further, Smith allegedly cancelled or cashed out clients’ insurance policies or annuities without their knowledge or permission, and used the cash value and / or future premiums or payments for his personal benefit, including to pay his personal attorney’s fees, his personal bankruptcy fees, and as purported annuity payments to other clients to prevent them from discovering that he had not purchased their annuities as promised.

If convicted, the statutory maximum penalty for each count of mail fraud (two counts) and wire fraud (one count) is 20 years in prison, and a fine of up to $250,000, and the statutory maximum penalty for the offense of money laundering (one count) is 20 years in prison, and a fine of up to $500,000, or twice the value of property involved in the transactions, whichever is greater.

Members of the public are reminded that an indictment is merely an accusation; the defendant is presumed innocent unless proven guilty.