SEC Charges Benjamin S. Staples and his Son Benjamin O. Staples with Profiting from Terminally Ill Patients

SEC v. Benjamin S. Staples and Benjamin O. Staples, Case No. 3:13-2575-MBS.  On September 20, 2013, the SEC announced fraud charges against Benjamin S. Staples and Benjamin O. Staples.  The SEC alleges that the Stapleses lured terminally ill people into their scheme by offering to pay their funeral expenses if they agreed to open the joint accounts and sign documents that relinquished their ownership rights to the accounts or any assets in them.  According to the SEC’s complaint, the Stapleses ran what they called the Estate Assistance Program.  Using investor money, they bought approximately $26.5 million in bonds from numerous issuers.  To enter into the Estate Assistance Program, the terminally ill people had to sign three documents: an application to open a joint brokerage account, an estate assistance agreement, and a participant letter.  The documents required the people to give up their ownership interests in the bonds.  The SEC alleges that once a joint account was opened, the Stapleses bought discounted corporate bonds with “survivor’s option” that allowed them to redeem the bonds for the full principal amount prior to maturity if a joint owner of the bond dies.  Once they redeemed bonds, they profited from the difference between the discounted price of the bonds they bought and the full principal amount they obtained when redeeming the bonds early.  The Stapleses made more than $6.5 million.  According to the SEC, when a participant died, the Stapleses would write the brokerage firm where the joint account was held and seek redemption of the bonds under survivor’s option.  To obtain the proceeds, the Stapleses lied by saying that that the deceased participant was an “owner” of the bonds and failed to disclose that deceased had given up their ownership interests in the bonds.  The SEC charged the Stapleses with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5.  The SEC seeks disgorgement, civil monetary penalties, and injunctive relief.  The complaint names a Brian Staples as a relief defendant to recovering $400,000 in profits that were transferred into his possession.  The SEC has not accused Brian Staples of wrongdoing.

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