Federal prosecutors are investigating a Rhode Island lawyer who recruited terminally ill people so he could buy annuities in their names and cash in when they died. The lawyer, noted local philanthropist Joe Caramadre, began taking out ads in 2007 in the local Catholic diocese’s newspaper, proclaiming “Terminal Illness? $2,000 in CASH, Immediately Available.” The goal was to take advantage of the “death benefit” built into many variable annuities, which, because they are sold as investments, generally don't require the "annuitant" answer health-related questions when purchasing.
The benefit essentially allowed Caramadre, and many similar enterprising investors around the country, to make million-dollar bets on the market, risk-free: If stocks rose while the person was alive, they profited; if they fell, a full refund of the investment was granted. Caramadre says he really did want to help the terminally ill, and gave people money whether they bought into the scheme or not. But the husband of one of his recruits tells the Wall Street Journal that Caramadre never mentioned the annuity. “They took advantage of my wife,” he says. ‘I think they’re scumbags.”