Death Be Not Profitable

Investors are finding that terminally ill patients don't make the best investments

In early 2000, Don Elliott gambled his retirement savings on the life expectancy of five AIDS patients.

The Chino Valley retiree invested $112,000 in viaticals, a type of an investment that allows the terminally ill to cash in their life insurance policies while they're still alive and spend the money. Essentially, an investor pays the policyholder a one-time chunk of the insurance payoff; in exchange the investor receives the right to collect on the individual's death benefits.

Viaticals took off with the rise of AIDS in the '80s and '90s as a sort of humanitarian investment to help patients cover end-of-life expenses and buy medication to live out their remaining days in comfort. In Elliott's case, the company that brokered the deal told him that his patients had less than a year to live.

Don Elliott
Don Elliott

Nearly four years later, he has yet to collect on any of his viatical contracts. None of his "investments" have died.

He's all but lost the bet -- when they do die, he can still collect, but Don Elliott is 66 and has his own life expectancy to think about it.

Moreover, Elliott says -- and the Arizona Corporation Commission confirms -- the investment company welshed on its promise to keep up the insurance premiums, so now Elliott has to pay them himself. Each year the patients continue to live reduces the amount he'll eventually collect.

Now he's gambling again, this time through a lawsuit against the firms that sold him the investments. Elliott says either his latest court filings will force the unregistered "investment advisers" to return his money or he'll cut his losses.

In January, Elliott won a $212,000 judgment against The Chamber Group LLC (now called Senior Life Asset Management), an unregistered investment firm run by Joseph Hiland and his two sons, Tyson and Travis, out of offices in Mesa and Prescott.

But collecting the judgment is proving difficult for Elliott. The Hilands are skirting orders from both the Yavapai County Superior Court and the Corporation Commission to pay back more than $16 million to their clients, including dozens of Arizona residents who had invested in about 150 viatical contracts. The contracts sold by the Hilands originated with Carrington Estate Planning Services, a Phoenix company run by Richard Carrington that specialized in viaticals.

In early 2001, the Corporation Commission ordered The Chamber Group to refund its clients' principal investments after the Commission found that "The Chamber Group and the Hilands committed securities fraud and securities registration violations in selling four different investment products: brokered certificates of deposit, viaticals, a tax lien investment program and a money voucher investment program," according to a Commission press release.

Elliott and the Corporation Commission contend the Hilands have used the appeals process and various asset transfers to avoid paying back the investors as ordered.

"Not only are they frustrating collection efforts through their appeals, but they're also using other means like mortgaging their houses to the nth degree, making it hard to find the money," Corporation Commission spokesperson Heather Murphy says.

After winning his lawsuit, Don Elliott enlisted the Yavapai County Sheriff's Office to help him. A writ of restitution was issued on January 14 and two weeks later collectors from the civil division of the sheriff's office went out to the firm's Prescott office, hoping to seize and then sell furniture, computers and other office assets.

They came back empty-handed. The day before, the Hilands had made their assets untouchable by putting everything up as collateral for a $50,000 loan from a company in Oregon called Engage Development LLC.

Elliott's latest legal filing, which is leveled at the Hilands personally, charges that these transfers also were fraudulent. Corporation Commission and Maricopa County Recorders Office documents show that Engage Development is based locally and that it uses the same Mesa address and post office box as Senior Life Management. The lawsuit alleges that the Hilands have simply shifted their assets around and in fact operate both companies.

Joseph Hiland declined to answer questions about his company and the lawsuit. "Everything we did was perfectly legal. If there was anything illegal, I think they'd file criminal charges," he says. "We did nothing fraudulent."

Hiland, who works out of the Mesa office, says his company is still appealing the ruling.

Between 1999 and 2000, Elliott invested about $212,000 with The Chamber Group after responding to a radio spot advertising certificates of deposit that would mature in six months and produce a 9.5 percent return. He plunked about $100,000 into the CDs; the rest went into viatical investments.

Like many elderly investors who'd come to The Chamber Group looking for short-term investments, Elliott came back six months later and tried to cash in his CDs only to learn that he'd purchased 20-year CDs. They wouldn't mature until he was 83 years old. In his court affidavit, Elliott accused the Hilands of misrepresenting the investments, a charge that is similar to testimony from other investors collected by the Corporation Commission in its own investigation.

But Elliott's bigger problem is his five viatical investments.

"I said to [Tyson Hiland], What about these new drugs and new medicines they have to prolong life?'" Elliott says. "And he said, Not with these viaticals they don't, they're too ill. These people are not given a year left to live by Carrington's doctor, the laboratory and their own doctors.'

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