Minor Vargas, the president and CEO of Costa Rican-based Provident Capital Indemnity (PCI), was arrested last week in New York on charges of misleading investors in a $670 million fraud scheme. Vargas, along with auditor Jorge Luis Castillo, is charged with committing wire and mail fraud on financial promises made to investors on life insurance policies. Castillo was arrested last week in New Jersey.
According to a statement by the U.S. Securities and Exchange Commission (SEC), the arrests were issued to halt the massive, ongoing fraud the company. PCI earned its wealth by claiming to provide financial guarantee bonds on life settlements and by promising to protect investors interests in life insurance policies by paying a death benefit if the insured party lives beyond their life expectancy.
The bonds offered by PCI bonds offered a fixed maturity date for the investments and the company was obligated to pay investors the face value of the insurance policy by a certain date if the insured lived past his life expectancy date.
According to the SEC complaint, from at least 2004 through March 2010, PCI issued approximately 197 fraudulent bond offerings of investments in life insurance policies that were worth more than $670 million.
“PCI has been accused of lying to investors across the globe to sell more than half a billion dollars worth of ‘guaranteed’ bonds which turned out to be worthless,” said the U.S. Attorney for the Eastern District of Virginia Neil H. MacBride this week.
The SEC complaint also alleges that the audits performed by Castillo were illegitimate and fraudulent, as the company assets reported by the audits were exaggerated and fictitious.
The arrest of Vargas and Castillo has caused considerable national uproar amongst national businesses and in the Costa Rican First and Second Division soccer leagues. Vargas owns or holds shares in 35 national companies, including the soccer teams Barrio México, Liberia Mia and Brujas.
Late last week, several of Vargas’ offices in Costa Rica were searched by the Judicial Investigation Police (OIJ). On Friday, Vargas was denied bail by a federal judge in New York and was later transferred to a Virginia jail where he will remain until given a court date.
