Betting Their Lives

It's easy for a three-time felon to get $20 million for his investment company, as long as no one asks any questions.

On December 17, 2008, Keith King opened his e-mail and unknowingly played his part in the downfall of what state prosecutors say is a $20 million investment scam.

King, an Austin mortgage consultant, had been moonlighting for a friend, hawking a sure-fire investment opportunity in the midst of crumbling financial markets. Like any legitimate, non-sketchy investment program, it was advertised in the financial services section of Craigslist.

King saw an e-mail from a guy named Ron Frank: "I saw your ad...I may be interested in making an investment. Could you send me some info?"

"Yes, sir," King replied. "Take a look at this, and if you're still interested, let me know. We can then set up a meeting with my partner, David Herzog, a long-time financial advisor who specializes in retirement income."

King shot Frank some literature from a company called National Life Settlements, which sold interests in securitized pools of life insurance policies of old, sick people who sold their policies for less than face value so they'd have the money right away. These were people who were going to die in five years. All you had to do was wait around for the geezers to croak, and your $25,000 investment (the minimum) would yield $37,500, guaranteed. No traditional investment vehicle guaranteed that kind of no-risk return, according to National Life Settlements. If you invested before January 1, 2009, you'd get a 10 percent return. After that, for some reason, the return would dip to 8 percent.

Frank replied the following day, saying he was really interested and wanted to talk to Herzog ASAP. King gave Frank Herzog's phone numbers. What Frank didn't say was that his real name was Rani Sabban, and he was an investigator for the Texas State Securities Board.

According to Sabban's subsequent affidavit, Herzog explained to him that NLS was run by a Houston guy named Howard Judah — a retired former "head" of Ford Motor Credit — and his partner in Colorado, Greg Jablonski. Herzog e-mailed "Ron Frank" a PowerPoint presentation detailing how the investment product worked. In true Mission: Impossible style, according to Sabban, Herzog asked Sabban to "destroy" the file after he viewed it.

Sabban and Herzog forged a professional relationship built upon mutual omission: Sabban wouldn't say he was working undercover, and Herzog wouldn't say that Howard Judah was a three-time felon who wouldn't recognize a sensible investment program if it bit him in the ass. (National Life Settlements' literature failed to disclose that Judah had been convicted in a New York federal court of wire fraud, contempt and money laundering in the late 1990s. It's doubtful that NLS's sales agents knew this.)

The same could be said for the nearly 300 people — many of whom were public schoolteachers — in Texas and abroad who invested more than $20 million in National Life Settlements. In Texas, teachers at or near retirement rolled $2.6 million from their state pensions into NLS. Many of these people were steered toward NLS through insurance agents they trusted.

As far as the State Securities Board was concerned, Judah and Jablonski were selling unregistered securities; in other words, they didn't have proper state certification. In 2009, the board and the Texas Attorney General's Office seized NLS's assets and assigned a receiver to oversee reimbursement to investors. Judah and Jablonski were sanctioned civilly.

Then, in January 2011, the two were charged criminally in Harris County District Court with misleading investors. Both men maintain they are not guilty. (There are still hearings scheduled before a formal plea must be entered.) According to securities ­regulators and district prosecutors, Judah and Jablonski were responsible for the following violations, among others:

• They only invested a fraction of their clients' money and used the rest to line their own pockets.

• They claimed that NLS was an industry leader before it even had any clients.

• They misrepresented that investors' returns were guaranteed.

• They misrepresented that NLS had billions of dollars in backing from the Federal Reserve.

If NLS was the scam that state authorities allege, it was an almost obscenely unsophisticated one, perpetrated by a soft-headed septuagenarian and his equally oblivious co-conspirator. If it was a scam, it reads as a sort of what-not-to-do guide that could serve as a learning tool for budding swindlers. So if you're a budding swindler, pay attention to what Judah and Jablonski did, and try to do pretty much the opposite. It will go a long way toward ensuring an exciting career in white-collar crime.

Though not illegal, life settlements are perhaps the most repugnant way to make a buck off an investment.

They literally place a value on human suffering and death. The industry's ideal insurance policy was written for an old person with at least two severe medical conditions.  Once you plunk your money down, you become a buzzard. You are waiting for someone's grandmother to die so that you can get a return on investment. Ideally, this grandmother is in an advanced stage of renal failure or smokes Salems through a stoma, because you're betting on the short life expectancy that was advertised. If doctors suddenly cure what ails them, you're screwed.

Next Page »
My Voice Nation Help

Good news: this website (======= =======) we has been updated and add products and many things they abandoned their increases are welcome to visit our website. Accept cash or credit card payments, free transport. You can try oh, will make you satis.


The old saying "If it seems too good to be true, then it probably is (too good to be true)" still holds true.


You guys are 2 in a row with solid cover stories this month. Keep up the good work, Malisow.

Note to the Editor-in-Chief: Can you see how this type of story is more useful than uninspired "top five lists" and vanity blogs about "The 1980s softcore cable porn I jerked off to when I was a kid?"

Gary Packwood
Gary Packwood

Good article about strange companies in the business of trying to guess when folks are going to die.

I think we are talking about Life Partner Holdings, Inc. out of Waco, Texas ...NOW.

And their stock (Life Partner Holdings) closed out today at about $8.00 per share

And today, March 9, 2011 Attorneys are attempting to communicate with investors.

Lieff Cabraser Heimann & Bernstein, LLP Reminds Investors of Upcoming Deadline In Class Action Lawsuits Against Life Partners Holdings, Inc. (April 4, 2011)

Again, the deadline is April 4, 2011 and investors need to be aware of that deadline so we can all watch the stock price move down to $7, $6, $5, $4, $3, $2, $1 and then one penny.


Not a timely or well-informed article, and you gotta love folks throwing in their opinion into these articles, as well. NLS was shut down 2 freaking years ago, and mainly for non-disclosure of ownership. ie. They were the owners and beneficiaries of the policies. Hell, 2 others were shut down last year. You couldn't write-up on at least a more recent one?

Secondly, You did know annuity companies have been using mortality rates (ie. life expectancies) to determine a payout, right? Right? No, of course you didn't. Please tell me your outrage there. These are 80-90 year olds, typically. Nobody is betting on a 20 year old getting run over by a car.

Thirdly, The State of Texas has determined this not to be a security. Links are below.

If you want to be a serious journalist, keep your opinions to yourself, and be better informed. It took 15 minutes to shred every ounce of credibility regarding this article.


That would primarily be in response to the WSJ article from Dec. that claimed that Life Partners was tossing out valid life expectancies and replacing them with an "in-house" doctor who only took a few minutes to review each and significally shortened the LE's making them look more favorable than they really were.

And, yes. THAT story would've been a tad better as far as timeliness.

Instead we get a story that was written in the Chron when it actually occured. 2 years ago.

Look into Retirement Value and AGAP, as well for at least some that happened in the last 12 months.

Craig Malisow
Craig Malisow

Hi Texanfanrocket,

Thanks for posting your thoughts, and I just wanted to briefly respond.

1.) The reason we felt this was a timely article was that there are currently criminal charges pending. Although the company went into receivership in 2009, the story wasn't over. But of course, it's all up to the amount of interest a person has in a story. There are plenty of 600-word summaries of the NLS receivership, but if a person wants to dive deeper and get to know the people involved, and their histories, then they may enjoy an in-depth look. Different strokes, I suppose.

2.) Yes, life expectancy is calculated in both annuities and life settlements, but they are different products. Of course, my characterization of life settlements as "repugnant" is an opinion, and I understand that other people may not feel the same way. However, I hardly feel that a difference of opinion is a "credibility" factor.

3.) I think the point is that the State Securities Board defines life settlements as securities, and Judah and Jablonski are being charged with securities fraud. We'll be following the proceedings, and if a trial or appellate court rules in this case that NLS was not peddling securities, then we'll report that.

Thanks again for sharing your thoughts,Craig Malisow


Hi Craig,

1.) There have been in-depth articles written in both Forbes and the Wall Street Journal about these. I'll be more than happy to provide links if you would like.

2.) Did you know that Social Security uses these LE's, also! How repugnant to think our Gov. uses tables to determine when people will die? If you want to really be offended, then look no further than the Insurance Companies. The "Cash Value" on policies is so laughably bad that it created this market in the first place. Imagine if you put away $10,000 a year for a $1,000,000 insurance policy for 30 years and then your significant other passes, or you need extra cash, etc. and the insurance company decides that they will give you $100,000 for it?!? The whole reason this exists is so folks can get additional funding and has been around since 1911... But I'll assume you didn't know that, either.

Life Settlements have been used as investments by institutions for years, including Berkshire Hathaway, Wells Fargo, and the like.

3.) NO. You obviously didn't look at the link I provided. It is NOT defined that way by the State of Texas. They are being charged by the SEC because they worked in several States and are therefore subject to Federal law, which at this point does seem to regard these as a security.



The first point is that typically investors are buying a bundle of policies with the full understanding that the estimates are just that: estimates. Some will pass earlier than others. The main issue is the knowledge that folks in their 80s tend to die sooner rather than later.

And if the TSSB had determined these to be securities, Life Partners would have been shut down years ago. They are located in Waco, after all.

If and when they are determined to be securities, I promise I'll be the first to let you know.

Craig Malisow
Craig Malisow

Hi Texanfanrocket,

I don't want to prolong this exchange indefinitely, but, if you read closely, my characterization of life settlements as repugnant is not based on the mere fact that LE's are used. LE's themselves are completely benign. My opinion -- and again, it's only my opinion -- was based on third parties literally profiting from someone else's death. The fact that LE's are a factor is a non-issue. Investors are not making money off pork bellies or a better mousetrap; they are literally getting a payout upon a complete stranger's death. Was that person going to die anyway? Absolutely -- we all are. So therefore, some people might say, "Look, this old bag is gonna kick the bucket anyway; I might as well make some money off it," and sleep peacefully. You might feel that, since the seller of a policy gets cash they might need right away, then everyone benefits. Totally valid point. It's also a valid point that some people might find that idea ghastly. Again, different strokes.

And again: the State Securities Board believes life settlements are securities, regardless of what the court ruling says in the link you provided. Now, you might believe the Board to be foolhardy and quixotic in their stance against life settlements, but nevertheless, they are the ones who believe they had jurisdiction, and they are the ones who got the ball rolling. Again, you can disagree with them, and hey, maybe they'll change their minds in the future, but right now, they believe life settlements are securities. (The SEC is still undecided on the matter and recently convened a task force to look into it; the task force recommended that they be defined as securities).

I'm sure you'll again point out the error of my ways, and I truly appreciate your input, but I think I've addressed everything.


Houston Concert Tickets