The American government went after a Ponzi scheme operators’ wife for a $465,000 life insurance payout
The day after a Ponzi scheme operator died the United States government went after the remaining balance of his life insurance payout.
After he was diagnosed with cancer Robert E. Lee Jr withdrew half of his $1 million life insurance policy because he was too sick to continue working.
A year later the investment banker and broker, was arrested and found guilty of carrying out a million-dollar Ponzi scheme.
Cathy Lee, Robert’s wife filed a motion to dismiss the government's claim claiming she had no idea her late husband was involved in anything illegal and that he paid his premiums with his legitimate income.
The courts rejected her motion on the government’s assertion the premium payments came from the Citibank account that held the Ponzi scheme proceeds.
“If the government proves that criminal activity funded Lee’s premium payments, claimant may have to forfeit the life insurance disbursement,” wrote Judge Jeffrey Meyer, who cited a 2008 ruling by the U.S. Court of Appeals by the Second Circuit that all the government needs to do to pursue a forfeiture claim is to prove the money was linked to a criminal enterprise.
In 2013, Lee who worked for Rockwell Global Capital, was investigated by the Financial Industry Regulatory Authority investigation for failing to follow a customer's instructions, making misrepresentations to a client and for providing false testimony to FINRA.
FINRA imposed a lifetime ban, which barred him from working for anything FINRA would regulate, and he was fired from Rockwell.
But Lee didn’t tell several of his clients about the ban, who believed he still worked at Rockwell and investing their money. Authorities say he was actually using some of the funds to pay off other investors and putting much of it in his personal account.
In 2013, Lee's scheme started to fall apart as clients started to ask him to liquidate their portfolios and he could not.
Lee pleaded guilty to five counts of wire fraud last December, and was sentenced this past March. He never made it to prison. He was being treated for a rare cancer of the joints when he died in April.
