Lexington, SC: The Securities and Exchange Commission (SEC) today charged a father and son duo, in Lexington South Carolina, of running a fraudulent investment scheme designed to specifically target some of society’s most vulnerable citizens, the terminally ill. The two are charged with profiting illegally from the deaths of their victims.

According to the charges filed in Columbia, SC., Benjamin S. Staples and his son Benjamin O. Staples designed a scheme by which they defrauded brokerage firms and bond issuer’s alike making over $6.5 million in profits in the process. The Staples recruited terminally ill individuals to their program by preying on these individuals fear of the high costs of a funeral. The duo lured people in with the promise that they, the Staples, would agree to pay the funeral expenses if the sick individuals would agree to open joint accounts with the Staples. The father, son team also had the individuals sign documents which relinquished ownership in the accounts or any assets that may be in them.

“The Staples exploited the tragic circumstances surrounding a terminally ill diagnosis and turned the misfortune of others into a profit-making enterprise for themselves.

The Staples deceived brokerage firms and bond issuers by casting themselves as survivors of a joint ownership situation when the deceased had no legal ties to the bonds at all.” said Kenneth Israel, Director of the SEC’s Salt Lake Regional Office that investigated the case.

The SEC alleges that once the two men had sole control of the joint account opened with the terminally ill patient, they would purchase discount corporate bonds containing a “survivor’s option”. Essentially this allowed them to redeem the bond for the full principal amount prior to maturity if the joint owner of the bond died. Naturally, knowing that their “joint owner” was terminally ill, the Staples had every reason to believe that they would be collecting shortly. Following the death of one of their terminally ill patients the Staples would redeem the bond using the “survivor’s option” to swindle the brokerage firm and by misrepresenting that the deceased individual had rights to the bond. They would then pocket the difference between the discounted price at which they had purchased the bonds and the full purchase price they collected when they redeemed the bonds early.

The investigation found that the Staples operated what they called the Estate Assistance Program and had recruited over 44 individuals into the program purchasing approximately $26.5 million in bonds from at least 35 issuers.

When an individual signed up for their program the Staples required the terminally ill individuals to sign three documents: an application to open a joint brokerage account with them, an estate assistance agreement, and a participant letter.  The latter two documents required the terminally ill participant to relinquish any ownership interest in the assets in the joint account, including the bonds that the Staples later purchased. Once the terminally ill person had passed, the Staples would send a letter to the brokerage firm exercising the “survivor clause” and falsely representing that the deceased was the “owner” of the bond. The agreements between the Staples and their clients were never revealed to the brokerage companies.

The SEC’s complaint charges Ben S. Staples and Ben O. Staples with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5

The frailest in our society are also the easiest for someone to scam. From the first time investor, to the sick and elderly scam artists are always looking for ways to either scam the public or use the public to scam someone else. Making sure that due diligence is followed, leads are legitimate, and that businesses or businessmen are not just con artists looking for a quick buck are essential parts of the investment community and should always be followed.