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6 years for R.I. lawyer in fraud targeting terminally ill

PROVIDENCE, R.I. — A federal judge sentenced a Rhode Island lawyer to six years in prison Monday for his role in a $46 million investment fraud that preyed on terminally ill people, calling him the architect of the scheme and saying he didn’t seem to recognize the harm he had caused.

Joseph Caramadre was sentenced in Providence after pleading guilty to wire fraud and conspiracy. His lawyers asked for two years in prison and two years in home confinement. Prosecutors sought 10 years.

Judge William E. Smith also ordered Caramadre to perform 3,000 hours of community service to help the elderly and terminally ill. He put off the question of restitution because Caramadre’s lawyer has objected to the amount.

Caramadre was a prominent lawyer and philanthropist. Prosecutors say he and former employee Raymour Radhakrishnan illegally got personal information from terminally ill people and used it to purchase bonds and annuities that would pay out when the person died.

The judge said Caramadre had obstructed the legal process and committed perjury.

“You seemed to apologize that they were hurt. You don’t seem to recognize that you were the one that hurt them,” Smith said at the sentencing, after Caramadre addressed the court. “You were the one who was the architect of the scheme and ultimately you are the one who’s responsible for the hurt and distress that’s been imposed upon those individuals.”

Radhakrishnan was also sentenced Monday to a year and a day in prison after pleading guilty to the same charges. Prosecutors had revised their sentencing recommendation to five years. Radhakrishnan’s lawyer, Olin Thompson, asked for just one day.

Radhakrishnan apologized to everyone he had wronged, including the families and companies. He said it was satisfying to give money to people — the way people got roped into the scheme — and acknowledged he made misrepresentations to people.

“My compassion led me to my shortfall,” Radhakrishnan told the judge. “I did cut corners.”

Smith repeatedly asked him what he was thinking and why he hadn’t asked someone outside the firm whether what he was doing was legal.

“You’re smart. You’re naive in a lot of ways, but you’re smart. I’m trying to figure out why that bell didn’t go off for you,” the judge said.

Radhakrishnan also was sentenced to six months of home confinement following his prison term.

One comment

  1. This is so reminiscent of how government bond dealers conducted repo to finance positions, before the Drysdale Securities affair. The standard repo contract disregarded accrued interest…sure enough, Drysdale exploited this weakness in the repo contract (albeit in violation of securities laws concerning the amount of leverage a broker-dealer can employ). The aftermath was that the repo contract was rewritten to include both the consideration of accrued interest, and periodic repricing of the securities underlying longer-maturity repo agreements.
    The fault here lies in the glaring sloppiness of the paperwork for a product that is half insurance, and half investment. If the insurers bemoan what has befallen them here, the cure is simple: rewrite the contract, and require that the owner of the variable annuity have a legitimate insurable interest in the life of the person for whom the contract is written.