The Story of National Heritage
In late 1989 National Heritage Life Insurance Company (website) reported an operating loss and 27% reduction of capital from a decline of sales, and in 1990 insurance regulators threatened to shut down the company if it did not raise additional capital. A group of investors offered $4 million to satisfy regulators, in exchange for a controlling interest in National Heritage. The group provided a $4 million check, but once in control of National Heritage, transferred $3 million from National Heritage to help cover the check. This began a long series of schemes in which millions were stolen from National Heritage by the group of investors. Bad investments further depleted National Heritage capital. This story is detailed by an article in the BEST’S REVIEW insurance journal. Anatomy of a Failure.
In 1993, the group decided to cover up all the missing money – about $35 million. They reached out to Mr. Weiss as a financial consultant and told him they needed a way to cover “bad investments”. He was unaware of the theft that caused the financial troubles.
Mr. Weiss agreed to have his company purchase discounted mortgages, with National Heritage funds, and rehabilitate them to increase their value. He also agreed to invest $20 million of his own assets in exchange for stock in the company. The mortgages were eventually taken from Weiss’s company by officers of National Heritage, and placed into a mortgage-backed bond that was then placed on National Heritage books with inflated values in an attempt to cover up the $35 million hole.
In 1994, the Delaware Insurance Department did a full examination of the company and placed it in receivership. Three corporations and 13 individuals were convicted, including Mr. Weiss.
The government never alleged that Mr. Weiss was aware of the theft by the investors and officers of National Heritage until after he had purchased the the mortgages, at which time the company took the mortgages from his control.
Mr. Weiss sought to restore the financial health of National Heritage, and by so doing, make a large profit. He never intended to do financial harm to the company. And, in fact, evidence shows that the mortgages purchased by Mr. Weiss made a profit for the company, not a loss. See “No Losses”.
The government made Mr. Weiss the scapegoat for the failure of National Heritage Life Insurance Company, resulting in a 845 year sentence. While those who were actually responsible for the insurance company failure were given light sentences in plea bargains for cooperating with the government! In fact, Mr. Weiss tried to save the company by investing $20 million dollars of his own money.