A Securities and Exchange Commission civil lawsuit that accused Lexington County businessman Ben Staples of setting up an unlawful scheme to reap profits from the deaths of terminally ill people has been settled.
Nearly all charges, including intentional wrongdoing, in the SEC’s case against Staples have been dropped, according to court filings.
Staples, 66, still had to pay $58,049 plus $5,804 interest for acknowledging simple negligence in setting up his plan as well as an additional civil penalty of $58,049, according to a settlement document.
But those payments are minor compared with the $15-plus million the government might have won at trial, said Staples’ lawyer, Michael Montgomery of Columbia.
“While we were confident that a trial would have fully exonerated Ben, the decision to settle was an economic one. Fighting the federal government in a complex securities case is an expensive proposition,” Montgomery said.
Staples’ difficulties with the SEC began in 2011, three years after he began working with terminally ill people to create an unusual financial vehicle to both make money for himself and to help the families of dying people.
In his plan, Staples set up a joint brokerage account with the terminally ill person. Then Staples, using his own money, purchased corporate bonds at a discount and put them in the account. The bonds contained a “survivor’s option” – meaning that when the terminally ill person died, Staples could redeem them at full value.
The terminally ill person benefited this way: When Staples set up the joint brokerage account, he and the dying person signed a contract that the soon-to-be deceased’s family would get $10,000 or so to create an estate whose proceeds could go for funeral or other expenses. They also could have received the entire account had Staples predeceased them, Montgomery said.
In all, the SEC alleged, Staples purchased some $26.5 million in bonds from 35 institutions and made some $6.5 million in profits from 44 terminally ill people.
Montgomery said the plan was legal because Staples complied with the law by fully disclosing in writing what he was doing to everyone involved.
FBI agent Ron Grosse – a respected FBI financial crime specialist in South Carolina – was among those investigating the plan.
“While what Staples was doing may be immoral, it didn’t appear to be illegal,” Grosse wrote in an FBI memo.
CORRECTION: In several news stories between 2013 and 2015 in The State that mentioned the SEC lawsuit, The State might have erroneously implied that the SEC was alleging that Staples was defrauding terminally ill patients of assets they owned before Staples set up the plan. In fact, Staples’ profits came from money he had originally put into the joint accounts.