Prison for Rhode Island Lawyer in Tale of Insurance and Death

Joseph Caramadre contends he was a philanthropist and a clever lawyer, offering $2,000 payments to people who were dying. The United States attorney contends that he was a scam artist, preying on the very ill and getting rich by defrauding insurance companies.

In the face of overwhelming evidence, Mr. Caramadre pleaded guilty last year, and on Monday, a federal judge here sent him to prison for six years.

Mr. Caramadre, an estate planner and a prominent member of the state’s Roman Catholic establishment, said he was merely exploiting a gap in insurance companies’ writing of the rules governing their products, and doing nothing illegal. Instead, he said, he was giving thousands of dollars to struggling families. His largess is well known; the court received dozens of letters praising Mr. Caramadre, including one from the bishop of Providence and one from a former Boston mayor.

“I created this program to be a win-win situation,” said Mr. Caramadre, 53, to Judge William E. Smith in Federal District Court.

Mr. Caramadre’s scheme, which a federal magistrate judge said cost insurers and bond insurers $46 million over 15 years, usually had two parts.

First, he advertised in a Catholic newspaper in Rhode Island, seeking terminally ill patients, to whom he would pay at least $2,000. He then collected signatures from those who were close to death so he could set up certain types of annuities and bonds in their names, with investment from Mr. Caramadre’s clients, friends and family members. When the patients died, the annuities or bonds would pay out to the investors.

Among Mr. Caramadre’s investors was Terry McAuliffe, the governor-elect of Virginia, whose campaign in October released a statement saying that he was a “passive investor” in the scheme. It said that Mr. McAuliffe had given his earnings from the investment and also a campaign donation from Mr. Caramadre to the American Cancer Society.

In 2011, Mr. Caramadre and his employee, Raymour Radhakrishnan, were charged in a 66-count indictment that accused them of fraud, identity theft, conspiracy, money laundering and witness tampering. The two initially pleaded not guilty, but in November last year pleaded guilty to one count each of fraud and conspiracy.

In the plea agreement, they admitted to obtaining patient information by misrepresentation and omission. The agreement said that Mr. Radhakrishnan lied about what they planned to do with it. They also admitted to lying to insurance companies and brokers about what they were doing. The agreement also said that they committed wire fraud by putting $280,000 into a brokerage account opened in the names of Mr. Caramadre and one of the terminally ill patients.

Mr. Caramadre has since tried to change his plea, and maintains that it was Mr. Radhakrishnan, not him, who lied to patients, but Judge Smith denied his motion to do so and said on Monday that it was “an incredibly cynical effort to manipulate the court” that had lengthened his sentence by at least a year.

The case has raised questions about the life insurance industry’s increasingly complicated financial products. It has also presented the court with a vexing picture of insurance companies whose own rules seemed to enable Mr. Caramadre’s scheme and of victims who gained money even as they sustained emotional and psychological losses.