Sonoma County man's soured retirement bet reveals risks of investing in timely demise

Nearly 20 years ago in 1998, Petaluma jazz musician Christopher Amberger gave $20,000 to Legacy Capital Corp. with the hope of a 12 percent return. The transaction involved buying portions of two life-insurance policies held then by patients with life expectancy of 18 and 24 months, according to Amberger. If the patients died as expected within two years, the investment would pay off.

But the patients with AIDS did not die as expected. They apparently lived for many years and may still be alive. In October 2016, Amberger sued Legacy in federal court for amounts he alleges he lost plus punitive damages. The complaint includes allegations of violation of the consumer legal remedies act, fraud, breach of fiduciary duty and violation of the Securities Act of 1933.

One of the life-insurance policies was with Massachusetts Indemnity, and the other with MetLife, according to the lawsuit.


“It was supposed to pay off in two years,” Amberger said in an interview. “It didn't.”

Amberger is a jazz bass player who has made his living for several decades as a musician. He moved to Petaluma some 30 years ago. Now age 68, he played a gig recently at Claremont Club in Berkeley and one on March 28 at Dry Creek Kitchen in Healdsburg. Amberger plays regularly with Peter Welker, another Petaluma jazz musician.

“You have to work 500 gigs to make $30,000 a year,” said Amberger, noting that he receives about $600 a month from Social Security. “For me, $20,000 was like $200,000 to the average Joe,” he said. “They tell you you need $1 million to retire. I'm not even close.”

New York-based Legacy Benefits, LLC, named as a co-defendant in the lawsuit, has Anat Peirez as its general counsel.

“Mr. Amberger entered into a transaction with Legacy Capital Corp. in 1998, almost 20 years ago,” Peirez wrote in an email to North Bay Business Journal. “That transaction is wholly unrelated to Legacy Benefits, LLC, which was established in 2008 and has had no business dealings with neither Mr. Amberger nor Legacy Capital Corp.”

“It is clear that all the claims in Mr. Amberger's action are not only baseless but well beyond the statute of limitations,” Peirez said. “Based on the choice of jurisdiction/venue provisions in the contract between Mr. Amberger and Legacy Capital Corp., the defendants successfully petitioned to transfer the action to a New York court, where it is currently pending.”


The defendants filed an answer in the U.S. District Court in New York. “Legacy Benefits, LLC intends to vigorously defend itself against all the meritless claims made against it in this action,” Peirez said.

In the answer, all three Legacy entities and trustee Mills, Potoczak denied all the allegations in Amberger's complaint, and requested dismissal of the lawsuit as well as attorney fees and costs. The defendants are represented by Jeffrey Kramer, attorney with Locke Lord in New York.

In January, the court of the Northern District of California ordered that the action be transferred to the Southern District of New York. A section of the contract Amberger entered into stated: “This Agreement shall be governed by the laws of the State of New York, and any litigation related hereto shall be brought in the State of New York.”

The lawsuit alleges that Legacy “knew that viatical settlement investments were risky - especially for AIDS patients,” the lawsuit stated. Legacy Capital Corp. “knew that the first effective retroviral drugs, lamivudine and zidovudine, were released on Sept. 26, 1997 and by the time of Plaintiff's investment, had shown significant promise,” the lawsuit alleged, and that “these investments were exceedingly risky and inappropriate for a small-time unexperienced investor.”


Viatical investments may appear lugubrious because they are a speculative financial bet against the survival of persons, and the investor benefits from viators' early demise. Viatical investments assume a risk-benefit position similar to that of a person who buys life insurance on himself or herself, typically naming family members as beneficiaries who then benefit financially from the purchaser's early demise when premium payments are few.

A viatical settlement involves sale of a life insurance policy on a terminally ill patient who may need money for medications or to improve quality of life. Typically, a viatical contract gives the ill patient a portion of the face value of the policy in cash. Patients in viatical investments usually have life expectancy less than two years.

Sale of a life-insurance policy on an insured with a longer life expectancy is called a life settlement. Usually such settlement amounts are higher than insureds would obtain under a surrender value or cash value - the savings portion of a whole-life insurance policy, which may impose a surrender charge up to 10 percent.

In the Amberger case, he invested $20,000 in the form of slices of two life insurance policies, each with estimated face value of about $100,000.


The market for life settlements and viaticals is difficult to measure. According to Life Settlements Report, which had offices in Petaluma, the total number of transactions in 2015 was about 1,100, with some $325 million paid on face value of nearly $1.6 billion. The report, owned by The Deal, listed Legacy Benefits 12th in its 2015 ranking, with about 35 settlements sold that year for an estimated $6.7 million on face value of $63 million.

The seller of a viatical or life settlement contract places the policy with an escrow agent or trustee, such as accounting firm Mills, Potoczak & Co., based in Cleveland, Ohio, which held policies purchased by Amberger, according to his lawsuit. Mills Potoczak, alleged in the lawsuit to have breached its fiduciary duty, was expected to “keep track of the dying insured and advise when the insured was dead,” the lawsuit alleged. Amberger named Mills, Potoczak as a co-defendant.

“I heard from them once in two and a half years,” Amberger alleged, then he called the company about every year to check whether the viators (insured persons under the policies) were still alive.

“To make the investment more attractive, Legacy Capital Corp. promised to retain from the investment sum an amount sufficient to pay all life insurance premiums for a period equal to two times the life expectancy of the dying insured,” the lawsuit alleged.


Because the viator apparently remained alive, once these periods ran out after about three years, Amberger had to continue paying premiums on the underlying insurance policy, additional amounts he estimates totaled about $2,500, according to the lawsuit. In October 2015, Amberger's interest in both policies was canceled after he stopped paying premiums.

Premiums on one of the policies were initially paid through an employer-benefit program, according to Douglas Applegate, attorney for Amberger. Applegate is a partner with San Francisco-based Seiler Epstein Ziegler & Applegate. The employer of one of the viators was General Electric, the lawsuit states, which had a group insurance policy with MetLife and paid premiums until the employee retired, Applegate said.

Applegate filed a petition for writ of mandate with supporting documents in February in U.S. District Court, opposing transfer of the case to the New York district court. In the lawsuit, Applegate claimed that Legacy Capital, Legacy Benefits, LLC and Legacy Benefits Corp. are “believed to be controlled by Meir Eliav, an individual resident of New York owning more than 10 percent of the stock or membership interest of each entity.”

In April 2017, the website of Legacy Benefits showed Meir Eliav as its chairman and noted that he founded Legacy Benefits Corp. in 1991 and Legacy Benefits LLC in 2007.

“As a pioneer in the settlement industry, he was a founding member and past president of the Viatical and Life Settlement Association of America,” the website stated. Eliav was born in Argentina and emigrated in 1964 to Israel, where he studied finance and earned an MBA, then embarked on a career in finance and banking, the Legacy website said.

“We don't know who the employee is,” Applegate said of one of the viators in the Amberger case. “We don't know when he stopped working. About a year ago, Chris (Amberger) got a bill for that policy as well. That's when he said, what the hell is going on here.” Premium invoices on the policies kept coming until the end of 2016, Applegate said.

Amberger bought the viatical investments through Josh Brackett, an agent of Legacy Capital Corp., according to the complaint, filed in U.S. District Court in San Francisco. Brackett supplied Amberger with a report on typical returns from viatical settlements that “ranged from a low of 12 percent to a high of 60 percent,” the lawsuit stated.

Amberger relied on “the opinion of an independent board-certified physician that the life expectancy of the viator was consistent with the investment objectives of a 12 percent return on investment,” the lawsuit alleged.


“I will be doing discovery,” Applegate said of the lawsuit. “Right now I am trying to figure out what court I land in. We are in limbo with venue.”

He expects to learn whether either of the patients with AIDS is still alive, though relevant documents will likely be sealed under confidentiality laws affecting medical records.

In the lawsuit, Applegate seeks attorney fees. “That's a big number,” he said. “You're entitled to interest” at 7 percent to 10 percent in California, plus punitive damages, typically up to four times actual damages. “We are talking somewhere around $150,000 to $200,000,” Applegate said.


Viatical investments surged during years when HIV was difficult to treat, according to Applegate. “Both of them were AIDS,” he said about the medical conditions of insured persons in the investments by Amberger. Once treatment for HIV became more effective, “they are still sold for certain cancers,” Applegate said of viatical investments, but “not very often. They really came up for the AIDS epidemic. There is still a small market.”

Amberger “invested $20,000 of his retirement savings into the viaticals,” Applegate said. “This was a way he could expand his retirement portfolio. He was a musician. He didn't have a lot of money.”

“Finally he became suspicious,” Applegate said. After hiring a different attorney to write a letter to Legacy, Amberger filed the lawsuit.

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at or 707-521-4257

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