The jackpot is small or nonexistent if the old person takes his time dying.

On June 16 of this year, the California Department of Business Oversight issued a desist and refrain order to Encinitas’s Lawrence (Larry) Freeman and two of his many now-defunct companies, Yeshilkoy Insurance Services and Structured Marketing.

Investors Soon Get the Bad News

In peddling financial products, Freeman made “an untrue statement of material fact to investors,” charged the department. Freeman boasted that his product was “a no-risk investment.”

Freeman sold investment contracts to people who handed him millions of dollars, and he should have registered those contracts as securities, said the state. It was the second such offense for Freeman.

Gregg G. lost $400,000 buying into Freeman’s scheme. “What should [Freeman] desist and refrain from doing?” complains Gregg, who wants to see a criminal investigation.

He went to the Federal Bureau of Investigation, the San Diego police, the federal Commodity Futures Trading Commission, the San Diego district attorney’s office, the state attorney general, and the state Department of Insurance before getting what he calls “worthless actions” from the California Department of Business Oversight.

Beginning in 2007, Freeman took in millions of dollars. He was promising investors 36 percent a year — a return so high it should have been a scam tip-off. He told his victims that he needed their money so he could purchase discounted life-insurance policies of rich, elderly policyholders not expected to live long. Initially, Freeman would pay the premiums.

Viaticals, or Death Bets

He called these deals “senior life settlements,” although they are a form of viatical settlement that is more realistically known as a “death bet” because the jackpot is small or nonexistent if the old person takes his time dying. For decades, anti-scam agencies such as the FBI and Securities and Exchange Commission have warned investors about death bets. Some con artists don’t even buy viaticals with investor money — they simply pocket the money they raise.

In 2012, Gregg sued Freeman and some of his companies for fraud. The suit stated that Freeman promised to purchase viaticals, “but he was not in the business of purchasing and selling viatical products.” Nor was he licensed to deal in viaticals, and he never had any intention to pay back Gregg’s money, said the suit. Gregg won and got a judgment, but Freeman has not paid.

San Diego investors got their “Dear John” letter on March 14, 2008. Freeman said he could not pay returns but would be able to resume the payments in five months.

Eric Matz, who put in $100,000 and lost a fourth of it, says, “I was told he had a big lump sum of money [raised from investors]. He explained he had all this money and invested it in a company that went broke. He gambled everybody’s money on a big return, and it didn’t pay off.” Matz realizes that Freeman had no investor authority to put the money into anything but viaticals.

As months passed without payments, investor indignation rose. “I was surprised the guy was walking around with both legs,” says Matz. “If he had taken money from the wrong people, they would have taken him out.” (And not to a fancy restaurant.)

Dr. Gene Muse of Oklahoma City lost $912,000 investing with Freeman, and much of it was from his employees’ pension fund cache. He sued Freeman and also got a judgment that Freeman has not paid. Muse’s attorney, Shawn Fulkerson, deposed Freeman under oath. Freeman admitted that only some of Muse’s money went into senior life settlements. Much went into Structured Marketing, a company he had set up. Freeman also revealed that he had put investors’ money into a pen that supposedly could digitize handwriting and an unexplained adventure in the soap business. He tried to set up a hedge fund. He had his own bank. He had other companies such as CDO Capital.

L. Donald Guess, His Buddy

Freeman admitted under oath that he had done business with L. Donald Guess, a former Coronado dentist who had set up a tax-shelter plan for doctors and dentists. In 2004, a federal judge froze more than $500 million in assets owned by those professionals through Guess’s Xelan operation. The Internal Revenue Service and FBI raided Guess’s headquarters. The IRS thought Xelan was an abusive tax shelter. Guess entities went into bankruptcy.

Guess eventually won that case, but in 2010 he was sentenced to serve 18 months in federal prison for filing false income-tax returns. In 2012, after Guess had been released from prison, an appeals court ruled that he had concealed assets from his ex-wife.

In the deposition, Freeman glowingly called Guess his mentor. Freeman had made a deal to purchase “intellectual property” from Guess — basically, a marketing program to sell insurance products to health professionals. Freeman committed to pay Guess $1.8 million but didn’t pay all he owed, according to the deposition. Guess, while operating his tax shelter, had relationships with offshore tax havens Barbados and the British Virgin Islands.

Fulkerson asked Freeman if he was running a Ponzi scheme. There was no reply. The lawyer also attempted to quiz Freeman about his tax payments. After consulting with his lawyer, Freeman took the Fifth Amendment on any tax subject.

I asked Fulkerson what Freeman and Guess planned to do with investors’ money. “They never had any intentions [of] paying people back. It is alarming that these folks are not behind bars,” he says.

To Hold Investors at Bay

But Freeman has pulled a slick delaying tactic. One of his investors convinced others that good ol’ Larry will pay them back. For seven years, Freeman has been running his Noteupdate.com website. Regularly, he posts information on what he is doing to get investors’ money back. He complains about “technical difficulties” and enthuses about a “promising day,” but he never comes up with money. He tells investors not to contact him.

Freeman did not answer phone calls, so I sent him an email, asking such questions as whether he is running a Ponzi scheme, why he is taking the Fifth Amendment, and whether he has been doing offshore banking. His answer: he is a victim of the Great Recession of 2007–2009. Quoth he, “My enterprises, financed with personal and borrowed funds, were counted among the casualties of that downturn.” He did not address the specific questions.

I couldn’t find out if investors believed him, because I couldn’t get them to call me back.