Three former Bay Area insurance agents have been convicted in federal court in San Francisco of engineering a scheme to create phony life insurance policies and then collect commissions and fees on them. Behnam Halali, 32, and Karen Gagarin, 32, both of San Jose, and Ernest Magat, 35, of Hayward, were found guilty on Monday by a jury in the court of U.S. District Judge Susan Illston after a four-week trial.
They worked as independent contractors selling supplemental life insurance for the American Income Life Insurance Co., known as AIL and based in Waco, Tex., until Halali and Magat were fired and Gagarin resigned in the spring of 2012. They were each convicted of one count of conspiring to commit wire fraud, 13 counts of wire fraud and one count of aggravated identity theft.
A 2014 grand jury indictment alleged that the fraud cost AIL $2.5 million in commissions and bonuses. U.S. Attorney’s Office spokesman Abraham Simmons said evidence at the trial showed that the defendants submitted applications for life insurance on behalf of people who didn’t know that a policy was being applied for or who didn’t want them. They paid recruiters to find people willing to take medical exams in exchange for approximately $100 and then submitted applications in those persons’ names.
They paid initial premiums on the insurance and typically let the policies lapse in one to four months, Simmons said.
The three former agents will be sentenced by Illston on July 28. The conspiracy and wire theft convictions each carry a maximum sentence of 20 years in prison. Aggravated identity theft has a mandatory minimum sentence of two years in prison.
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