Structured Settlement Swindler With Kennedy Ties Sentenced to Prison

By Jim Sams | September 25, 2020

A well-connected Virginia financial advisor was sentenced to five years and 10 months in prison for embezzling approximately $8 million from money that the U.S. government and a hospital had entrusted to him to set up annuities for 13 people who were the beneficiaries of medical malpractice settlements.

Joseph Edward Gargan, owner of The Pension Co. in Arlington, Va., was also ordered to pay $9,117,165 in restitution, which represents the money he stole plus the extra cost of the annuities that the government established after realizing that the malpractice victims had been swindled, the U.S. Attorney’s Office for the Eastern District of Virginia said in a press release.

Gargan, 60, is a relative of the late President John F. Kennedy. He is also well known to Washington D.C. luminaries as a major investor in Courtroom Connect, a virtual legal hearing platform, and Instant Labs, a COVID-19 test provider.

Prosecutors say from 2015 to 2019 the government transferred a total of $15,925,00 to Gargan’s company, which had been hired by a structured settlement broker to set up annuities for plaintiffs who filed six malpractice suits against hospitals and clinics operated or insured by the federal government. Gargan embezzled $6,925,000 of that money.

Gargan also embezzled $1,032,750 that had been entrusted to him by the self-insured St. John’s Riverside Hospital in Yonkers to establish a trust fund for a severely disabled child. That money is now gone and nothing is available to pay for the child’s care, court documents say. Prosecutors asked the court to allocate a portion of the restitution paid to replace that money.

Prosecutors say Gargan carefully covered his tracks.

“In some cases, Gargan attempted to conceal his criminal activity by creating false documents purporting to show that he had purchased the annuities when, in fact, he had embezzled and converted that money to his own use,” the U.S. Attorney’s Office said in a press release. “Gargan also made payments to the plaintiffs falsely claiming the payments were proceeds from an annuity, when, in fact, the payments were made only to conceal his criminal conduct.”

The government said Gargan initially created fake annuity contracts, but, “by the end of 2018, Mr. Gargan no longer produced false annuity contracts and his attempts to conceal his criminal conduct turned to lies, misdirection and stall tactics until his scheme was ultimately uncovered in 2020,” the U.S. Attorneys office said in a sentencing memorandum.

Gargan pleaded guilty in June to one felony count of fraud and one felony count of embezzlement.

Several members of the Kennedy family wrote letters to District Court Judge Rossie D. Alston asking for leniency before sentencing. Edward M. Kennedy Jr., a Connecticut state senator and son of the late U.S. Sen. Ted Kennedy, said Gargan was his cousin and a “compassionate and humble man” who always owned up to his mistakes.

Ethel S. Kennedy, wife of the slain U.S. Attorney Robert Kennedy, described Gargan as her nephew. She said he would never intentionally hurt anyone.

Washington D.C. attorney Kenneth R. Feinberg said he has turned to Gargan for advice when setting up structured settlements and annuity payments for hundreds of innocent victims. Feinberg was master of the federal September 11 Victim Compensation Fund and the Gulf Coast Claims Facility after the Deepwater Horizon oil spill.

In his own letter to the judge, Gargan said he never intended to skim money from settlement funds but did so initially to protect a long-time employee. He said that employee, while struggling with health problems, failed to lock in the purchase of an annuity for a plaintiff in an action titled Whitney v. U.S.A. As a result, the cost of the annuity increased by $100,000 as interest rates dropped, and eventually required the company to pay $1.2 million more than had been deposited. Gargan said he would have had to shut down his company if he filed a claim with his professional liability insurer.

“To try and recoup the loss on the Whitney annuity and to cover the $14,000 per month trust payments, I continued to shift money from one government settlement to the next to make up for the previous losses,” Gargan said in the letter. “This turned into a ‘slippery slope’ and turned more desperate.”

The 70-month sentence handed down on Sept. 23 was the minimum amount called for under federal sentencing guidelines, which allowed for a prison term of up to 87 months. Judge Alston rejected a request to sentence Gargan for less than the minimum.

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