By LARRY O’DELL

RICHMOND, Va.

A former Costa Rican insurance executive charged in a 0 million fraud scheme testified Thursday that he was unaware that the financial statements he used to lure clients had been falsified by his company’s accountant.

“I was not dealing with the financial statements in detail,” Minor Vargas Calvo said in U.S. District Court. “I just had them as a marketing tool.”

Vargas, 60, is charged with conspiracy, mail fraud, wire fraud and money laundering. He was the final witness to testify on the fourth day of his jury trial, which will resume with closing arguments Monday.

Vargas was president of Provident Capital Indemnity Ltd. The company sold bonds guaranteeing funding for life settlement companies, which buy life insurance policies from insured people at less than face value and collect the benefits when those people die.

Prosecutors say Vargas lied to investors about Provident’s financial assets, stability and credit rating. Vargas denied lying, saying the company had substantial “intangible assets” the government was not counting. He said he believed he was telling prospective clients the truth when he said Provident was protected by “reinsurance contracts,” even though he had never seen them and they turned out to be nonexistent.

Vargas also denied knowledge that an accountant cooked the company’s books to attain a top credit rating, despite what Assistant U.S. Attorney Jessica Brumberg described as “frantic emails” from the accountant to Vargas as regulators and investigators started to demand more information about Provident’s finances.

“You are the only one who knows the real truth,” the accountant, Jorge Luis Castillo of Hackettstown, N.J., said in one of the emails.

Castillo, who testified against Vargas, pleaded guilty last year to conspiring to commit mail and wire fraud. He is scheduled for sentencing Sept. 5 and faces up to 20 years in prison.

During his nearly three hours on the witness stand, Castillo said that before he was arrested he was working with two other businessmen who wanted to take over Provident and infuse it with .2 billion in new capital. Brumberg said Vargas wanted to unload the company “and disappear into the night.”

“Oh my God, never. Never,” Vargas said.

Brumberg also said that while the company was failing to meet its obligations and Vargas was looking for new capital, he was transferring more than million from Provident accounts into other entities he controlled, including the Brujas professional soccer team. She suggested Vargas, who has a doctorate in economics and formerly worked for the Central Bank of Costa Rica and for the U.S. Agency for International Development, was using Provident money to maintain his status as a big shot in his home country.

“You don’t know me,” Vargas protested. “I am a Christian.”

According to prosecutors, Provident sold bonds with face value of 0 million based on fraudulent financial statements from 2004-2010. The company agreed last week to plead guilty to a single count of mail and wire fraud conspiracy and faces a fine of 0,000 or double the amount it collected from any victim of the offense, plus full restitution. Sentencing is set for Sept. 5.

The Securities and Exchange Commission also filed a civil complaint against Provident last year, and a judge froze the company’s assets and enjoined it from doing business.

One of Provident’s major customers was Houston-based life settlement company A&O. Seven people affiliated with A&O, including its three principals, have been convicted in jury trials or pleaded guilty to a 0 million fraud that claimed 800 victims in three dozen states and Canada. Two of those people testified against Vargas, who seemed mystified that the United States could prosecute him.

“I just do not see how the U.S. government is judging me,” he testified. “I was in Costa Rica.”

Brumberg asked Vargas if he had felt immune from extradition in his homeland.

“I have not done anything wrong, so I don’t see why you ask me,” he said.

The Provident and A&O cases were brought in Virginia because that’s where some of the victims and transactions were located.

SHANGHAI (Dow Jones)–China shares ended flat Thursday, as heavyweight financial companies dropped following China Life Insurance’s lower-than-expected first-quarter net profit, offsetting gains in metal companies.

The Shanghai Composite Index ended down 2.11 points at 2404.70 and the Shenzhen Composite Index fell 1.62 points to 943.03.

“The market is likely to be stuck in a range bound trading pattern after recent gains,” said Everbright Securities analyst Zeng Xianzhao. The Shanghai index has risen 6.3% since the start of this month.

Huatai Securities analyst Li Wenhui said uncertainty about the outlook for listed companies kept investors from chasing the market’s rally. Trading volume in Shanghai totaled CNY104.82 billion, down from CNY113.07 billion Wednesday, indicating investors remain cautious.

However, “overall, I think the odds for the upside in the broader market are still big because of low valuation of blue chip companies,” he said.

Analysts expect the benchmark Shanghai Composite to trade within a 2400-2450 range in the short term.

Insurance companies fell after China Life said late Wednesday its first-quarter net profit fell 29% from a year earlier to CNY5.63 billion. Analysts had widely expected the country’s biggest life insurer by premiums to post higher net profit in the first quartet.

Barclays said the main driver of the profit decline was a worse-than-expected impairment loss of CNY7.7 billion in the January-March period.

“We are somewhat surprised by the size of this impairment charge given the A-share market increased 3% in the first quarter. The company may need to book additional losses if the equity market doesn’t recover significantly in 2012,” Barclays said.

China Life dropped 1.1% to CNY18.32, New China Life fell 2.2% to CNY34.16, and China Pacific Insurance slid 0.5% to CNY21.81.

Banks fell on profit-taking. China Construction Bank fell 0.4% to CNY4.79 after having risen 1.7% in the previous two sessions and ICBC ended 0.7% lower at CNY4.39 following a 0.7% gain over the same period.

Metals-related counters gained, on expectations for higher demand as the second quarter is traditionally a peak season for the construction sector.

Yunnan Aluminium surged by the 10% daily limit to CNY6.74, Sino-Platinum Metals added 3.9% to CNY19.12 and Zhongjin Lingnan Nonfemet gained 1.2% to CNY9.60.

-Rose Yu and Chao Deng contributed to this article, Dow Jones Newswires; 8621 6120-1200; rose.yu@dowjones.com

ALBANY — A recently imposed mandate on life insurers has netted 2.2 million for family members of policyholders, according to Gov. Andrew Cuomo’s administration.

An investigation by the state Department of Financial Services last year found many life-insurance companies hadn’t diligently sought out beneficiaries of the deceased based on Social Security Administration death records.

Since the state agency began looking into the issue last July, there have been 32,715 payments made nationwide based on Social Security records dating back to 1969, according to Cuomo’s office. That includes 7,525 payments totaling .9 million to New Yorkers.

“It turns out that sometimes people don’t know or have forgotten that a loved one had a policy,” Financial Services Superintendent Benjamin Lawsky said at a Manhattan news conference Monday. “In such cases, unfortunately, life-insurance companies were not taking any proactive steps to find out if a policy owner had died and to locate their beneficiaries to pay them.”

Lawsky’s agency required life insurers to check their records against the Social Security records beginning last July. He said the process should be completed by the end of this summer. Cuomo’s office said there are still 445,000 “potential matches” for unpaid claims that are still being investigated.

The American Council of Life Insurers, a Washington D.C.-based trade group, issued a statement Monday saying the industry “adhere(s) to the letter and spirit of all laws and regulations pertaining to unclaimed life insurance benefits.”

“Many companies are taking proactive measures to locate missing policy holders and the industry is working with regulators and lawmakers on ways to help ensure all beneficiaries get the benefits they are due,” the statement read.

Of the payments recovered, a total of ,500 went to West Nyack, Rockland County, resident Karen Masucci and her two siblings, whose father died in 2005. Masucci appeared with Cuomo and Lawsky at the news conference Monday.

Masucci received the payment in July after the life-insurance company was contacted by the state. Her father, Norman Kattenstroth, was a firefighter for 25 years in New York City and on Long Island.

With the stress of losing a loved one and the task of sorting through their possessions, it was easy to overlook an insurance policy, she said.

“His memory was failing. There were papers everywhere,” Masucci said in a phone interview. “I took home bags and boxes of papers that I went through and sorted, and I don’t remember seeing a paper on this policy, but there were other things that disappeared too that he just misplaced.”

Prior to the state investigation, Cuomo said many life insurers would check Social Security records in order to stop making annuity payments, but not to help locate beneficiaries.

“They were more aggressive in the area where they were going to save money,” he said Monday. “They were less aggressive in the area where they were going to pay beneficiaries.”

For more information on locating unclaimed life-insurance benefits, visit NYPolicyFinder.com.

Starting in 2002, I began to get a lot of inquiries about life insurance from the financial services community.

Having been a financial adviser for years, I found it odd that these questions suddenly were becoming more common.

Our industry faces a tsunami of potential lawsuits due to the poor performance of many types of life insurance products that were sold earnestly over the past 25 years. To make matters worse, the Uniform Prudent Investor Act, which has been adopted in most states, now demands that trustees be subject to defined standards regarding the management of trust assets.

Contrary to what many trustees think, life insurance is, in fact, an asset. Indeed, it is often the largest asset held within a trust.

Yet much to the surprise of trustees, these assets often underperform.

In the most recent and comprehensive study of trust-owned life insurance policies, National Underwriter Life & Health magazine evaluated more than 500 policies ? owned by 300 trusts ? promising a total of 5 million of death benefits.

The results showed that 27% of policies had problems. In this group, a large percentage of the problems were due to factors such as the underperformance of equity markets and/or the plummeting of interest rates.

I wonder whether now, in 2012, has that percentage been magnified due to the economic downfall?

Advisers who take proactive steps to begin educating their financial services professionals, as well as their clients, on the obligation that the UPIA mandates will certainly be viewed as heroes. They will be taking swift action in an environment where most are sticking their heads in the sand.

Our practice has established a process to handle this issue. Using our knowledge of the strengths and potential pitfalls of policies, we have developed a formal process.

First, we recommend that the adviser obtain a letter from the owner of the policy ? usually an individual or a trustee ? to authorize him or her to gather information about the policy in question directly from the insurer.

Once you have this letter, you can ask the insurance carrier for an in-force illustration. This is a forward-looking diagnostic tool that projects the policy’s future performance under stated sets of assumptions.

Beware that these sets of assumptions are critical to the accuracy of the audit.

What is the rate of return you are assuming? What are guaranteed, versus nonguaranteed, values? What is the assumed premium being paid going forward?

Work with your client’s attorney to create an investment policy statement, a written agreement of what the policy is supposed to provide to the trust.

Provide your client with a written analysis of the policy.

Make sure to cover such areas as particular risks, insurance company ratings, longevity of policy and other specific items that merit attention. Also, show solutions to any underperformance that can be made within the coverage.

If the policy can’t be efficiently remediated, I think it is fair to suggest potential alternatives. At the end of the day, I actually love the cases needing remediation that can be done within the existing policy, as it gives all these potential referral sources (clients and their advisers alike) the chance to get a firsthand glimpse of our extensive knowledge on the subject matter without skepticism that comes from a product sale.

For my clients, that breeds a trust that gives them confidence to refer their friends and family to our practice. For accountants and attorneys that serve these clients, we become the go-to resource for any and all insurance-related questions.

When these questions come about, it further enhances their view of our financial advisory practice, which makes them comfortable recommending our wealth management practice to their clientele.

By helping the potential victims in getting their regular checkup of their life insurance policies, you will reap the reward of having satisfied clients.

Tom Henske (thenske @lenoxadvisors.com) is a partner at wealth advisory firm Lenox Advisors Inc.

SEOUL/HONG KONG - (Reuters) – Carlyle Group CYL.UL is among private equity funds bidding for a stake in unlisted South Korean group Kyobo Life Insurance worth around .8 billion, sources with direct knowledge of the matter told Reuters.

Daewoo International (047050.KS) and Korea Asset Management Corp (KAMCO) are offering about a one third stake in the life insurance company in two separate sales, the sources said on Friday.

The sale offers a rare opportunity for private equity firms to invest in the life insurance sector, which is usually dominated by strategic investors who can pay higher valuations and command greater capital resources.

The stakes in Kyobo Life have come up for sale as Dutch group ING’s (ING.AS) Asian insurance businesses are on the block, a deal expected to fetch more than .5 billion.

Separately, private equity firm Vogo Fund is exiting its near 61 percent stake in Tong Yang Life Insurance (082640.KS).

South Korean is among the more mature insurance markets in Asia, with premiums forecast to grow 3.8 percent this year and 3.9 percent in 2013, according to Swiss Re estimates. That compares with an Asian average of 4.4 percent for 2012 and 4.5 percent next year – steady growth that has been attracting private equity funds to the auction.

Asian buyout firms Affinity Equity Partners and MBK Partners are among the other buyout firms that have submitted initial bids for Daewoo’s 24 percent stake, one of the sources said.

KAMCO, concurrently selling its 9.93 percent in Kyobo, has attracted the same suitors, another source said.

Based on OTC pricing for Kyobo Life shares of 250,000-300,000 won, the total value for both stakes is as much as 2.1 trillion Korean won (.8 billion).

Daewoo, part of the POSCO Group, has put its stake on sale as part of a move to sell non-core assets, while KAMCO is trying to retrieve public funds it has invested. The company acquired stakes in Kyobo Life from now defunct Daewoo companies.

ING’s sale has attracted interest from South Korean insurers including Korea Life and Samsung Life Insurance (032830.KS), sources previously told Reuters.

Daewoo has hired Woori Investment & Securities (005940.KS) and Australian group Macquarie (MQG.AX) to advise on the sale of its stake, while KAMCO has hired Samsung Securities (016360.KS) and Barclays (BARC.L), the sources said. The two sales are running on similar timetables.

The initial deadline for expressions of interest closed last Friday for Daewoo. Bidders will likely have three weeks to conduct due diligence.

KAMCO has received six bids and plans to pick qualified bidders next week, according to one of the sources, adding all six bidders were expected to qualify. Bidders will have a month to conduct due diligence before submitting actual bids.

The sources were not authorized to talk to the media.

Carlyle, Daewoo, Woori and Samsung declined to comment. Affinity and MBK were not available to comment.

(Editing by Dan Lalor and Denny Thomas)