STOLI FRAUD 

Post 5430

In Daniel E. Carpenter v. United States Of America, No. 3:21-cv-1485(RNC), United States District Court, D. Connecticut (August 17, 2026) Daniel Carpenter was convicted after a bench trial of mail fraud, wire fraud, and money laundering offenses arising from a stranger-originated life insurance scheme involving stranger-originated life insurance (“STOLI”) and his attempt to avoid the conviction by a motion pursuant to 28 U.S.C. § 2255 to set aside all the convictions.. Robert N. Chatigny, United States District Judge resolved the issues raised from Carpenter’s leadership role in an insurance fraud scheme.

Carpenter caused life insurers to issue 84 STOLI policies through Charter Oak Trust, an entity he controlled, with an aggregate face value of approximately $450 million. The insurers allegedly issued policies they would not have issued but for false statements in applications and related materials concerning insureds’ finances, premium funding, resale intent, and life expectancy reports. Carpenter-controlled entities funded premiums and received more than $12 million in commissions.

LAW

A § 2255 movant generally may not relitigate claims already raised and rejected on direct appeal or raise claims that could have been raised on direct appeal, unless he shows cause and actual prejudice or actual innocence. The right-to-control theory alone cannot support a fraud conviction because deprivation of information, standing alone, is not deprivation of “property.”

The prosecution relied in part on the right-to-control theory of fraud, which applies to schemes to deprive victims of information they need to make informed decisions regarding the use of their assets. After Carpenter’s convictions were affirmed on appeal, the Supreme Court held that depriving a victim of information in contravention of the right-to-control theory cannot provide the sole basis for a fraud conviction because mere information is not a form of “property” as the term is used in the fraud statutes.

However, a fraudulent-inducement scheme may satisfy the mail and wire fraud statutes when false statements induce a victim to part with money or property, even if the victim receives something of equal value and even absent net pecuniary loss.
DISCUSSION / ANALYSIS

The court denied Carpenter’s § 2255 motion. It held that his claims were procedurally barred because many were not raised on direct appeal and others had already been rejected. The court concluded that Carpenter failed to show cause for not challenging the right-to-control theory on appeal, as that argument was reasonably available.

The court also rejected actual innocence, finding that the indictment and trial proof established a traditional fraudulent-inducement property-fraud theory. Carpenter used material misrepresentations to induce insurers to issue valuable policies, pay commissions, and assume death-benefit obligations.

The Government’s reliance on the right-to-control theory did not create a miscarriage of justice because the convictions rested on sufficient traditional property-fraud grounds.

The actual innocence exception does not apply because the scheme alleged in the superseding indictment and proven beyond a reasonable doubt at trial was a prototypical fraudulent-inducement scheme which plainly satisfies each of the statutory elements of mail and wire fraud.

Under the fraudulent-inducement theory a defendant is guilty if he:

devises a scheme;
to induce the victim into a contract to obtain her money or property and
by means of false or fraudulent pretenses.. (quoting 18 U.S.C. § 1343).

In this case, the superseding indictment alleged and the evidence proved that:

1. Carpenter devised a scheme
2. to induce the insurance companies into contracts to obtain STOLI policies obligating them to pay commissions and death benefits by means of false or fraudulent misrepresentations in applications and related documents.

Two tests of materiality are potentially available. Under the traditional common law standard, a misrepresentation is material if a reasonable person would attach importance to it in deciding how to proceed, of if the defendant knew (or should have known) that the recipient would likely deem it important.

Both tests were satisfied. here. The superseding indictment alleged and the Government proved that Carpenter and his co-conspirators falsified insurance applications to avoid raising red flags related to STOLI policies. To that end, they misrepresented the insured’s financial situation and motivation for procuring the policy and provided false answers to questions about third-party funding of premiums, the possibility of the sale of the policy and the performance of life expectancy reports. As explained in the Verdict and Special Findings, these misrepresentations were the mechanism by which Carpenter and his co-conspirators were able to defeat the insurers’ underwriting safeguards against STOLI business. The misrepresentations went directly to the essence of the bargain because Carpenter knew the companies would refuse to issue policies if they suspected the policies were being procured for sale to investors with no insurable interest in the life of the insured. The insurers testified and Judge Chatigny credited their testimony.

The motion was denied without an evidentiary hearing, no certificate of appealability issued, and the case was ordered closed, and Carpenter must serve his sentence in full.

ZALMA OPINION

STOLI is a means of defrauding life insurance companies that is easy to do and difficult to discover. The conviction for mail fraud, wire fraud, and money laundering offenses stands and the attempt to avoid jail failed.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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