Posted: Feb. 2, 2010

A two-time felon who Heritage Christian Schools officials say defrauded the school has been arrested in Florida on insurance fraud charges involving about $500,000.

Just before his arrest Monday, Richard Incandela, 57, attempted to solicit $528,000 from an undercover insurance investigator "to purchase life insurance policies not in existence," according to an arrest affidavit filed in Hillsborough County, Fla. He was arrested on felony charges of scheming to defraud more than $50,000 and selling insurance without a license.

The charges contend that Incandela sold insurance policies to an elderly couple but did not forward the $489,000 they paid him in premiums from December 2007 and September 2008 to the insurance company. Instead, the 15 premium payments went "to two different corporations that just happened to have Incandela as the manager and president," said Jennifer Hirst, a spokeswoman with the Florida Division of Insurance Fraud.

Incandela told the couple he would sell the policies to investors so they could make a quick profit, she said.

Then, on Monday, an insurance fraud investigator posing as the couple's nephew met with Incandela in a St. Petersburg office. During that session, Incandela solicited money that he claimed would be used to purchase four insurance policies from two other people in deals known as life settlement transactions, Hirst said. In life settlements, people sell their life insurance policies to third parties who would then be entitled to any death payments.

Incandela was released from county jail on a $17,000 bond early Tuesday. It will be up to the Hillsborough County state's attorney's office whether Incandela should be formally charged with the crimes alleged in the arrest affidavit.

Incandela has two prior convictions, one for a $1.1 million fraud in Illinois and a second for grand larceny in Florida. Both convictions occurred in the early 1990s.

Incandela was profiled in a Journal Sentinel story last month for collecting more than $1.5 million from Heritage, a financially strapped school with locations in the Town of Brookfield and West Allis. The school is attempting to raise $710,000 by the end of June to pay for operations for the current school year.

Mark Garsombke, a board director for the school, said Incandela collected money from Heritage for insurance policies that had been taken out on staff members naming the school as a beneficiary. Garsombke said Incandela did not forward all of the money the school paid him for premiums to the insurance companies.

Incandela also had relatives of students at the school agree to have life insurance policies taken out on them so the policies could be sold to outside investors, Garsombke said.

Incandela, who did not return calls for comment Tuesday, has returned $1.2 million to Heritage. He said last month he had "wound down" most of his relationship with the school. "We settled everything up except for the last 5%," he said at the time.

The school is still investigating, Garsombke said.

 

Playing on faith

Parents of students at Heritage said Incandela often played up his professed Christian beliefs when selling the policies. Hirst said he did the same in Florida.

Incandela is also facing legal problems in Florida and Oklahoma, where religious organizations sued him last year claiming he improperly kept hundreds of thousands of dollars.

Complaints in both cases lay out stories similar to Heritage - both involve life settlements and claims that not all of the money paid to Incandela was forwarded to insurance companies.

A South Carolina school, Shannon Forest Christian School, was able to recoup its money from Incandela without going to court, according to school head Brenda Hillman.

Hirst said that in Florida Incandela targeted Christians and played up his ties to the church community.

"The whole, whole religious aspect was still a big part of it," she said. "He represented himself through the Christian community . . .  he talked to congregations about the importance of life insurance and he made promises of profits from the investments they made through him . . . 

"It's really sad, really really sad when you look at the whole picture."

Posted: Sunday, January 23, 2010 - www.jsonline.com

Richard Incandela came to Heritage Christian Schools as a smooth talker selling a creepy product.

In return for recruiting school staff and student relatives to sign up for life insurance policies, naming Heritage as beneficiary, the school was told in 2004 it could reap millions of dollars when the insured people died. The death benefits were meant to help build an endowment and lower tuition to entice more students at a time when enrollment was plummeting.

The two-time felon was a persuasive salesman. The school ultimately spent $1.5 million to buy about 40 policies, mostly on school staff and administrators, each with a $250,000 payout on death.

In addition, at least 10 more policies, taken out on "high net worth individuals" connected to the school, were to be sold to investors, although school officials are still trying to figure out what happened with those policies. Those policies carried death benefits of up to $10 million each, said Mark Garsombke, a director on the school's board.

The school's dreams of riches collapsed in 2008. When faced with a cash-flow problem, officials looked closer at the policies and discovered they were worth at least $1 million less than they had been led to believe, said Garsombke, a partner at the law firm of Whyte Hirschboeck Dudek.

"The school was a victim of fraud by Rich Incandela, and we are looking at all our legal remedies right now in terms of pursuing the money the school was defrauded," he said.

"We want to make sure justice is done and something like this doesn't happen to another school or religious organization," he said.

Today, the school is struggling financially. Kindergarten through 12th-grade enrollment on the school's two campuses, in the Town of Brookfield and West Allis, has continued to tumble and is now 43% lower than it was a decade ago. The newly appointed school board is trying to recoup its money from Incandela, who has paid back $1.2 million of the $1.5 million paid to him by the school for the insurance policies, although he has failed to meet the June 2009 deadline to return the remainder, Garsombke said.

School officials say the current financial problems facing Heritage are separate from their dealings with Incandela, but Garsombke acknowledged that the school had lowered tuition based on its plans to create the endowment. A $9 million addition to the school's upper campus in West Allis also was built on the belief that the lowered tuition would spark an enrollment gain that never materialized, a project that the school apparently expected to pay for out of its regular operating budget.

Incandela delayed answering any questions from reporters from Monday until late Friday afternoon.

He said that he worked with Heritage for several years, during which time he said he raised more than $500,000 for the school, helped it with fund-raising, arranged a mortgage and even briefly managed the schools' accounts payable.

Now, he said, he has "wound down" most of his relationship with the school. "We settled everything up except for the last 5%," he said.

He gave variations of the statement when asked repeatedly whether he defrauded Heritage.

"It's a sad ending to what was a wonderful relationship," Incandela said. Although Incandela's wife, Barbara, is registered to sell insurance in Wisconsin, he isn't and never has been. Barbara Incandela's license to sell insurance in Florida was revoked this month, after Florida insurance regulators alleged she had misappropriated money from insurance transactions for Richard Incandela, who did not have a license.

Incandela already was facing problems elsewhere. In each case, Incandela said the entities had already been made whole or would soon be.

A lawsuit against Incandela and several of his businesses, which Incandela is contesting, is pending in a Florida circuit court. In October, a federal judge in Oklahoma ordered Incandela and two of his companies to pay more than $205,000 to Mid-American Christian University in Oklahoma City.

Risky 'life settlements'

Complaints in both cases lay out similar stories to Heritage. All involve policies known as life settlements, risky investments that have drawn the scrutiny of state and federal legislators as well as law enforcement.

Both lawsuits involve small Christian organizations that were looking to build a secure financial future. And they also involve allegations of Incandela's unfulfilled promises to pay back money he had been given for premium payments.

A South Carolina school, Shannon Forest Christian School, was able to recoup its money from Incandela without going to court, according to school head Brenda Hillman. Even though the school bought into Incandela's system, some had concerns about how the program was supposed to make money for the school, she said.

"It's just very indicative of our inward sense of depravity," Hillman said. "I think the numbers looked wonderful and it was done for the right reasons, to secure and stabilize a ministry that people felt so strongly about. And to be able to secure it so easily, I think, was a pretty easy sell."

Heritage was no different. When Incandela first came to the school, a nondenominational Christian academy, its longtime superintendent, Thomas Wittkamper, was looking to build an endowment to provide financial stability. Wittkamper did not return calls for comment.

School administration embraced Incandela's idea at first. But some parents felt queasy, especially after Incandela repeatedly urged them to solicit their parents to agree to have life insurance policies taken out on them.

"It's just kind of creepy, offering your family up on a life insurance policy," Heritage parent Pam Jerzak said. "When some guy comes from Florida and you're supposed to surrender your parents' information - to me that's just creepy."

Stephan R. Leimberg, a financial consultant who last year testified before a U.S. Senate committee about the life settlement industry, said about the market, "It's a heck of a business model - the business model is: The sooner you die, the more we profit."

Heritage parents who met Incandela back in 2004 described him as a slick salesman who capitalized on his professed Christianity to make vague pitches and lofty promises. Unknown to school officials and parents was his criminal background, which includes committing the largest fraud in Lake County, Ill., history at the time of his conviction in 1993.

Incandela, the son of an Illinois millionaire, served two years of a six-year sentence in Illinois prison after pleading guilty to the scheme, which netted more than $1.1 million. Incandela owned a suburban Chicago dining club with an exclusive clientele, including Michael McCaskey, owner of the Chicago Bears.

The crime: "He created fictitious tabs for meals they never had" and submitted bills to a credit card company which then paid him, said George Strickland, who prosecuted the case.

Around the same time, Incandela was convicted in Florida on charges of grand theft and forgery when he tried to cash in a bogus airline ticket.

That criminal background was not known to the Heritage parents he approached a decade later.

"He came across in my eyes as a smooth move machine," said Kathy Solper, a Brookfield resident who had a child enrolled in Heritage at the time. "He had all the very expensive clothing - pants, ties, shirts (that) had the initials on them . . .  I saw a very smooth, successful person."

Playing on faith

The initial pitch was made to groups of parents, but those who raised questions about his product or the salesman were courted individually, several parents said. Sometimes those who resisted had their Christian faith questioned.

Incandela, 57, also relied on the Christianity of the parents to sell the policies and to relate to them as well, encouraging them to recruit students' grandparents for the program. He told some parents that he had been inspired to devote the remainder of his life to helping Christian organizations by the book "Halftime" by Bob Buford, in which the author shares personal stories about his faith to urge others to make something significant of their later years.

"Absolutely, he told us he was a Christian, and I didn't believe a word he said," said Solper, who did not participate in the program.

Enough people at the school did believe Incandela, however, and it wasn't until the school tried to tap into the life insurance policies to help with finances in early 2008 that school officials discovered the policies were worth far less than they had been told by Incandela.

Periodic statements sent to the school on insurance company letterhead by Incandela had shown an inflated value on the policies that did not match what the insurance company directly told the school they were worth, Garsombke said. Instead of paying premium amounts that would have paid off the policies within seven years, which he had been sent by the school, Incandela had been paying the insurance company the minimum amounts to keep the policies from lapsing.

The school is still investigating what happened to 10 policies that the school is aware of that were taken out on individuals affiliated with the school and were supposed to be sold to outside investors, Garsombke said.

"The whole area is still foggy," he said.

Heritage is also working to keep its school afloat.

Staff was slashed, as were salaries, after financial problems caused the school to miss five paychecks at the end of the last school year. School leaders have said they have until the end of June to raise $710,000 just to fund Heritage's operations for the rest of the school year. So far, they have been able to raise $560,000, including pledges.

School officials are now expressing confidence the school will remain open in the next school year, but they also have signaled that major changes could be ahead and are trying to refinance their mortgage so they can keep their school buildings.

The school has far to go to resolve its financial problems, and that worries those connected with the school. Sheryl Mamerow, a Brookfield resident who has sent five children to Heritage schools, lays the blame in Incandela's lap because of the promises he made for the endowment program and the ramifications of actions the school is now taking - such as raising tuition - will have on its future.

"If they have to close the school, he did, you know, the most damage he could possibly do," she said. "It certainly has set families back. It has denied families that would like to send their kids there the ability to do so, at least comfortably so. It's hurt the teachers because there's back pay that's supposed to be paid to them."

 

Posted: Jan. 3, 2010

A private suburban school is trying to raise $710,000 by the end of June to pay its operational costs for the current school year.

So far, Heritage Christian Schools has received $400,000 in cash and pledges, said Mark MacKay, superintendent of the nondenominational school with campuses in West Allis and the Town of Brookfield.

"I feel pretty positive," MacKay said. "I'll feel better when (the goal is) met, but those are moneys that have been raised probably in the last three weeks. To me, that's evidence of God's provision and oversight."

The school's fiscal problems stem from a combination of forces, officials said. Enrollment has dropped in recent years, from more than 1,110 students to 600 students in kindergarten through 12th grade plus 75 preschoolers, MacKay said. Lower enrollment has meant less tuition for the private school.

Heritage also took out a mortgage when it added onto and remodeled its upper campus. The school is trying to renegotiate the terms of the mortgage to avoid foreclosure on both of its school buildings, MacKay said.

Unlike other parochial schools, which can rely on church affiliates to help support them through tough times, Heritage has no such ties to one individual church, he said. It has been working to seek more support from its alumni, he said.

The school's board members went public with their financial problems in early December, holding a meeting with parents where they asked each family to donate $1,500 and raise another $4,000, said Paul Alexy, who joined the board in September.

"The last thing anyone would have wanted to do is all of a sudden the school's closing and nobody knows about it," said Alexy, who has a daughter enrolled in Heritage's upper school. "That was just fundamentally repulsive to us."

Since the meeting, parents have stepped up with ideas and volunteered to help the school with its problems, he said. One parent set up a Web site at www.pleasesaveourschool.org that allows donors to contribute $1 each through PayPal. Another parent has suggested a fund-raiser where families can donate items that can be auctioned off on eBay with the proceeds going to the school.

"The response that we've gotten from people is gratifying," Alexy said.

The school also has undertaken steps of its own to try to control the costs.

After missing five paychecks to staff at the end of the last school year, the school has eliminated more than 20 staff positions - most of them full time - and reduced pay, MacKay said.

The school will finish out the current school year no matter what, but school leaders are likely to make a decision about whether to continue operations in the 2010-'11 school year by early March, he said.

"I think the key for next year is 'What will our school look like?' " MacKay said. That includes whether the school will continue to operate on two campuses.

"We're looking at all kinds of different options."