Like offensive linemen in the NFL, advisors' names are usually only mentioned when they’ve done something wrong. The Glenn Neahsam case created a firestorm of discussion and controversy earlier this year as the industry debated the complicated ethical and regulatory ramifications of his controversial sale. On the other hand, some cases don’t leave much room for debate.
This week, La.-based life insurance agent Timothy R. Schlatre was charged with mail fraud, money laundering and asset forfeiture as a result of his alleged part in a life insurance scam.
Schlatre, an agent for New York Life Insurance Co. and Lincoln National Corp., allegedly scammed hundreds of thousands of dollars in bogus commissions
selling policies based on fraudulent representations.
Schlatre orchestrated a scheme in which he directed six applicants to provide false net worth and monthly income, allowing them to apply for larger amounts of coverage, according to U.S. Attorney Donald J. Cazyoux Jr.
Schlatre promised to foot the bill for premium costs and deposited money into the applicant’s bank accounts, Cazyoux said.
He now faces up to 30 years in prison, along with fines of up to $500,000 or twice the gross gain or loss from the offense, whichever is higher.
To add insult to injury, he could lose his 2007 Cadillac Escalade, which was purchased in a transaction that “derived from a specified unlawful activity, namely mail fraud,” according to the bill of information.
His attorney said that Schlatre has agreed to enter a guilty plea. The other parties involved in the fraud have been charged with conspiracy to commit mail fraud. Each faces up to five years in prison and as much as $250,000 in fines.
I often hear from advisors who are frustrated with the increasing regulation
and scrutiny they’re subjected to. Blame it on the Timothy Schlatre’s of the world. Unfortunately, the only time that most Americans read about financial advisors is in stories exactly like this. If the only people who recognize your name are your clients and prospects, you’re probably doing something right. But as long as crooked advisors continue making national headlines and become household names, the spotlight will remain firmly trained on the industry and everyone in it, honest advisors
included, who will pay the price.
Here’s to anonymity.