Elder abuse and product suitability: An annuity nightmare in California
By Dick Duff
Let me tell you an alarming story. It involves an insurance agent charged with a crime. Everything is based on a proposition that the sale of an annuity policy to an 83-year-old woman was theft. The verdict in this case will shake you to the core. It may even tax your belief in human nature. It will make you question our criminal justice system.
In January of 2008, the agent — call him Glenn Williams — had an 83-year-old client refer him to an 83-year-old woman who happened to be his live-in girlfriend. Call them Mildred and Floyd. Mildred had a $225,000 CD that was about to mature, and Floyd wanted her to consider the popular Allianz MasterDex 10 annuity – like the one he owned and believed in. Floyd brought Mildred to see Glenn.
Glenn carefully assembled Mildred’s financial data and made his 1½ hour presentation on the MasterDex 10. She actively participated, completed and signed suitability forms and an application for the policy. She signed an Allianz “Statement of Understanding,” too. She seemed articulate and pleasant. You and I have probably seen many like her.
The premium would be $175,000, leaving $50,000 from the CD and another $50,000 or so in cash for liquidity and emergencies. The cash would remain in banks. Floyd would be beneficiary of the policy, as he was under the CD.
Mildred and Floyd went to the bank and obtained a $175,000 premium check payable to Allianz. Her banker was concerned Floyd was influencing her decision and that she lacked appreciation for what was happening, but the policy was placed in force.
After releasing Mildred’s funds, her banker contacted local Adult Protective Services, expressing concern about Floyd’s influence on Mildred. One month later, a local district attorney’s investigator interviewed Mildred. The conclusion was that she seemed confused, but that Floyd was taking good care of her. Local law enforcement declined to press charges.
Soon, the state Department of Insurance took over and interviewed Mildred. It concluded that Mildred was not competent and because of its illiquidity, the MasterDex 10 policy wasn’t suitable for her. Now, Glenn Williams was in trouble. There was a lengthy investigation, and things were about to get worse for Glenn.
From reading the reports, it is clear that Mildred fully intended to complete her annuity transaction and felt no misrepresentation or undue pressure. Indeed, she (or her advocate) hasn’t made a demand for her money or withdrawn anything from the policy (or her $100,000 in bank funds) to date. Apparently, she has enough income from outside sources. Liquidity has not been an issue. Unfortunately, Mildred’s mental health deteriorated from February 2008 to the present. As dementia set in, Glenn Williams was in deeper trouble. The system had the benefit of hindsight; Glenn didn’t.
The MasterDex 10 Annuity
The 2008 MasterDex 10 policy is sometimes referred to as a two-tiered fixed indexed annuity. It credits a 10 percent one-time first year “interest bonus.” There is an accumulation account, which includes the bonus and is fully available for 10-year or lifetime annuitization after five years. The cash surrender value starts at 87½ percent of premium and can be withdrawn at any time.
Both AA and CSV build with interest credits. A guaranteed interest allocation account is available, which Mildred elected for her AA. It has grown at 3.25 percent or so compounded annually.
Thus, Mildred’s $175,000 policy started with a $192,500 AA ($175,000 plus the 10 percent bonus) and a fully liquid $153,125 CSV ($175,000 multiplied by 87½ percent). In February 2013, her AA will be about $224,000, which she can fully annuitize into lifetime income streams (one option will be at least $1,962 for 120 months). Her other guaranteed CSV will be $171,000.
Her policy looks better every day. If she had kept a $175,000 CD instead, she would be earning an insignificant 0.50 percent on her money.
Mildred’s Allianz suitability questionnaire assures that she wanted lifelong income after five years and didn’t need the premium for liquidity. Allianz accepted her statements. She has not complained or expressed dissatisfaction with Glenn, Allianz or her policy. It appears that she acquired the ideal safe savings vehicle, given her circumstances.
In December 2010, Glenn Williams was charged with a crime. Allegedly, he “committed theft and embezzlement to the property of an elder and dependent adult.” Yet, no funds came directly to Glenn or were under his control. There was no unhappy victim either.
How could this happen? It might be an issue of Glenn’s compensation — an 8 percent or so one-time commission. Or, it could be the 12.5 percent initial surrender charge. Mildred did lose some liquidity, but not much compared with the guaranteed benefits she gained.
It seems Glenn’s prosecutor believed he knew (or should have known) that Mildred was (or soon would be) demented — something that, sadly, has occurred. Seemingly, all this didn’t look right to a zealous deputy district attorney.
Glenn’s real last name is Neasham. He was convicted on Oct. 21, 2011 of grand theft — stealing money from Mildred, his client. Imagine the horror. Glenn faces up to four years in prison and will be sentenced on Dec. 20. A motion for a new trial is filed. If denied, Glenn will appeal. Lakeport is a charming town in northern California. On Oct. 7, 2011, I testified there at Glenn’s trial. I explained the financial results of Mildred’s annuity. I kept eye contact with his jurors and felt that he would be exonerated. His lawyer was competent.
The verdict was a complete blindside. I weep for Glenn every day. I respect the system, but this can’t be happening in America.
In the article “Press On: Where’s the Crime?” which appeared in the Lake County Record-Bee last month, Gary Dickson expressed great concern about Glenn’s guilty verdict. Could this affect how we do business in America? Could it be as significant as the McDonald’s hot coffee ruling? Could sellers become standoffish when dealing with seniors? Gary explains that Glenn Neasham had an A+ Better Business Bureau rating. Glenn also has scores of satisfied clients, but he has suffered greatly. He is financially destitute.
Indeed, who wants to sell a car or even shoes to a senior — let alone remodel their home — when someone could claim someday that the buyer was incompetent at point-of-sale? Will it be necessary for seniors to get a certificate of competency that alerts sellers it’s okay to make a sale? Must sellers obtain a certificate of something that they are qualified to judge a buyer’s dementia? Has the system gone too far trying to protect us from ourselves?
There’s more. In the insurance business, must you back off when approaching a senior? Is the magic age 80, 70 or even 60? If someone complains, who will help on your path to financial ruin? Will your E&O policy cover you? Will satisfied clients stand behind you? Should you immediately hire legal counsel? Will your carrier be there to assist with a criminal defense?
There but for the grace of God go I! And you! If you’d like to know more about this case, Google Glenn Neasham Trial. Glenn’s email address is firstname.lastname@example.org. He welcomes contact. Support Glenn. God bless him.
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