Glenn Neasham didn't steal anything: the case for exoneration
By Dick Duff
Glenn is currently out on bail pending appeal. Deputy DA Abelson, Judge Martin and the jury unleashed a firestorm. The insurance business can’t put up with this.
Last fall, a California jury convicted Glenn Neasham of one count of larceny for selling an annuity to Fran Schuber, then age 83. Glenn was charged under Section 368 of California's Penal Code — PC 368. (Know that I testified for Glenn at trial. I compared Fran Schuber's annuity with an alternate CD, had she kept her $175,000 at the bank. That wasn’t difficult. Interest rates at her bank dropped to 0.50 percent in 2011.)
Glenn was sentenced to 300 days in jail — first offense. The judge reduced this to 45 days with good behavior. Glenn is currently out on bail pending appeal. Deputy District Attorney Abelson, Judge Martin and the jury unleashed a firestorm. The insurance business can’t put up with this.
Glenn Neasham didn’t steal anything.
He must be exonerated.
You need to be familiar with the law of larceny, what really happens in an annuity sale and the inner workings of an annuity contract. It's Groundhog Day. This will happen again. Next time, it could be life insurance, long term care or mutual funds. If you are an agent-thief, you may go to jail. If you are a carrier-thief, you could go under.
In this article, I will acquaint you with 1) the general definition of larceny anywhere, 2) California larceny laws, 3) how to defend a charge of larceny, and 4) whether the sale of the Schuber policy could possibly be a crime. This will upset you.
I will make things as simple as possible. Stay with me.
1. The general definition of larceny
In old English law, which can still be applied today, larceny was the physical taking and carrying away of someone's personal property without their consent. The thief also needed a specific intent to permanently deprive that person of the enjoyment of their property. In old England, they didn't like someone taking a fellow countryman's cow, for example. The thief could get the gallows, where justice was swift.
2. California larceny laws
In California's PC 484, the definition of larceny is essentially the same. But, you can also be a thief if you temporarily deprive a person of their property for a substantial period of time. So, it could be larceny if you "borrow" someone's cow until you milk her for, say, six months, and then return the cow. That won't get you the gallows. It could get you many years in jail, however.
Let's say you spot a box of chocolates at Safeway. You put the box in your purse and carry it out of the store. Shoplifting, right? Larceny, correct? Not so fast. A good lawyer will have some defenses.
3. How to defend a charge of larceny
Consent: Suppose there was a sign by the chocolate boxes that said, "Take one." Consent is a defense to larceny. This sign invited you to take and carry away the chocolates. You aren't guilty of larceny. Not carrying and taking away: Assuming you really did intend to steal the chocolates, let’s say you pick up a box off the stand and carry it outside without payment. When you are arrested, the box turns up empty. Your defense should be, "I didn't take and carry away anything of value." At worst, you took and carried away an empty box.
Lack of specific intent to steal: Finally, you find a box of chocolates by itself on the floor. As you pick it up, your plan is to return it to Customer Service. Then, someone yells, "Fire!"
You run outside, still with the chocolates. You did take and carry away a box of chocolates, but your defense will be no specific intent to permanently/temporarily deprive Safeway of its property.
The bottom line: A prosecutor has a heavy burden when bringing a charge of larceny. He or she must prove the specific intent to deprive — a taking and carrying away — and all this without someone's consent.
4. Could the sale of the Schuber policy be larceny?
Not in your wildest dreams.
Allianz MasterDex 10 (MD10)
MD10 is a two-tiered accumulation annuity approved for sale in California through age 85. It could be the worst or best annuity in the world. It is neither. What's relevant is whether Glenn Neasham committed a crime when he sold her a MD10.
The MD10 is cousin to a deferred-immediate annuity currently marketed to buyers who simply want a no-cash value policy that pays income in the future. Interestingly, the MD10 does have cash value awaiting payout someday — a probable plus for Fran Schuber.
The MD10 credits a 10 percent bonus at point of sale to its annuitization value. That bonus earns index interest credits. The Allianz Statement of Understanding and Product Suitability Form clarifies that Fran Schuber, the applicant and policy owner, clearly and succinctly wanted future income after five policy years. She wasn't concerned about an early cash-out. You would say the MD10 was perfect for her — even better than a true deferred-immediate policy. The issue isn’t whether her MD10 would be right for another person; the issue is whether the MD10 would be right for Fran Schuber.
Know that some people acquire annuities for the payment of future income. They aren’t interested so much in cash values. A lifelong income is what counts for them. Schuber wanted the MD10.
Glenn Neasham didn't steal her premium money. Not as a matter of fact. Not as a matter of law.
Then, how could he be convicted of larceny "by annuity?"
First, the defense of consent:
Deputy DA Abelson knew that consent was a defense to larceny. In her opposition to Glenn's motion for new trial, she stumbled to explain her position. She merely exclaimed, "There was sufficient evidence presented to show that Fran Schuber was not capable of consenting to the transaction in question and evidence showed that he (Neasham) knew that at the time of the evidence."
Paradoxically, she rambles (as reported in a March 22, 2012 Insurancenewsnet article), "Not necessarily that he knew that she had Alzheimer’s or dementia, I couldn't prove that." Ms. Abelson might get her act together. She has ruined lives.
Depending on the trial record, consent still may be one of Glenn's best evidentiary points on appeal. Even if Fran Schuber was suffering from mental deficiency at point-of-sale, was she still able to drive a car, tend herself, pass all daily duties in a long term care policy, sign beneficiary forms and/or enter into agreements such as her annuity contract? If not, she surely couldn't make a decision to keep a $100,000 emergency fund at the bank.
If not, should her bank manager have been charged with theft, too? The key is whether there was sufficient evidence of her mental stability to give legal consent to her annuity, as seems clear on all Allianz paperwork.
Put yourself in Glenn's position. What could he do? He might have walked away from the sale. Perhaps someone else could do it (and go to jail). What would you do without sufficient training in mental illness matters?
Second, a defense that there was no taking and carrying away of property.
Let's say you believe Ms. Schuber couldn't give consent to her annuity. Did Glenn take and carry away her property and still commit larceny?
Mendocino Bank issued a $175,000 check payable to Allianz. Glenn forwarded it and all paperwork immediately to Allianz, which interviewed Schuber by phone and issued the policy. And all this was in the ordinary course of doing business. This occurred freely, in an economy where sellers and buyer shouldn't fear each other or the system.
In the peoples' motions, Deputy DA Abelson refers to "carrying away" as the "slight movement" of the property involved — something called asportation. We understand that things are questionable when a client gives payment to his/her agent's bank account. Then, a little later, the agent writes a premium check to say, Allianz. That didn't happen here.
There was no taking and carrying away of Fran Schuber's money. She was happy with her policy. She never complained, and for nearly four years, she didn’t withdraw any money from her policy.
There was no larceny here.
Third, the issue of specific intent:
Even if (a) Fran Schuber couldn't give consent, and (b) Glenn Neasham took and carried away her $175,000, there can be no larceny without a specific intent to deprive Schuber of her property. Let's dissect an actual annuity sale.
In an annuity sale, deep down an agent could intend to hoodwink an unwitting prospect/client/buyer/policy owner. But even that would be ridiculous. In the rush of a sale, agents can’t help but instinctively reinforce the sales positives. Here, there were many positives. They indicate a specific intent to help, not steal. Glenn Neasham was a top Allianz producer. He had sold millions of MD10 premium. He earned over $1 million in Allianz commissions 2008-2011. Glenn wasn't a beginner. He had scores of satisfied clients and tells me that there were not any DOI complaints from his book of business. He had to be well versed and aware of what worked in the MD10 policy. Consider 21 positives, some or many of which he surely relayed to Ms. Schuber. You would, too. Each one shows intent to help someone, not to steal money or deprive anyone of its enjoyment.
1. There were policy owner surrender charges that would help her. Here’s why: Her annuity forms clearly indicated she would wait five years to take a 10 year/lifetime (or both) payout. She wanted full annuitization value (AV) applied to that income. She had $100,000 in other bank money for emergencies. She had ample income now.
Surely, she was aware of inflation and a possible increased need for income later on. Her boyfriend and policyholder Louis Jochim didn't need his money; she wouldn't either. She would know that other policyholders who cashed out early and suffered penalties to their detriment would be accruing interest credits for her benefit. Give her the benefit of the doubt.
2. There was a 10 percent bonus initially for her AV.
3. Her AV after five years would be penalty-free and available for income.
4. There was full AV under a nursing home rider.
5. She could eventually receive (a) a lifetime income, (b) a 10, 15 or 20 years certain payout, or (c) both from her AV.
6. There could be no negative market value adjustments to her AV.
7. There was full AV at her death for a five-year payout or longer.
8. There was measured creditor protection for annuity values under California law.
9. There could be California Insurance Guarantee Association protection for annuity values up to $100,000.
10. There were penalty-free withdrawals (of 10 percent annually) up to 50 percent of premium.
11. There was tax deferral until annuitization; then, a favorable tax exclusion ratio not common to amortizing other money.
12. If a fixed guaranteed interest option was elected (and it was throughout), it would be a 2 percent minimum annual interest rate on her AV. Her interest the first year was 3.25 percent.
13. There was no possibility of a flat interest result due to negative index returns; her AV would grow each year.
14. Viewed retroactively, there would be much better annuity interest credits than interest earned on someone’s CDs.
15. Fran Schuber would have full ownership rights in a unilateral annuity contract. In the event of a contractual ambiguity dispute with Allianz, she should prevail.
16. With 100 percent ownership control, Fran (or her advocate), could sell her policy to you, me, or anyone in the secondary market. For one, I would use her AV in measuring what I would pay her. Interestingly, with a little effort by her or them, her policy should be almost fully liquid. 17. There would be a 30-day free-look period for a full premium refund.
18. Policy values would likely be 100 percent collateral for a private or institutional loan.
19. There always would be the possible return of Fran Schuber's money from Allianz on request. Allianz wouldn't have to do this, but it could. Indeed, in early 2012, it did return that full value less the 10 percent bonus and interest on that bonus. Her custodian received $197,267 -- $22,267 more than Fran's premium of $175,000. There was no surrender charge. In a way, this surrender was unfortunate for her and her loved ones. I know from personal family experience how much a steady stream of annuity money helps pay bills if one cannot manage their affairs. In one year (Feb. 2013), her five year accumulation period would expire.
20. Fran Schuber would also have intangible benefits knowing that her money was safe at Allianz, a major insurance carrier. Surely, it would be more secure than at many small banks, where safety mostly depends on any changing protection the FDIC gives. Her amortized annuity payment would eventually be over $1,800 monthly; a bank CD would pay her next to nothing.
21. Finally, she would know that her agent would receive $14,000 (8 percent) one-time in compensation directly from Allianz for helping her over 15 years or so. She wouldn't pay him a dime, and nothing would be subtracted from her policy. His commission payment would be about one-half of 1 percent of annuity value on average, on an annual basis. But Fran should know that his experience and reputation would be there for her. If she would do more for him, she could refer him to others, as did Louis Jochim.
There was no specific intent to deprive Fran Schuber of any money. Glenn only intended to help her with her financial affairs. There was no "theft by commission" either. He was entitled to earn a living. If Allianz had paid him $140,000 (instead of $14,000), it wouldn't affect her.
Glenn Neasham didn't steal anything. He must be exonerated.