Independent insurance agent Glenn A. Neasham has been convicted for felony theft for selling a complex annuity to an elderly woman who was suffering from dementia. Neasham, who maintains that the woman seemed fine when the transaction was made in 2008, contends and that he acted appropriately. Now, other insurance agents say they are having second thoughts about offering this financial product.
“Indexed” annuities are savings products that pay interest tied to how the stock- and bond-market indexes perform. An insurance agent gives the buyer a guarantee that the latter won’t lose any principal as long as the investor doesn’t withdraw his/her money early when steep penalties would otherwise ensue.
A lot of insurance agents like annuities because they can earn high commissions (12% or greater of the amount invested).from insurance companies. Annuity sales have increased by over four times in the last 10 years as a volatile stock market and low interest rates attracted buyers.
The Wall Street Journal says that in the mid-2000’s, state attorneys and private plaintiffs sued insurers for making allegedly unsuitable product sales to elderly persons, who ended up losing money due to withdrawal penalties. The insurance companies settled the cases by agreeing to make a number of changes, including employing better efforts to make sure that the products sold to investors were suitable for them.
Neasham claims that the elderly client, Fran Schuber, came to his office with her boyfriend, Louis Jochim, who is also an octogenarian. Jochim said Schuber wanted an annuity like the one he had purchased from Neasham. Jochim told Neasham that the girlfriend was “mentally competent, and the insurance agent said that no one told him, not even Schuber’s son, that she was suffering from dementia.
Yet according to a local bank manager’s complaint, when Jochim and Schuber went to the bank to withdraw 5,000 to buy the annuity, she seemed confused and Jochim appeared to be influencing her. The manager notified Adult Protective Services about her concerns regarding Jochim and the Lake County District Attorney’s Office became involved.
Neasham wasn’t charged with the crime until 2010. Prosecutors contended that Neasham knew at the time of that firs transaction that Schuber lacked the capacity to agree, to it and Lake County Senior Deputy District Attorney Rachel Abelson said the 8% commission that was in it for the insurance agent was the incentive for his “criminal intent.”
At Shepherd Smith Edwards and Kantas, our elder financial fraud lawyers represent senior investors that have been the victims of all types of securities fraud. Unfortunately, there are loved ones and financial professionals that will take advantage of an elderly person’s lack of knowledge, dependence, or diminished mental capacity to defraud them.
Annuity Case Chills Insurance Agents, The Wall Street Journal, March 18, 2012
Insurance Agent Gets Jail Time for Selling Annuity to Elderly Woman; He Denies Recognizing Dementia, ABA Journal, March 20, 2012
More Blog Posts:
Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors, Stockbroker Fraud Blog, December 14, 2011
AG Edwards & Sons (Wells Fargo Advisors) to Settle Securities Charges it Sold Variable Annuities that Lacked Proper Documentation to Elderly Clients, Stockbroker Fraud Blog, May 4, 2011
SIFMA Wants FINRA to Take Tougher Actions Against Brokers that Don’t Repay Promissory Notes, Institutional Investor Securities Blog, January 17, 2012