By Steven A. Morelli
Editor's Note: This is a sneak peek at the March 2012 issue of InsuranceNewsNet Magazine. For photos and a timeline, view the article here.
UPDATE: Glenn Neasham's request for a new trial was denied on Feb. 29 by a county judge and he was sentenced to 300 days, reduced to 90 days. Neasham's good behavior credit reduces the sentence to 60 days. Neasham's attorney told the Lake County Record-Bee that he filed an appeal in higher court. Neasham has established a fund for donations. InsuranceNewsNet did not participate in setting up or administering this fund.
Glenn A. Neasham was sure the state didn’t have a strong case against him as he watched the jury file into the courtroom with his verdict. But, still, he awoke that October morning with a bad feeling.
So, when he heard the word “guilty,” he was not shocked like his family, friends, lawyer and many people in his community were. The 51-year-old Neasham was already numb from more than three years of an ever-deepening nightmare. His insurance business was in ruins; he was relying on private and public assistance; and now he was facing as many as four years in jail for his felony conviction of grand theft from an elder. All for selling one annuity.
“A day or two later, it hit me that they found me guilty,” Neasham said. “At the beginning of all this, my attorney told me the only way there would be a conviction is fate.”
Few would have predicted Neasham’s current fate if they saw him before his arrest. He had a thriving insurance business for more than 20 years in his hometown of Lakeport, the county seat on the shore of Clear Lake in northern California. He was involved in the Mormon church and in the community as a board member of civic organizations. The married father of three young children (soon to be four) lived in a lovely home. His sales led him to qualify for the Million Dollar Round Table (MDRT) for seven years and he made more than $500,000 income in 2007, his best year.
By the time the verdict came down, Neasham had made $20,000 in all of 2011, was renting a house from his in-laws and his family was relying on food stamps.
His alleged victim not only still held the indexed annuity he sold her, she had earned more than $40,000 on it, despite the worst recession since World War II.
The Case That Led to The Case
Neasham’s trouble started on Feb. 1, 2008, when Fran Schuber, then 83, and her boyfriend, Louis Jochim, made an unsolicited visit to Neasham Insurance Agency in Lakeport. Neasham had known Schuber since 1997 and Jochim had been a client since 1998. Jochim said Schuber had a CD maturing that month and thought she would get a better return from a product like the Allianz indexed annuity that he had bought through Neasham. The annuity had earned 10 percent the previous year.
Neasham had a preliminary discussion with the couple and started some of the paperwork. “On the health questionnaire, I asked about her health and she quoted ‘good,’ ” Neasham recalled. “I did my due diligence. I gave them a brochure and they left for the weekend.”
They were scheduled to return Feb. 5, but the couple came back a day early. Neasham spent an hour and a half on his presentation and the application. In addition to considering what to do with $239,000 from a maturing CD, they looked at Schuber’s entire financial picture. They decided to leave $100,000 in CDs and bank accounts, allowing for a monthly income, and to purchase a $175,000 MasterDex 10 indexed annuity from Allianz, which was approved to sell to people up to 85 years old. The product had been introduced in 2004 and had been one of the most, if not the most, popular indexed annuity nationally since then.
Neasham said he made certain the annuity was suitable for Schuber and complied with California’s senior protection law. The law is one of many passed nationally to protect seniors against con artists and aggressive salespeople. Annuities have a particularly bad reputation with some insurance departments and consumer organizations because of some unscrupulous salespeople and unflattering media coverage. Neasham said he is aware of the potential for abuse and said he is a member of the National Ethics Bureau, had an A+ rating with the Better Business Bureau and never had any charges filed by the Department of Insurance.
“The few questions she did ask were not financial—she said her boyfriend handled that,” Neasham said. “I didn’t notice that there was anything wrong with her. And my assistant, Deanna (Jones), who was in the room during most of the presentation, later testified that she seemed very competent and not at all confused about the transaction.”
Neasham said no one mentioned dementia or Alzheimer’s.
Schuber’s mental condition did not raise a red flag for Neasham, but the choice of the beneficiary did—that was Jochim and his daughter was named as the contingent. When Neasham questioned that, Jochim later produced a bank statement showing that he had been a beneficiary on Schuber’s CD since 2004.
Neasham said he called Schuber’s son, Ted Schuber, on Feb. 5 and met with him the next day.
“If he had mentioned that she had Alzheimer’s or dementia, I could have stopped it right there,” Neasham said. “But he didn’t. The only comment he said to me was he was concerned about his mom’s overall health. And I thought, ‘Hmm, I’m concerned about my mom’s overall health, too.’ He never said what the details were.”
That was during the phone conversation. The next day, Neasham discussed the annuity’s details with Ted Schuber. Years later in court, Ted Schuber would say he couldn’t understand how his mother could make any investment decision because “she just can’t concentrate.” His relationship with his mother had deteriorated because her mood fluctuated and she was increasingly under Jochim’s control, Ted Schuber testified, according to the Lake County Record-Bee.
Still, Ted Schuber didn’t mention his concern about his mother’s mental state during the phone call or meeting, according to Neasham.
“If there was a definite problem, I would have stopped it,” Neasham said. “I’m a member of the Church of the Latter Day Saints. I’m 100 percent ethical. And I would rather live in a tent under an underpass next to a freeway than hurt someone financially.”
Neasham had Fran Schuber and Jochim sign an addendum in reference to the beneficiary.
[In a phone conversation with InsuranceNewsNet, Ted Schuber said his mother had Alzheimer’s since 2002 but hung up when he was asked why he didn’t tell Neasham that. Louis Jochim could not be reached for comment.]
The Investigation Begins
Meanwhile, the manager of the Savings Bank of Mendocino, which held the CD, was raising her own red flags.
The manager spoke to Neasham, who began explaining the annuity to her. “But then she said, ‘we don’t have a problem with the annuity—we have a problem with Lou,’ ” Neasham recalled.
Because the bank manager was concerned that Schuber was under Jochim’s influence and she did not understand the annuity, Neasham later asked Schuber if she had any questions and if she understood the product she was buying.
“She said she did and gave me a check with a big smile on her face,” Neasham said. At that point, Schuber had 30 days to cancel the contract without penalty.
The bank manager reported Jochim to Adult Protective Services, which involved the Lake County District Attorney’s Office, according to court records.
An investigator interviewed Schuber in April 2008. “In a statement by the DA’s office, they said the client did it for tax purposes and did it of her own free will and choice and nobody pressured her to do it,” Neasham said. The report also showed the investigator thought Schuber displayed some signs of dementia.
The investigator recorded the interview, but according to court records, prosecutors denied the existence of the recording until three and a half years later—the day before closing arguments at Neasham’s trial.
After the interview, the DA’s office did not press charges but instead referred the case in May 2008 to the California Department of Insurance, where investigator Kristin Schriber got involved. She met with Schuber and Jochim that December for 30 minutes during which Schuber showed signs of dementia, according to Schriber’s testimony.
Neasham wouldn’t be charged with a crime until two years later in December 2010.
On Dec. 14, 2010, Neasham said he hurried home from an appointment with a client because Schriber had called him and said she was in the area to “close the case.”
“I was at my house still dressed in my suit,” Neasham said. “Two people came to my door. I knew something was up because one was standing on one side of the door and the other was on the other side. They asked me to come outside and she said you’re under arrest.”
Neasham found himself in the back of the car, heading to jail but not really worried. “I just had the feeling that everything was going to turn out all right because I didn’t do anything wrong.”
An insurance department press release trumpeted Neasham’s arrest with a statement from then-Commissioner Steve Poizner: “Insurance agents or brokers who steal from vulnerable seniors will not get away with their shameful tricks. CDI investigators will continue working to track down any unscrupulous agent who preys on California’s seniors.”
On the day Neasham was arrested, he had a good name in his community as a native son who served six years in the U.S. Navy, attended a couple of colleges and whose all-American good looks had gotten him minor acting gigs in movies and on TV. He had returned to the area more than 20 years earlier to start a family and a business. He at one time published two newspapers in the Sacramento area. His insurance practice was thriving despite the down economy, making about $200,000 that year. His family—a wife and four children—enjoyed their $735,000, 4,000-square-foot home. They also had a 14-acre site on top of a mountain overlooking Clear Lake where they planned to build their dream home one day.
Neasham said his attorney, Mitchell Hauptman, assured him that there wouldn’t be a trial—and if there were a trial, there wouldn’t be a conviction. In less than a year, however, all Neasham would have left would be his family.
Trial by Trial
In March 2011, more than three years after the annuity was sold, Deputy District Attorney Rachel Abelson laid out the case during a three-day preliminary hearing. Abelson said she was submitting medical records showing that, in 2003, doctors had diagnosed Schuber with “Alzheimer’s-type dementia,” according to the Record-Bee. Hauptman cross-examined district attorney investigator Martina Santor and suggested that, in her April 2008 interview, she as an expert might have noticed signs of dementia—but that a layperson such as Neasham would not have.
In April, the newspaper reported that County Judge Richard C. Martin allowed the charges, but said the prosecution’s case “has only passed that (strong suspicion) test by the thinnest of lines.”
Neasham faced a felony charge of theft from an elder or dependant adult exceeding $950, and two special allegations, with one stipulating that the theft exceeded $100,000.
After months of delays and a failed dismissal motion, trial was set for Sept. 21. During the trial, two out-of-town defense witnesses were brought in early and testified out of turn during the prosecution’s portion. One was Dick Duff, noted author on annuities, who said an Allianz MasterDex 10 is complicated but has “many more benefits than there are negatives,” according to the Record-Bee. “Not everyone wants liquidity.”
The MasterDex 10 had a five-year deferral and 10-year payout. After the five years, the owner can annuitize and get a guaranteed monthly income for 10 years. During the period, the owner can take out 10 percent annually or 20 percent if the owner is in a nursing home. The owner starts with 87.5 percent of value, is credited 1.5 percent annually and would be able to “break even” after seven years if the owner surrendered the product.
Duff said that he himself receives money from annuities and would, in fact, be happy to buy Schuber’s annuity for at least $180,000—$5,000 more than she paid for it. Duff knows a good deal when he sees one because, at that moment, the annuity had $217,000 of annuitization value.
Another one of Neasham’s witnesses, psychiatrist Dr. Douglas Rosoff, said he did not meet with Schuber, but reviewed medical records and viewed a video of an interview of Schuber from the summer of 2011. He said the dementia seemed quite advanced at that point but he could not say what her condition might have been three and a half years prior. He also said people with dementia have good and bad days and she could have had a meeting where she appeared lucid.
The trial was scheduled off and on for a month until the prosecution rested its case on Oct. 19 and the defense called two witnesses. One was a former Neasham assistant who said Schuber did not seem confused and to understand the annuity. The other was Jochim’s daughter, who said Schuber understood her finances around the time she bought the annuity.
Several other defense witnesses were lined up to testify, but Neasham’s attorney Hauptman pulled him aside and gave him some surprising news.
“He said, ‘I’m not going to call any of your witnesses because I don’t think the state has proven anything,’ ” Neasham recalled. “He said it would just muddy the water and he was just going to go to his close.”
Then the prosecutor revealed the existence of the audiotape of the interview with Schuber in April 2008. Hauptman decided against playing the tape but said it would be grounds for an appeal if he were convicted, Neasham said. “But he said that wasn’t going to happen—I wasn’t going to be convicted.”
The prosecution’s argument was that Neasham was motivated by the $14,000 commission and that Schuber was denied access to her money because of the annuity, which the prosecutor compared to moldy bread.
“It’s like if you sell bread to a blind person,” Abelson said, according to the Record-Bee. “It’s fine if it’s good bread, right price; the same as everybody else. But if you sell them a moldy piece of bread with them not being able to see it, then that’s where you’re looking at a criminal case.”
Hauptman argued that the prosecutor did not show any evidence of theft and that the alleged victim had, in fact, profited from the annuity. The whole case was the product of an “overzealous” government.
The jury deliberated into the next day, Oct. 21, when Neasham was found guilty on the felony theft but not the other two charges.
“My wife blew up,” Neasham said. “She was crying, ‘How could this possibly be happening to us?’ ”
New Trial Motion
Judge Martin denied Neasham's request for a new trial at a hearing on Feb. 29. Neasham was then sentenced to the probation's office recommendation of 300 days, which the judge reduced to 90 days with three years' probation. That sentence was further reduced to 60 days for Neasham's good behavior credits. Neasham may also have to pay yet-unspecified restitution to Schuber. His lawyer has filed for an appreal with a higher court. Neasham owes his attorney at least $40,000 and can’t pay him anymore, so he has qualified for a public defender.
In his new trial motion, Hauptman cited several significant points. Perhaps one of the most important was a statement from Robert K. O’Briant—Juror No.3.
O’Briant said a juror’s grandfather had Alzheimer’s and another juror’s father had dementia, neither of which was disclosed during jury selection. Two others said they made their minds up about the case before the trial because of newspaper accounts.
Other jurors said they should make an example of Neasham: “Some jurors made the statement that, in essence, meant we should send a message to insurance companies to be careful when selling annuities to 83-year-olds. The jurors also felt they should send a message to insurance agents that they should be careful who they sell to.”
The motion made several other arguments, including:
Hauptman concluded that the case has far more ramifications beyond Neasham.
“The verdict is shocking to the conscience and allowing the verdict to stand will diminish public confidence in the integrity of the judicial process. The only rational conclusion to be drawn by a citizen wishing to conform to the law is that they should never do any business with senior citizens for fear that some agent of the State will have a negative opinion about the quality of otherwise lawful merchandise.”
Many others in the community agreed with Hauptman’s conclusion, including several letter writers to the Record-Bee, the overwhelming majority testifying to Neasham’s solid character and honest dealings. Publisher Gary Dickson also wrote a column excoriating the verdict.
“I have not talked to one local person who wasn’t absolutely shocked by the ruling of the jury,” Dickson wrote. “Most people I have visited with about the case have indicated a strong opinion that it should never have gone to trial.”
Dickson also made a larger point about the chilling effect the whole affair would have on service to seniors.
“Unless the guilty verdict is overturned on appeal I can envision it as a footstep toward American business becoming more standoffish in dealing with elderly customers,” Dickson wrote. “More than one business person I have talked to during the last week has said the Neasham case will force them to think twice about doing business with the elderly. Who wants to sell someone a piece of property, a car or a remodel of their kitchen to later on be hauled into court because someone alleges the person was incompetent to enter into the contract at the time you sold them goods or services?”
The Effect on Annuity Sales
The chilling effect also concerns indexed annuity analyst Jack Marrion of Advantage Compendium.
“Essentially, he was convicted of selling an annuity,” Marrion said. “It’s saying a surrender charge amounts to fraud.”
The conviction’s effect will depend on whether it becomes a precedent, he said. If it is considered a precedent, it puts producers in a tough spot because, in Neasham’s case, he sold an annuity approved by the state for sale to someone up to the age of 85 and the insurance company approved the sale. Marrion said he knew of many cases where producers have been convicted of pocketing premium or keeping withdrawals on client contracts and keeping the money. This is the first time he’s heard of someone being convicted or even charged with theft for selling an annuity.
“That’s the whole thing. Is this just an isolated case?” Marrion asked. “Now, you have people saying, ‘What do I do?’ ”
Neasham said he knows what he would do now.
“If they came in today under the same circumstances, I’d do the exact same thing,” Neasham said. “She got a great deal out of it. That’s the thing I don’t get—how can they convict me of theft when she made $43,000?”
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at firstname.lastname@example.org.